Negotiating a new lease in Blk 13 Reeves Co directly offsetting existing horizontal production. Any thoughts on how to respond to potential lessee’s Landman that says bonus will be less because this is a developed area? I always though bonus should be higher the more certain production is.
Thanks
jmcb I agree with your thinking
“less bonus cause its more developed” as a standalone explanation seems counterintuitive, like you say.
The bonus is a number. Numbers that a landman doesn’t pull out of his butt come from math. Ask him to show the math behind his offer so you can see where the “more developed” variable comes in. Assuming you want to hear complete silence on the other end of the line. 
Myself personally, I always assume the oil company can afford to pay $1-2m per well for land costs when they are giving out 25% royalties. Just based on former life doing math for oil company. So you look around and pick out the highest number of wells people are drilling per (lets say 1280 acre) unit. Lets say that is 10 wells per unit. That means they can pay maybe $17m in bonuses (if you pick $1.7m per well). $17m/1280 = $13,281 per acre. That’s what it really comes down to, the economics of them drilling wells. The more wells they drill in an area (or more barrels they produce), the more spread out the land costs get per well so the more that they can pay. If you only think they will drill 4 wells, then asking for $13k/acre is pretty greedy. IMO.
If the wells are GREAT, they can pay more. Varies with oil price as well. Blah blah.
So, yeah this also highlights that its good (for the bonus) to have units around you that are developed with lots of wells. Like you say. Those wells aren’t draining your acreage and making it less valuable, they are proving it up. If the offset wells are crap then obviously it works in the other direction.
Block 13 is huge and varies quite a bit.
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