As a newbie, does the degree of speculation on the broker/oil company leasing affect the ability of negotiations, particularly how the lease is submitted with regards to the terms of the bonus? Thanks, Cynthia Schoeppel
Cynthia:
When you refer to speculation, are you referring to leasing in a "provern" area whereas good producing wells are in the proximity of the lease or is the lease in an area which is virtually undrilled and any well is drilled on speculation based on seismic reports, etc. Naturally, if the area is comprised of multiple good producers, your negotiation power is very strong in all aspects of the lease including bonus, royalty and other matters. If the area has seen little to no drilling, the negotiation power is lessened since the "risk" factor is much greater for the operator.
Cynthia,
Leases are acquired in several ways. The two most common ways are 1) An exploration company hires a land company to take the leases and provides them a target area and budget based on geologic potential. Any counter offers outside the budget will be subject to the approval of the exploration company and 2) Land speculators with differing business motives but usually with some geologic knowledge, will take leases that allow them to participate in exploration and production or to tack on a profit and turn the lease to the greater fool or a company that they speculate will want a position in the area.
In my opinion, it is up to the mineral owner to know his or her mineral potential and understand business risk in setting lease terms that will capture the proper revenue for sacrificing control of the minerals through leasing. Mineral owners rarely speculate unless that is their business model.
As this interest is owned in Kiowa County CO, I've been told that this would be speculative. So I guess what I'm wondering is about all of the information on Mineral Forum about payment of lease, i.e. suggestions about a cashier's check, bonus in escrow, initially send broker copy only of executed lease, then 15 days to send check and they get the original, etc. As you can tell, I'm not sure if I have any bargaining power about this part of the lease. Thanks, Cynthia A. Schoeppel
Cynthia,
RULE # 1 for mineral owners: Never, never, never deliver a signed lease to the Lessee prior to payment!
Once they physically hold your signed lease you have ZERO bargaining power. If they're dishonest you may have also just 'signed' off on some large legal bills cleaning up their mess. So yes you have bargaining power on delivery of the lease. They may initially object. Or, they may want to modify the terms you listed (number of days, etc...), yet if they want your lease they will comply with RULE # 1. There are several ways it can be handled while protecting their interests and yours. So don't ever bend on RULE # 1. Good Luck
If the leasing agent wants you to compromise your needs in a lease because you are in a "speculative" area, they are asking you to take a risk with them. You don't need to do that. You own the minerals and there is no speculation about that. If they want to speculate on your lease, they should do so under your terms not theirs. "No, Not Now" may be your best option. The minerals aren't going anywhere unless you let them.
Cynthia A. Schoeppel said:
As this interest is owned in Kiowa County CO, I've been told that this would be speculative. So I guess what I'm wondering is about all of the information on Mineral Forum about payment of lease, i.e. suggestions about a cashier's check, bonus in escrow, initially send broker copy only of executed lease, then 15 days to send check and they get the original, etc. As you can tell, I'm not sure if I have any bargaining power about this part of the lease. Thanks, Cynthia A. Schoeppel