I would like to hear feedback on this Top Lease offer amount and any other words of wisdom this group cares to share.
The Offer received is to purchase a Top Lease {a new Oil and Gas Lease} covering my 160 NMA to take effect once my current lease expires in April 2019.
Offering to lease at $8,000 per NMA, 25%, 3-years with no option to extend. Additionally, the Top Lease terms will pay 10% of the Lease Bonus now, upon execution of the Oil and Gas Lease.
When my current lease expires in April, they will pay the balance of the Lease Bonus.
In the event current lease is maintained beyond current lease expiration in April, due to drilling or production of oil or gas, then I get to keep the 10% down payment and the Top Lease will be null and void.
So the question is, considering my location, is the $8000/NMA and 10% down a good price. Here is the Legal:
160 Acres, W/4 Section 38, Block 1, H&GN Ry. Co. Survey, Reeves County, TX A-1807
Thanks in advance,
Will
Will…10% non refundable now…eh? Sounds pretty lucrative to me. But, get a good oil and gas lawyer to represent you. There are several on this forum I recommend.
Good advice Lawrence.
I am hoping to get feedback on what others have recently leased minerals for in and around this location.
I have heard of leases going for as high as $13,000/NMA. Not clear how close that was to my location.
Though I am not interested in “selling” the mineral rights, I can say that I have received half a dozen very high offers in the last two months.
Will
Just an opinion, but I’d be very hesitant about top leasing, particularly if it’s a hot area like you appear to be in. You could be giving somebody the opportunity to flip your lease at the cost of only a 10% option fee. Are the people making the offer drillers or flippers?
Definitely wouldn’t do it unless I’d first approached my current lessee about extending the term of their lease. If they aren’t willing to negotiate and you are confident you are getting a significant premium over the current bonuses and lease terms being paid in your area you might see how the top lease group reacts to telling them you would need more of the bonus up front, say 25%.
I wouldn’t have even entertained the idea at that price. They may be willing to go much higher, if not I’d wait for the next offer. You’re definitely in one of the better areas…right off the river across from Loving County. $10-15,000 per nma is what I would expect. Wait until University Lands’ bid results are released September 19th to get an up to date idea of rates. I don’t like the idea of top leases in general…makes the transaction muddied when you have to start making estimations of time value of money, future lease rates, etc. But some people need upfront money now and everyone’s circumstances are different. They may be
Actually, University Lands doesn’t have minerals in Reeves. Their closest holdings are in Ward and Winkler counties. Still look up the results when they come out though since parts of those counties are still in the Delaware Basin and knowing will give you at least some reference point. Also check in October for the Texas General Land Office bid results - they do have holdings in Reeves. Both agencies use EnergyNet.com for their lease sales.
Kathy…I’m sorry, but all the land in Reeves county that is PSL Survey IS Public School Lands…or the
University of Texas Permanent Endowment Fund collects half the mineral rights. There’s plenty of PSL
Surveyed land in Reeves, Winkler, Ward, even Loving, Culberson, and Hudspeth counties.
The east boundary of the Delaware Basin is the Pecos River. The west boundary of the Permian Basin
is the Pecos River. There’s no change in the stacked shale play formations in either basin, but the oil companies have been sitting on development of the Delaware basin for over 80 years. They’ve known
the Delaware basin was here since the early 1930s. It was determined to be a strategic resource
and kept ‘secret’ from the public because of the heavy development of the fields in Saudi Arabia, Iraq, Syria, etc. The theory among American oil companies especially after WWII was that it was better to
develop the oilfields of the Middle East and use up THEIR resources than to develop domestic sources
when we might need them in another global war. So, they purposely sat on the Delaware basin discoveries all that time. Now we are using the production of the Delaware and Permian basins to
throttle OPEC and maintain some economic semblance of control worldwide. It’s not classified in the
corporate minds of American oil and gas E&P companies as Strategic Reserves for nothing.
The surface and mineral land owners of the USA work hand in glove with the US oil and gas E&P companies to prudently use our reserves to help maintain the relative Peace of the world. Notice we’ve not had a global war since 1945. It’s not all due to maintenance of our military presence and preparedness worldwide, the American surface land and mineral rights holder is playing a big
part in maintaining that Peace.
Off my soapbox podium…class dismissed!
University Lands does not have holdings in Reeves. Don’t take my word for it: University Land's Interactive Map. Proceeds from these lands go into the Permanent University Fund (PUF) and supports the University of Texas and Texas A&M University Systems. This is a separately managed fund from the perhaps more well known Permanent School Fund (PSF), which is managed by the Texas General Land Office and supports primary and secondary public education.
My earlier point was since University Lands doesn’t have interests in Reeves, you won’t be able to use their lease sale from this month as a reference point, except for the limited purpose of knowing their Ward and Winkler results. Instead, you’ll have to wait until the Texas GLO conducts its sale in October. They have plenty of holdings in Reeves.
Not a fan of top leasing, especially a year out. Too much chance that the prices will increase in that time frame. I let my leases die a natural death due to time and then try to get better leases with the competitive rates at the new time. Here is an article that might be helpful.
An Overview of Recurring and Related Issues Involving Top Leasing.pdf (210.2 KB)
Thanks Stephen! I appreciate your input. Messages all sound pretty unanimous form the group. Be patient and don’t do a top lease. I’m not destitute yet, so patience is in order. If the world politics and economy can just stay stable till May 2019… perhaps the chickens will come home to roost.
M Barnes,
Much thanks for the article. I shall read and heed.
I will also wait till April. Looks like there is a good chance there may be a big jump in what a NMA will lease for by then.
If they offered you 8000/nma they will pay 16,000 /nma if you counter. Do not know whom has your current lease but a top lease this far out is not likely to go into effect. I would not be in a hurry to top lease. You could contact the current lease holder and ask if they would like to extend. The people your talking too will likely simply offer to the current lease holder for twice or 3 times the price.
Several horizontal wells offsetting your lease.
http://wwwgisp.rrc.texas.gov/GISViewer2/
William,
The folks on the site here have convinced me that the top lease is not the way to go. I can just hang in there till April when my lease expires. From what others are saying lease prices are going to be considerably higher than 5 years back when I first signed this lease. I won’t start counting the chickens just yet, but you may be on the money at 16,000, I hope so.
Will…I wouldn’t expect things to remain stable until May 2019. I expect it to get right scary in the Middle East
from now until the middle of the coming winter. I also
expect violent weather and even earthquakes to impact
the world oil and gas exploration and production development.
Is TOP as in TOP Lease an acronym? If so, what does it
stand for?
Will…I gotta go see Josh Pass the opthomologist in
Pecos later today…when I get finished I’ll drive out there and have a look. Everything is building so fast
around here I don’t want to give you outdated information. I’ll take a looksee and let you know later
today.
Where do I think it might blow up first? I keep looking for Israel to preemptively attack Iran to destroy their
ICBM and nuclear weapons projects…that will bring all the Islamic factions together in a concerted Super
Jihad against Israel…and drag us into the conflict to
defend Israel. When? Watch around September 28th
the 70th anniversary of when Israel was restored as a nation by UN charter. If we make it through that week
from September 28th to October 6th…then it won’t be this year…maybe next year at the same time it will
happen. JMHO.
