What is the difference between releasing a soon to be expired lease and top leasing?
I think you are in a stronger position after your current lease expires, to get the best royalty % and bonus $. A top lease from your current lessee would be cheap insurance if they paid you 10% of a new bonus for the top lease but started drilling operations before the old lease expired, the old lease royalty % and charges/deducts would still apply. I don't think third party lessees pay very much up front either, as your current lessee might still get a well started in time to perpetuate their lease. I really don't see an upside to top leasing for the mineral owner. If your current lessee wanted to top lease and you suggested a new lease superceding the old one that addressed any issues you found objectionable in your current lease, that gave you security now and the lessee security in that they wouldn't lose the lease, I think that would provide something for both sides. Outside of that, I'd let the lease expire.
Thanks for the information. It is kind of a strange deal. The company that wanted to release said that we couldn't change the lease except to add that this was good 3 years from the date signed. Royalty % and everything else in lease had to stay as is. They offered us $500 an acre which is double what we got in 2008. But from what I have seen that is low per acre bonus. We also have 18.75% royality right now. And have seen rates of 20 -22%.
Thanks again
r w kennedy said:
I think you are in a stronger position after your current lease expires, to get the best royalty % and bonus $. A top lease from your current lessee would be cheap insurance if they paid you 10% of a new bonus for the top lease but started drilling operations before the old lease expired, the old lease royalty % and charges/deducts would still apply. I don't think third party lessees pay very much up front either, as your current lessee might still get a well started in time to perpetuate their lease. I really don't see an upside to top leasing for the mineral owner. If your current lessee wanted to top lease and you suggested a new lease superceding the old one that addressed any issues you found objectionable in your current lease, that gave you security now and the lessee security in that they wouldn't lose the lease, I think that would provide something for both sides. Outside of that, I'd let the lease expire.
Sounds very much like they want to lock in a nice low profitable rate. They may change their tune the closer you get to the expiration date. Out of curiosity, how close are you to expiration? Many people here are asking the when will the toplease offer come question.
Our lease expires January 29, 2012
r w kennedy said:
Sounds very much like they want to lock in a nice low profitable rate. They may change their tune the closer you get to the expiration date. Out of curiosity, how close are you to expiration? Many people here are asking the when will the toplease offer come question.
That's great! I wouldn't pass up any opportunity to let the landman know you are seeking other offers, which I would be doing. Remember, if you lease your acres to someone other than the operator and your lessee participates in the well the operator makes nothing off your acres. They don't like that.
thanks very much.
r w kennedy said:
That's great! I wouldn't pass up any opportunity to let the landman know you are seeking other offers, which I would be doing. Remember, if you lease your acres to someone other than the operator and your lessee participates in the well the operator makes nothing off your acres. They don't like that.
Thelmarule, I replied on your homepage. The nearest well to your spacing (1 1/2 mile away or less) produced 13,000 barrels of oil in october. I'd say there was no risk that they will find oil in paying quantities.
Folks,
The nomenclature of "top lease" sounds like it is being misused in this instance, probably by the people thelmarule is talking with. What she is talking about sounds like a simple renewal. Historically, the phrase "top lease" is used to describe a circumstance when a company acquires a lease covering a mineral interest that is already subject to an existing oil & gas lease (within its primary or extended terms), but which is probably going to expire in the next 12 months or less. Buying a top lease in this situation is a risk for the company buying it, since the lease may never become effective if the existing lease is maintained beyond its primary terms, especially by production. Again, this sounds like its the same company, the current leasehold owner, wanting to extend and renew the lease it already owns. That would more accurately be called a renewal or extension. The phrase "top lease" is not normally used to describe this situation.
Mr. Skipper, while the OP lease is now expired , it was in effect when she first posted and she was dealing with companies other than the one that held her lease. Would that not be defined as topleasing ? I realize you probably couldn't have gotten that from the original question. I only know because of Thelmarules other threads and posts.
Mark Skipper said:
Folks,
The nomenclature of "top lease" sounds like it is being misused in this instance, probably by the people thelmarule is talking with. What she is talking about sounds like a simple renewal. Historically, the phrase "top lease" is used to describe a circumstance when a company acquires a lease covering a mineral interest that is already subject to an existing oil & gas lease (within its primary or extended terms), but which is probably going to expire in the next 12 months or less. Buying a top lease in this situation is a risk for the company buying it, since the lease may never become effective if the existing lease is maintained beyond its primary terms, especially by production. Again, this sounds like its the same company, the current leasehold owner, wanting to extend and renew the lease it already owns. That would more accurately be called a renewal or extension. The phrase "top lease" is not normally used to describe this situation.
If another company is trying to buy a lease covering minerals under an existing lease, that would be the typical circumstance for calling it a top-lease. I got the idea the then current lessee was simply trying to renew its own lease, and that would be called a renewal or extension, probably an extension since it sound like the lessee did not intend to sign a new lease.