My friends and I own a section of land just west of Robert Lee in Coke County. We were contacted today via letter by a company requesting to lease our property for $600/ acre for a 3 year lease and we retain 20% of oil production. Can anybody confirm that this is in line with the going rates? Any other advice appreciated as well. Thanks

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Lots of things to consider but 20% is low.

My experience with offers at first is that they are 50% less or more than the going rate for leases. The rates per acre for lease bonuses in the Eagle Ford are way more per acre than your offer. Way more. The going rate for your share of production in the Eagle Ford is 25%. These wells cost a lot to put in but the returns are good enough to support 25%. You have strength in the fact you have 640 acres of land. My suggestion is get you a great O&G attorney that will write a lease that will work for you and then negotiate you the best deal for money. The lease they sent you will be in the O&G companies favor I will assure you. Is the offer for a veritcal or horizontal drill? Get you limitations on depth of drill for a specific shale also. Do not give them an open lease to hold it with one well to the center of the earth. Get your attorney to write you things in the lease to insure speedy drilling and development of when they start to drill. Surface damages need to be addressed in the lease also. A really great attorney can do all this for you.

Get an attorney to make sure you understand both the value of your minerals and any offers that come your way. By all means never cash a check that is sent to you unless you have a full contract in place. Doing so could put you into an agreement you may not agree with. Typically these type of agreements are negotiated. A lot of land man will come in very low to see if you bite.

Great advice fellas. The money you spend on an O and G attorney will easily be recouped with a much better (for you) contract. Obviously they're going to come in with a lowball offer and contract that is looking out for their interests and not yours. You're probably going to get an offer to "Buy" your minerals, we were. DON'T DO IT! They'll have a check written up with your name on it. DO NOT cash it. Tear it up.

Here is a related story on fracking lease agents that will make you some money. Get a good OG lawyer.

link

Its hard to compare any two areas on what the going price is per acre on the leases because history of the production in that area and current activity as well as a dozen other factors determine what the lease rate is. In some areas, 20% is really high and 12.5% is the going rate and some areas have most leases going at 5 yr leases with a production hold on any lease. If a company is really trying to get enough land for a pooling agreement and to actually drill a well in the area, they probably will not come in and negotiate on the terms of the lease as far as percentages and years are concerned. There should be a lawyer in your area that deals with oil and gas leases who would be more than happy to go over the lease with you. Bad info from people who mean well could cost you a fortune in the long run. Sometimes it is better to lease the land if a well is planned and reap the royalty interest that will follow. The royalty is more important that just the lease money because it is long term and many times, pretty substantial.

There is some good advice and some bad advice on this thread. It is a good idea to find an attorney that is very familiar with negotiating oil and gas leases in the area. Lots of attorneys will say they are, but you want to find one that actually has a lot of experience. However, you do not want an attorney that is so tough on the Oil Company that they decide not to pursue a deal with you. This happens, and it happens often.
As per the Bonus and the Royalty, I do not know if $600 is a good offer for the area, it never hurts to ask for more, but if you can only get one more bonus or more royalty, get more royalty. That being said, 20% is a very competitive offer, contrary to what people want to believe, it is very very hard to get more than this, unless you are in the heart of the Permian, or are in an open area of the Eagle Ford, you probably will not get 25%. Even in these areas, most leases are not over 20%, for example EOG (one of the largest if not the largest operators in the EFS) took several hundred thousand acres of leases at 20%. Of course there are examples of leases with 25%, but it is the exception not the rule. Sometimes when a company comes in looking to put together a big lease block, they will decide that they are going to flatly offer a lease Royalty. They might could lead with a lesser amount, say 3/16 instead of 1/5, but it is easier going forward if you can look at a landowner and say that everyone is getting a 1/5th lease, it helps to have everyone on the same page going forward, this helps minimize the hold outs that think they can get more if they wait. Lots of times these land owners get left out and get nothing. You have to remember that even the EFS and permian once started out as just an idea, not all of these work, most do not, so by holding out you are running the risk of getting nothing.
Pigs get fat, hogs get slaughtered. Good luck with the lease, feel free to PM me if you have any questions.

Good attornies aren't cheap and cheap attornies aren't good.

Also, with that in mind, think about a personal banker / investor and a trust for the future generations.

they're gonna need water lots of water make them pay you for it don't leave nothing out!

