Hello, We received a letter regarding a lease offer in Upton County Tx. stating it is available to lease due to lack of production. The offer is for Section 8 block 2. It further stated the intent is to drill below Atoka formation starting at 10,000’ and below.
We’ve haven’t had many leases in TX (mostly in OK), So any advice and/or insight, (i.e. what to strike/add to the lease, counter royalty offer, etc.), would be much appreciated.
Thanks, Van Manager, Deaner & Co.
It sounds as if your minerals were leased at an earlier date. If this is correct, I would think it would be very important for you to establish that the letter you received is correct regarding lack of production and availability. What happens if you lease minerals which are still held by an old lease in the opinion of the earlier lessee? Perhaps an earlier lease had a depth clause and you can lease below 10,000’ without any issues. I will defer to others here, but I would want an oil and gas attorney to advise me in a situation like this. You should be shooting for a 25% royalty which in actual application–not just in lip service–has zero post production deductions. Do not warrant title, especially given the questions raised in your first sentence. An oil and gas attorney can help you with the lease language and may be able to give guidance on what bonus $/acre is reasonable to expect.
Thanks for the reply. I agree with your points and will pass them on to the partners. I think more research needs to be done and if deemed leasable, addendums you stated would be added along with proposed changes to bonus and royalty %.
Thanks,
Van
You have a couple of issues at this point. You can take the title research obligation and make a decision on an OGL. It sounds like what you received is an OGL offer and a letter stating the intended target formation for the initial well. Just call the landman rather than speculating. The answer is probably fairly simple.