Newbie who recently received lease offer - any advice appreciated

I recently received a lease offer for small oil/gas interest I own in Doddridge County, West Virginia (.01961 net acres). The offer is $500 lease bonus and 15% royalty. Can anyone tell me if this offer is in line with what others are receiving in the area?

I also received a modification of oil and gas lease for a separate tract of land. I have a .26364 net acre interest in this tract. The original lease is from 1920. I never knew anything about it until now. The lease modification is for pooling only. I have no idea what the original terms were. Are you able to re negotiate an old lease - as far as bonus and royalties? They want to do horizontal drilling on this property. There has only been vertical drilling until now.

Any and all advice is greatly appreciated! Thank you!

Kathy,

Many variable are in play, is 15% based on Net or Gross? Personally, it is not the lease bonus that I seek, but a greater royalty. Secondly, who is the production company?

WJ

Don't fall for this is our last offer or you must sign by a specific date--that's bull. I would ask for 20% royalties---gives you room to negotiate. Negotiate a larger sign on bonus. Look for clauses such as transportation and storage charges in the contract. They want you oil/gas---why should you pay to have it stored or transported. Hold out----trust me when I tell you they will be back--again and again--probably making threats to sell it on the court house steps. It a game that they like to play. Is the company Antero?

Thank you for your response! The lease says "...of the net amount realized by the Lessee..". The lease also mentions less production costs. Antero is who made the lease offer.

Yes, Antero.

Kathy,

I have a decent working relationship with Antero and can make a few suggestions. I have sent you a private message if you wish to respond and I will assist anyway I can.

WJ

Thank you. Should I see your message in my Inbox? My inbox is empty. Sorry, new to the site and still trying to figure out how everything works.

Yes, in your Inbox there should be a 'friend request'. Once you accept that, I will be able to send you a message, directly.

WJ

Ok - I have accepted.

Kathy,

You have new mail in your Inbox.
WJ

The one other item you want in any lease is a "No Arbitration Clause". Do not give up your 7th amendment right to a jury trial.

I would also suggest that when approached by an oil & gas company wanting to lease your minerals that the owner do a google search under news there for you can see if they have been sued by mineral owners or an attorney general.

Excellent point and a very valid suggestion to mention!!!

Question- I have 122 acres of mineral rights. Is anyone familiar with the actual process of SELLING mineral rights (while retaining ownership of the land)? IS it the same process as settlement for sale of property, or something simpler? Kyle- feel fre to jump in here.

Selling mineral rights is selling never to receive money again. Leasing mineral rights is leasing and receiving $$ for every barrel of gas and oil pomped.

Jerry,

Selling only the mineral rights to a property is pretty straight forward, there are numerous people looking to purchase. Please share the general location (County, District and percentage of ownership) and I will try to assist you, either by directing you toward interested parties or having interested parties contact you.

WJ

Hi Wilson,

I have 100% ownership of the mineral rights. The property is close to Industrial School, near Long Run Road about 3/4 miles west of Salem. I am not looking to sell right now but was merely asking about the process. Thanks. Jerry Y

Hi,

I intend to hold onto the mineral rights, but was asking about the process of sale. Thanks.

Jerry Y

Jerry,

There are a few different ways to sell your mineral rights; five off the top of my head and the advantages are... (Please note, I am NOT an attorney, accountant, investment advisor! Below is simply the opinion of one person, that owns a few small mineral parcels.)

1. I assume you receive unsolicited phone calls / junk mail, like other mineral owners seeking to purchase your minerals. This would be a very quick sale, but traditionally at a very low, inequitable price, something I would avoid if possible.

2. Simply placing a classified ad in the local Doddridge County newspaper will get responses, set a specific date and review any offers you receive.

3. Approach a local Realtor and ask that they list the parcel in their listings. Frequently Realtors have clients that are in search of mineral rights, but there will be a commission associated with doing so.

4. I know of a few different attorneys that would separate the surface from the minerals, that have a list of clients they would approach to see if any are interested in purchasing the minerals. You will have a 250.00 - 500.00 bill for this, but worth having potential buyers trying to 'outbid' each other, thus a higher price for yourself.

5. If you know anyone in the industry that you trust, approach them and ask if they know anyone that is currently buying minerals. Typically you will have your best results with this, in that there is a 'friend factor' involved and whomever you approach, does not wish to see either party involved, get treated unfairly. Additionally, the title fee for separating the minerals from the surface and be negotiated into the sales contract, with each party paying 50%.

As you know, mineral rights are a type of commodity and prices fluctuate significantly. There are stories of people selling at 10,000.00 - 15,0000 per net mineral acre, but that was a few years ago and I have not seen prices in that ballpark recently. That said, I was recently approached to sell my Doddridge Parcel for their "best price" of 3,500.00 / net mineral acre and I scoffed at the caller. Within an hour their best price increased 40%, but was still undervalued in my opinion.

Lastly, to counter an earlier comment regarding "...selling never to receive money again." I am inclined to say, that is accurate. Minerals are a commodity and like all commodities, there are risks associated with ownership. A simple example that I would present is: If a person owned 100 mineral acres and sold at 5,000.00 / acre, they would receive 500,000.00. At a 5% return, their income on that half million dollars would be 25,000.00 / year. Currently there are not many wells paying 2,083.00 / month, but one never knows what the market will be like in 2 months, 2 years, 20 years. There is a risk involved and having all your eggs in one basket, is never a good thing.

Feel free to email me directly on this site if you wish to ask specific questions or if I may provide any additional information or assistance.

Cheers,
WJ

Wilson,

Thank you very much for the informative note! I appreciate the advice.

Jerry Yaremko