I was contacted by a landman with an offer to lease mineral interest for a tract of land I inherited in Cooke County, TX.
Term: 3 years
Signing bonus: $150
Royalty: 3/16th
The landman said the company “drills shallow conventional wells normally less than 6000’ feet so the offer is relative to this type of well.”
–What are your thoughts on this offer?
–The landman said I own 0.97400 net mineral acres. How is this calculated? I inherited 1/20 of 44.48 acres.
–Would it be worth getting an attorney to review the lease?
Thanks.
Most of the leases filed in that county only show a “memorandum of lease” so hard to know if the landman is telling the truth since you cannot check against other leases on the royalty. Bonus amounts are private, so they are not posted either.
Of the 39 current permits in Cooke County, all but one are less than 6000 feet. One is 12,500 for the Ellenburger and is an injection well in the southern part of the county. You can limit the depth of the lease.
44.48/20 is 2.24 acres, so I would ask the agent how he/she got 0.974 net mineral acres.
Most of the time I do recommend that folks get an attorney to review a lease, but at ~150 dollars for the bonus, it may cost you more than it is worth just on the bonus. It can save you royalty dollars in the long run if you get a better lease due to an attorney’s help so that can offset the cost.
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The description 1/20 of 44.48 may refer to the interest your ancestor purchased. Perhaps your ancestor sold a fractional portion, prior to your inheritance?. If it is your ownership, then the .974 nma does not compute. The land man should be able to clarify.
I have owned producing minerals in Cooke County for many years. These are long-producing, but not high producing wells. For that reason you should not expect a high bonus or high royalty rate. I would counter with $250/acre and 20%. Given your small nma’s, it’s not going to make any difference in your quality of life. But it is a matter of principle.
Ask for a no-cost lease, audit right. Others on this site will recommend their favorite clause.
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Our lease in Cooke County are 25%. I don’t remember the lease bonus. Lease form is very important. You can join TLMA and use their lease. It is a good one.
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Consider limiting lease to only the depths described by landman, such as surface to 6,000 feet. Then you can separately lease deeper rights later.
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Thanks for all the information! This is all very helpful.
The landman hasn’t sent me the lease yet. If I plan to negotiate on terms and lease language should I state my requests now or wait until I have their proposed lease in writing?
What are the chances that their exploration will develop into a producing well? Any guesses? While the term is 3 years, I assume that it develops into a longer secondary term if production begins?
Donald_Skotty mentioned that this area has long-producing but not high producing wells. So am I right in thinking that the lease terms could be in effect long after the initial 3 year term?
All this factors into my decision in whether to obtain a legal review of the lease.
TLMA does appear to have some good resources, too. Thanks for the tip!
The primary term is the first three years (or what is negotiated). If a well is drilled and is productive, then the lease moves into the Held By Production (HBP) stage which is the secondary term. The secondary term can last years to decades, so very important to get the clauses that benefit you. Hard to state your requests without having the document to read.
It is best to get the draft lease in hand and have it reviewed by a good oil and gas attorney. The draft is rarely friendly to the mineral owner and will probably need significant edits.
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Thank you, Martha. Much appreciated.