Me and some buddies own a section in western Coke County that we bought strictly for hunting. I received a letter this week from a company interested in leasing our mineral rights. They are offering $200/ acre and 20% royality for a 3 year lease with an option of an additional $200/ acre for a 2 year extension.

My questions- In your opinion does this sound reasonable and what is the liklihood that they will actually drill? Thanks!

Get you an Oil and Gas attorney to look at the lease. I would get one that comes highly recommended and from the area so he will know the going rate and advise you on length. There are lot of little things that become major issues when it comes to the fine points in a lease. With today's boom I would not even consider the 3 yr lease option at another 2 yrs for the same amount. Also in South Texas the going rate is 25% of production right now. If you do not ask for more they will not offer more.

25% is the norm in WTX now.

PM me - I am a petroleum landman.

And DO NOT sign a lease with an option!

Not sure what the going rates on lease monies are in West Texas but right now in the heart of the EagleFord Shale play right now leases that are not drilled or get screwed up and lapse are getting as much as $10,000 per acre. So not sure what your area is producing with wells but if they are interested I would think with a section of land you have enough room to get the best deal you can. Also I would seriously research the O&G company that is leasing you to see if they are a reputable company as all are not. In South Texas right now a lot of landmen or land companies are leasing properties for O&G companies to hide the main company. A great O&G attorney is worth the money you pay him.

Yep lawyer up!

I have this to offer as I hunt on gas leased properties and work in the oilfield. You open your land to anyone that the O&G wants to let in. They have the right to do what they want on their "lease" for that allotted time. Is the pad near your blind, then expect a frac crew running 15 trucks for weeks at a time 24 hrs a day. After the wells are completed expect water/oil haulers whenever the tanks are full. And when they are producing, expect punters, work over rigs or whatever else they want/need to do. Do you have nice roads now, expect that to end unless it's in your lease agreement. Do you hate trash/cig butts being thrown on the ground, get used to it. My main concern about a place I leased was that I never ran into the same pumper once, for all I knew they weren't pumpers at all. Found truck tracks by my stand and cam and who knows what they were doing.

Rant off

And once the gate combo is out there, it's out there. Say that water hauler saw a 150 class buck. After shift change is over he takes his personal truck out, has ur gate combo, shoots that deer, and you are none the wiser.

All that said, even if you only manage to lift $250/acre from the oil company (assuming you own 100% of the minerals) you guys will split a check for $160,000.

If you negotiate a 25% royalty and they drill a couple of 7,000' strawn wells that each produce only 50,000 barrels of oil before they are abandoned, you guys will gross something like $2.1 million (assuming $85 average price for oil).

I personally wouldn't mind dealing with some pumpers if the lease was going to pay for the land...

Just sayin'

If you get a deal worked out make sure they only have a lease for a petroleum "line", not "lines". One piece of our farm land has this distinction and they have to get a new lease anytime they want to lay in a new line, otherwise they can put as many lines as they want to across your section. I can promise you the O&G company will fuss about it but stick to your guns if you can. I wouldn't say anything to them, just make sure thats the way the lease is written when you sign it and send it back.

Don't do it unless you plan on hunting somewhere else. Take a good look at what cxjcherokec said.

200 and 1/5 is fair in Coke County, but you could probably do 250. Don't give them the option. Anything you discuss with the Landman and agree on, you want in writing on the lease.

Also be aware that the company that you sign with may not be the eventual owner owner/operator of the lease.

To clarify, I think what you're saying is something like "Lessee may build, contruct, repair and/or replace one pipeline per well only, and in no event shall said pipeline or pipelines exceed 4" in nominal outside diameter, for the transportation of liquid or gaseous hydrocarbons."

You're right that they will fuss and, while I completely agree that this is something I would negotiate HARD for, there may be considerations that would make this a dealbreaker for the company. In that event, instead of digging your heels in you may want to consider a provision arranging for a pre-negotiated price-per-rod for ONE additional pipeline, in addition to actual damages as determined by an independent appraisor and you would want to retain approval of the pipeline route (such approval not to be unreasonably withheld)/

And you say you work in the oil field?

