natural gas lease

[centexguy]

I recieved a letter and contract in the mail yesterday from a lawfirm in Dallas.
They represent a company that wants to lease my land for natural gas exploration. The contract says they will pay $150/ac for a 2year contract plus 1/5 royalty of gas produced. The contract also says they will pay up to $5000 for road repairs. 150/ac sounds pretty low but 1/5 royalty sounds pretty good if they find anything. I need to talk it over with my lawyer. How much damage can be expected. Anyone know anything about this stuff?

[Sand Flat Bob]

Do not sign anything. See an attorney that deals in Gas Leases. Don't know where you are located, but here the signing bonus is $2500 an acre up. Royalty is 25%. Choice locations are even higher. The standard leases make you liable for every thing. You want the Energy company liable for pollution etc, not you.

On my lease, we took 10 pages of overriding exceptions to the standard lease.

Good luck,

Bob

[Rocky Fields]

Hey.

Sometimes the first offer is a lowball figure. As above, consult a lawyer experienced in gas leases.

Send Texican a private message. He might know a bit about this subject.

RF

[texican]

I got 200$/acre for leasing an absolutely worthless tract 5 years ago. (There had been 4 dry wells punched in the small unit over the last ten years). I've got one small 20 acre block thats never been leased... land lawyer neighbor wants to pay 50$/acre in just 'promise' money..... he'd pay that just to show an oil company that he can get the unit together... he'd then have to pay ~200$/acre for actual leasing. Around here 3/16 minerals is the standard rate. Old leases were usually 1/8.

If you own the entire unit, a company might give you 20% royalty... saves them upfront money in chasing down all the owners and the necessary negotiating. Is your area new to oil/gas? Do you know of existing wells in your county? If there's current production, there's a good chance you'll have wells on your place.

If you own the entire unit, you'll be set up to make a fortune. 20 years ago this area had a drilling revival (new techniques for 'frac'ing' wells)... some oldtimers that had wells on their land in their youth, we're able to lease their land again... and some of them were getting checks for six figures each month.... back when gas was 2$/MCF.

Damages for roads.... check with others in your area, if they have wells, to see how much they got for roads. I sold some temp road easements 7 years ago for 7$/foot. Might be up to 10$/foot now. Pipelines are the same, 7 to 10$/foot... plus damages for timber, pasture, structures. Wellsite damages now go for ~30K. I'd ask for free gas rights... they'll probably decline... but if they really really need your land, you might finagle the free gas.

If you're worried about your road, take lots of pictures, with landmarks in the pics, so you can document the current state. 5000$ sounds mighty low. I wouldn't accept any company saying they'd just do 5K worth of maintenance.... if they're using my road, they pay by the foot, they put a minimum amount of rock on the road, they maintain the profile, and make it accessible at all times to a low clearance vehicle.... plus, they repair the road in perpetuity, as long as production is active..... cause salt water trucks and other big rigs will be using the road as long as the wells active. If dust is an issue in your area, a rider on the contract for summer dust control is needed... 5K? One day of a maintainer rig costs 5K. I have the oil company that uses my road to work on it at least twice a year, and a couple loads of gravel and a maintainer runs in to some real money quick.



Sand Flat Bob... where the heck are you located? Never heard of 2500$/acre for a lease, unless it might be for a 40 acre lease on top of a giant oil field.....but they aren't making many of them in Texas any more. Also never ever heard of 25% royalty. Must be nice...

Don't take any one's word for anything. Don't sign anything unless you've got good eyes.......read every page of the lease, and highlight anything you don't understand or know... do this 'before' going to an attorney... you'll be better prepared. There are lots of people who make livings by 'buying' leases...for theirselves... sign the document, you get a nice check, and your royalties are transferred over to them. I get at least a couple of these 'offers' each month.

[Sand Flat Bob]

Originally Posted by texican

I got 200$/acre for leasing an absolutely worthless tract 5 years ago. (There had been 4 dry wells punched in the small unit over the last ten years). I've got one small 20 acre block thats never been leased... land lawyer neighbor wants to pay 50$/acre in just 'promise' money..... he'd pay that just to show an oil company that he can get the unit together... he'd then have to pay ~200$/acre for actual leasing. Around here 3/16 minerals is the standard rate. Old leases were usually 1/8.

If you own the entire unit, a company might give you 20% royalty... saves them upfront money in chasing down all the owners and the necessary negotiating. Is your area new to oil/gas? Do you know of existing wells in your county? If there's current production, there's a good chance you'll have wells on your place.

If you own the entire unit, you'll be set up to make a fortune. 20 years ago this area had a drilling revival (new techniques for 'frac'ing' wells)... some oldtimers that had wells on their land in their youth, we're able to lease their land again... and some of them were getting checks for six figures each month.... back when gas was 2$/MCF.

Damages for roads.... check with others in your area, if they have wells, to see how much they got for roads. I sold some temp road easements 7 years ago for 7$/foot. Might be up to 10$/foot now. Pipelines are the same, 7 to 10$/foot... plus damages for timber, pasture, structures. Wellsite damages now go for ~30K. I'd ask for free gas rights... they'll probably decline... but if they really really need your land, you might finagle the free gas.

If you're worried about your road, take lots of pictures, with landmarks in the pics, so you can document the current state. 5000$ sounds mighty low. I wouldn't accept any company saying they'd just do 5K worth of maintenance.... if they're using my road, they pay by the foot, they put a minimum amount of rock on the road, they maintain the profile, and make it accessible at all times to a low clearance vehicle.... plus, they repair the road in perpetuity, as long as production is active..... cause salt water trucks and other big rigs will be using the road as long as the wells active. If dust is an issue in your area, a rider on the contract for summer dust control is needed... 5K? One day of a maintainer rig costs 5K. I have the oil company that uses my road to work on it at least twice a year, and a couple loads of gravel and a maintainer runs in to some real money quick.



Sand Flat Bob... where the heck are you located? Never heard of 2500$/acre for a lease, unless it might be for a 40 acre lease on top of a giant oil field.....but they aren't making many of them in Texas any more. Also never ever heard of 25% royalty. Must be nice...

Don't take any one's word for anything. Don't sign anything unless you've got good eyes.......read every page of the lease, and highlight anything you don't understand or know... do this 'before' going to an attorney... you'll be better prepared. There are lots of people who make livings by 'buying' leases...for theirselves... sign the document, you get a nice check, and your royalties are transferred over to them. I get at least a couple of these 'offers' each month.

I am located in the Barnett Shale in Johnson County. They have 17 drilling rigs running in the county now. Chesapeake Energy is leasing city lots in Cleburne and other citys. They are drilling all over town in Fort Worth. Lots of activity.

Bob