Don't confuse a "mineral lease" with a surface agreement as mentioned above concerning the water. Again - bad info on the forum could cost you a fortune. Water usage, roads, entry points, etc are all covered in the surface agreement with the owner of the land where the actual site will be located and shouldn't even be talked about on the original mineral lease. Two completely different situations and two separate contracts.

The surface usage should absolutely be agreed upon at the time of the signing of the O&G lease. Surface usage is granted by the signing of the lease. If there are not clauses in the lease that protect the surface, the company can use the surface as needed insofar as they are using regularly accepted industry standards. The surface owner cannot stop the mineral owner from developing their minerals.

I've leased over 125,000 acres for mineral rights and have never seen a surface agreement in the same form as the mineral lease. How would a mineral owner in a pooling agreement sign a lease with a surface agreement for a well being spaced 80 acres off their own place? Only the person who has the well on their property signs the surface agreement because the surface agreement doesn't even come into play until the well site is established; and this is after all the leases have been obtained for that particular block of leases.. In many instances, the landowner who signs the surface agreement may not even own any of the minerals and doesn't even sign a mineral lease. Maybe you could tell me the form number of the form that has the surface agreement on the same form as the original lease.

In the leases on our properties I have included the surface agreement and damages as an addendum to the O&G lease. I reference the addendum in the body of the lease and state that the addendum is controlling over any inconsistency between the two. Of course where I don’t own the surface I make no mention to surface items or damages in the addendum. Is this not workable? I've never been pooled...

When they start trotting out the "form #" leases like TX-88, etc. get ready to bend over. I have my own lease that we use as a starting point. The last one that I signed probably ran 6-8 pages.

Our lease had both on one lease contract. Our neighbors had both also. My lease was 26 pages in length.

I find it interesting in the advice one gets on these threads- landowners who have done leases, landman working for landowners, landman working for oil company, oil company mans and then the attorney versions. I will take a landowner friends advice and then go with an attorney in all cases. My attorney works by the document and not by the hour.

Surface agreements for an actual well site include the exact ingress/egress, the topping for the road to be put in, where the holding tanks and mix pits will be located, and a myriad of other exact parts; not hypotheticals in case there might be a well put there. A site survey has to be done in order to establish much of what is found in the surface agreement. How can this be done when it isn't even known if a well will be drilled on the place? Or, do any of these places mentioned in this thread even have wells drilled on them from the leases you have personally signed? If a well isn't planned for that particular location, why would anyone even waste their time with a surface agreement anyway?
aeb - the TX 88 form you mention is hilarious. Its a going joke in the leasing/drilling business saying that you signed or offered a "Producers 88" form because there are hundreds of different lease forms; nearly all with their name being the "Producers 88" which is usually printed on the form. Ya gotta love it.

I find it pretty interesting too. I'll always take an attorney and try to gouge on the lease bc there's no guarantee the unit will see production, just depends on what gets hot. 3 yrs ago out in that area (slightly North) ppl were signing leases for <$200 and flat out selling minerals interests for $1000+/- an acre, it perked my interest when I was told by a cpl landowners that up until then $50/acre lease was the norm.

I work for one of the largest lease holders in the Eagle ford and 20% is a great starting offer , on the other hand $600 a acre is a little low . $900 - $1500 a acre depending on area is about right and 15% -22% royalty rights. Like I said I actually work for a Oil company these are just not hear say prices , BUT with that said being that you do own a full section ( 640 acres ) I would not listen to anyone on this forum about prices myself included , Hire a Lawyer , again hire a lawyer . It will take you longer to get the deal done but will be beneficial in the end. Discuss how many wells , where they are wanting to build the pad , how big a pad , and if it is going to be multiple well pads. Also it is fairly easy to get some land work thrown in for free , if you need few tanks/roads built. It is fairly standard but be sure to include road up keep.

Forgot to add , I'm guessing they started off with such a high royalty % to off set the kinda low per acre bid. Its up to you but if it was me I rather have a higher royalty because during the life span of that well oil prices are only going to get higher which equals bigger checks.

since this is a hunting forum wait till opening morning and you pull up to the gate and there's 9 locks locked together and yours is gone!!

Never leave home without extra water and bolt cutters.

That is why I always have a universal key in the pickup.



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