I would hire an O&G attorney to write up a custom lease. If you truly own 640 acres, surface and minerals you have a TON of negotiating power, and most likely you can get an O&G attorney to write a hell of a lease with very specific surface use, continuous drilling, staking fees etc.

Also, never forget water usage. Companies can drill dry wells, but fresh water for drilling and fracing can make you rich quick.

Some good advice on here. The best being to get a good O&G attorney. What has served me well in the past is to get the names of three or four of the largest landowners in the area and go to the courthouse and get copies of their leases. These landowners ,most likely, will have gotten the best attorneys to write the best leases. Then you and your attorney can pick and choose what suits you best and you are not likely to leave out any thing.
Now for what "not to do". Never, never, never sign that little two or three page lease that the landman is going to put in front of you. It is written by the oil company for the oil company. Everything in it is slanted toward the oil company. Need proof ? Go back and read about the frustrations about problems with oil workers and oil companies and not being able to do anything about it.

I have worked in the oil and gas industry for over 35 years. You can put anything you want into the lease including where roads can and cannot be. And what time of day pumpers can or cannot enter the lease. This can also include trucks. you can also include the right to ban people/companies for violations. You can also include the right of approval of anyone they elect to sell the lease to. All of this has to go in up front though and if they don't like it they don't have to sign. As suggested get yourself a good O&G lawyer but know what you want going in and ask for it. If they don't like it they don't have to sign.

Many many years ago a sage old O&G man told me "Always be prepared to walk away". Kinda follows what Bud1Pointer is saying.

With 640 acres of minerals you have lots of bargaining power on your side to a point. You do not have to lease it right away either. The good is if they start to drill and hit a few good wells then you bargaining power goes up. Bad is if they hit nothing and you are out of the lease bonus if the cash is important to you. If there are any existing wells in the area then I would get on the RRC site and search for production queries on those wells to see what they are doing now and have done in the past. Someone posted about wells in the Strawn producing 50,000 bbls as an example. Here is an real example from the Eagle Ford Shale as a comparison. I know of 2 wells that are within 1 mile either side of my land that each did over 100,000 bbls of liquids + gas in 11 months last year as an example of what you could get on a directional drill. Directional drilling cost more but the wells can produce a lot more in the right areas. Some really good advice here.

Im not taking sides by any means, but you can clearly see that cxj has concerns of his own knowing "the type" of people he sees on the sites he just so happens to work on. And he also hunts properties that are under lease and sees what has happened to those places due to the oil/gas companies entering the property. Just sayin is all

Even if it screws up your hunting for a 3-5 year period, you can and your buddies afford to hunt elsewhere during that time and still have a nice chunk of change in your pocket.

Rancho, I obviously stated in my post that I did do what's your point? NDN, that is about the only way I'd go about it. It's lets the deer mature or one and also eliminates the likelyhood of theft, blown hunts and heartache. You can ask the world from the oil company but they will tell you to piss of and jut go to your neighbor. You can't really limit their hours of operation much due to the hazards it's creates. Do you want a tank battery overflowing with crude of waste water and damaging your property of creating an OSHS violation. Without pumpers checking these things on a regular basis it would happen. Would you like to fid out you have a gas leak after a lighting strike? They need reasonable access to maintain their equipment and operate safely. Another thing to think about is what happens if that well stops flowing, they don't sell the gas or crude and you don't get your royalties. Say thats all of deer season, 4 months of non profit, then a few weeks of workover operation if the well bore can be saved. So now you are out 5 months, if bit have a dead well and no royalties. The situations I posed we're issues I had on my last deer lease and the new construction of the lease I'm currently on has forced me to leave. Some of the folks I know in the field would do these things, albeit a minority but all it takes is one.

Kinda what I was thinking, must be a punter!