oil and gas leases?

Discussion in 'Countryside Families' started by okiemom, Nov 15, 2007.

  1. okiemom

    okiemom Well-Known Member

    Messages:
    2,292
    Joined:
    May 12, 2002
    Location:
    N.E. OK
    What is there to know about selling a mineral lease? We had someone call us wanting a 3 yr.. lease. what do we need to watch out for? Pm if you wish thanks Katharine
     
  2. Christine in OK

    Christine in OK Well-Known Member Supporter

    Messages:
    3,932
    Joined:
    May 10, 2002
    Location:
    Central Oklahoma
    If they're offering $50/acre plus 1/8, ask for $75/acre plus 1/4. If they're offering $75/acre, ask for $100. Whatever their first offer is, they generally have a better one waiting.

    If you have royalty in more than one section, ask for a separate lease for each section. If they drill and have a good well, they can keep every piece of property listed on the lease tied up until the well on that one section is exhausted. If they are on separate leases, then at the end of the lease period, they will have to re-negotiate the other areas.

    If you own both the land (surface) and right (mineral) under the same piece of land, before you sign the lease make sure that it is in there that the company will have to negotiate separately with the landowner for damages if they do choose to drill a well. That way the landowner may have a little more leeway in deciding where a well might go. They can't say no to a well, but they apparently have a little more sway, since the company legally has to deal with them.

    Can you tell we went through this recently? I am the only one in my family who never signed the papers! They could still force-pull me, but they would have to want it pretty badly to mess with going to court over the deal.

    Also, make sure it's a lease - just out of the blue a couple of months ago I had a letter from a company offering to BUY my rights. Uh-uh, no, I don't think so.

    Lance and I discussed rather than splitting them up again and again, when we die we may just will them to our church instead.
     

  3. Michael W. Smith

    Michael W. Smith Well-Known Member

    Messages:
    5,998
    Joined:
    Jun 2, 2002
    Do you live on the land? If so, make sure you get free gas. Most companies will offer you 100,000 - 150,000 cubic feet of free gas per year. They should have no problem going up to 200,000 - 300,000.

    If you have a larger section of land, tell them you want 200,000 or 300,000 of cubic gas per year PER WELL!!!!

    It all really depends on how bad they want your property to drill. 3 years is too long. Make it 1 year minimal, 2 years maximum.

    And when talking about the free gas, scratch out the "for one dwelling". Heat your house, your garage, your barn, the dog house, future houses your kid(s) may build.

    And find out for sure if this guy is actually works for a gas company or if he is just some shyster out getting leases for cheap, and then offering them to gas companies for the highest bid.
     
  4. heelpin

    heelpin Well-Known Member

    Messages:
    526
    Joined:
    Nov 18, 2003
    Location:
    Mississippi
    The standard share for a mineral owner under a lease is 1/8 but most companies now offer some upfront money (usually 100.00 per acre in my area) and 1/16 over-ride, this gives the mineral owner a total of 3/16 share of any production without any out of pocket expense for drilling and maintenence. It is possible to negotiate a 1/8 over-ride with a total interest of 1/4 if you have large acreage but with small acreage its doubtful. I would never lease for more than two years.
    You can also choose to not lease and if your mineral acres fall into the production pool you will be charged 300% of your share of drilling and operating expense which will come out of the first production, after that you will have a full interest less your share of operating expense.
     
  5. okiemom

    okiemom Well-Known Member

    Messages:
    2,292
    Joined:
    May 12, 2002
    Location:
    N.E. OK
    Thanks so much,

    I have been getting calls that are getting more and more persistant. I know something is up. I also understand that if I go to the courthouse I can find out how many mineral rights have been bought up and what other activity is in the area and for how much they leased the land.
     
  6. fantasymaker

    fantasymaker Well-Known Member

    Messages:
    6,787
    Joined:
    Aug 28, 2005
    Location:
    IL, right smack dab in the middle
    Could you explain this in more detail?
    Does it mean that If I dont want to sell my oil they can take it and charge me for what it costs for them to steal it?
     
  7. heelpin

    heelpin Well-Known Member

    Messages:
    526
    Joined:
    Nov 18, 2003
    Location:
    Mississippi
    No, they can't take your oil without paying for it but there is a penalty for not leasing. If you choose to not lease you will have a 100% working interest for your acreage, in other words if the well is pooled under 40 acres and you own 10 acres you will be responsible for 25% of the drilling cost plus the 300% penalty but they can't come after you, it will be taken from your share of first production until its paid off and then you will start getting a check for 25% of production less 25% of the expense to maintain the well and sell the oil.
     
  8. Windy in Kansas

    Windy in Kansas In Remembrance

    Messages:
    11,076
    Joined:
    Jun 16, 2002
    Location:
    South Central Kansas
    Some of what you are writing is a little confusing. The correct terminilogy is needed for us to be on the same page as you are.

    You won't be selling a mineral lease. What you will be doing is leasing. Selling a lease would be having procured a lease in a leasing agreement with someone else or if you have purchased a lease to resell.

    A lease for oil and gas rights in not selling or transfering mineral rights. You retain them, but are extending the right for the leasing agency to drill on the land or even SELL the LEASE to another party. Them selling the lease won't affect the lease agreement, only change who holds the other side of the lease.

    You mention going to the courthouse to find out how many mineral rights have been bought up. Buying up mineral rights and leasing them are two entirly different things. If you own the mineral rights you can sell them which is permanent unless you would by them back. Leasing is temporary and until the lease expires or is extended with another lease agreement.

    It seems every state or area within a state is different. Where I hold land in Kansas a three year lease is common. About all one can squeeze out of a leasing agency (maybe oil company) is $40 per acre without any overrides that others have mentioned.

    One thing I would watch out for is some lease agreements that give the right to pool your land in with others so that if a well is developed you all share in the pie. That is fine and dandy unless the well is on your property and others get a piece of it. The leasing companies often use this tactic now so that they aren't required to drill wells on adjoining land that are called offsets. Offsets are frequently required by states so that the oil isn't pumped out from under your land without you receiving benefit from it.

    While leasing doesn't provide great amounts of money if a well is developed it can in the end. Because of that you may wish to have an attorney advise you if you should be offered and so inclined to accept a lease. Of course that is just my opinion.