How do I go about accepting a lease? (Texas Haynesville play)
I'm posting this for my grandparents that is not computer literate. They have a few hundred acres in Shelby County and were given an offer of >$4000/ acre @24%. Now a landman (who is also a long time aquaintence of the family) stepped up and said that he could shop the land for us to get a higher price. In order to do so, we need to lease the land to him (an "open" lease where the lease price isn't on the books) and he would find a better deal. Actually, the lease wouldn't be in his name, but a third parties name, because the landman didn't want to make and enemies by using his own name since we works will all the companies in East Texas.
From my description you can probably see that I'm not experienced in the oil lease business. I have read on these boards that many leases are going for the $4-5K rate, but don't know if theres more to be made, and if this landman is being honest with us. When we began to question him, and he did not give the family a hard sell. But he did say that if we want to do it, it needs to be done fast. From experience I've learned to not trust people who try to force me into quick decisions . . .
So, is what this person wanting to do a common and valid practice? Or is this something that will give him money but not help us? Isn't $4300 + 24% a pretty attractive offer already? Any advice is appreciated
From my description you can probably see that I'm not experienced in the oil lease business. I have read on these boards that many leases are going for the $4-5K rate, but don't know if theres more to be made, and if this landman is being honest with us. When we began to question him, and he did not give the family a hard sell. But he did say that if we want to do it, it needs to be done fast. From experience I've learned to not trust people who try to force me into quick decisions . . .
So, is what this person wanting to do a common and valid practice? Or is this something that will give him money but not help us? Isn't $4300 + 24% a pretty attractive offer already? Any advice is appreciated
Views: 195
Replies to This Discussion
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Permalink Reply by Karen Mathews on
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How do I contact these men you mentioned...Devon, Noble and also Celero?
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HEY MY MINERALS ARE IN BETWEEN PAULS STORE AND HUXLEY, ABOUT A HALF A MILE FROM BANKS OF TOLEDO BEND. KNOW ANYTHING ABOUT THIS AREA
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BURTON PAUL A-566
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BURTON PAUL SURVEY
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Permalink Reply by Carter on -
Market on that right now is +/- $3,000 to $5,000 if Chesapeake would take it. My family has a 150 or so acres on minerals within a few miles of you. The two small tracts around 40 acres were leased at $2500/acre and $2000/acre with a 1/4 royalty by Chesapeake back in April of this year. We made an informed decision to lock in profits at that level knowing that prices could very well shift upward. Having said that, we knew that the remaining 110 (currently leased) would come open in 2009. Our rationale was to lock in bonus profits that were unprecedented in Shelby County early, and then if the trend continued upward, lock in bigger profits in 2009. That is some hedge against the alternative: prices going down, this thing being a bust, natty going under $7.
As I have said before, the leasehold position of Ellora, Hunt, and St. Mary's have depressed bonus prices in SE Shelby County due to the fact that Chesapeake has been allowed to set the ceiling on prices without real competition on buying pressure past $3,000 or so.
I am real curious to know what Ellora offered down there. They hadn't deviated from the standard $200 to $300 that they had been paying for leases until this thing blew up as of a few weeks ago. Anxious to know if they are still trying to slip and buy leases at that level... or if they have upped the numbers any.
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ELLORA IS OFFERING ALOT MORE THAN THAT . OVER 1,000 AN ACRE, WITH 20 PERCENT ROYALTIES.RIGHT AROUND THERE. BUT ARE DOING THERE BEST NOT TO LET ANYONE KNOW. I HAVE FRIENDS AND FAMILY WHO SETTLED FOR THE 200. AND 300. AND IT IS SO UNFAIR. I HAVE DONE MY RESERCH AND THEY HAVE KNOW THIS FOR 2 YEARS, SOMETHING BIG WAS COMING, AND FOR SURE IT WAS THERE FOR A YEAR. MY LAND MAN HAS BEEN TRYING TO SIGN ME SINCE JAN. ON A LEASE THAT DOESNT EXPIRE TILL LATER THIS YEAR. SO WHAT DOES THAT TELL YOU.
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Permalink Reply by CheetahBait on
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If you are getting offers of this level right now, you may want to hold off just a bit - however, Shelby County is not definitely in the anticipated play, so holding off may hurt you somewhat. If you can, I would give them no more than a 1-year term. If you use a local attorney, you might try the Fairchild Price Firm, as they have offices in Center, Nacogdoches (I believe) and Houston and should be well versed on what is going on in your area. $4,000 is not bad for the lease, provided you look very closely at the costs you share with the Lessee. Sometimes those costs can actually net you down to a much lower overall royalty. Have the attorney check that also. However, in Texas it is very easy to configure the unit to the acreage leased and you could risk being drained and never receive any benefit of the production. Be cautious, but don't wait forever.
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Permalink Reply by lanadan Ds3 on -
"however, Shelby County is not definitely in the anticipated play, so holding off may hurt you somewhat"
I have to disagree with you on this. At the end of the month, Chesapeake will sign a deal with Ellora Energy for 65% of the deep rights of 75,000 acres, much of it in Shelby county. They will pay big bucks for this and Chesapeake does not do this kind of thing unless they are sure the gas is there. Also, Comstock defines the play as being in Shelby county.
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"Sure" is when the well is drilled to the HS and producing.
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Permalink Reply by Kassi on
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Ask for a lease for oil, gas and other hydrocarbons only excluding coal, lignite and uranium. Also, ask for a no surface rights clause that also states the land owner has the right to refuse surface access for any reason. Make sure there is a clause requiring wells be at least 1000 ft from inhabited dwellings if your grandparents neighbors are close to their home. Make sure the depth clause is specific i.e. 100 feet below the deepest depth drilled at the expiration of the primary lease. Watch out for phrases that encompase formations as they can be side-stepped later with petitions to include this formation with that formation or redefine them, etc. If your grandparents have a water well be sure you ask that the well be tested for toxic substances such as BTEX (benzene, tolvene, ethylbenzene, xylenes, salt concentration, chloride, hydroxide, methane, TPH (Total Petroleum Hydrocarbons) as well as the stagnant water level in the well. Then there needs to be periodic testing to ensure the well has not been contaminated by O&G activity. The clause also needs to stipulate that the O&G company pay for repairs/cleanup of the well should it be damaged and to pipe in fresh water if it is not able to be repaired/cleaned. Also, if they are paying $5,000 an acre now that means they know there is something big under there. Do not get in a hurry and do not settle until you get the provisions you want and the price you want. Keep track of the market to gauge that.
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Permalink Reply by Gungagalonga on
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Hello AMC,
Congrats on your grandparent's acreage and the lease offer. The advice I have read on this board group is good and you are wise to have researched the offer before accepting.
I am working on leasing my own tract of minerals in northeast Shelby County. The last I heard was that $6,000-$7,500/acre is starting to creep in towards Joaquin, but that $5,000 is still a good deal in general for a 3 year paid up lease. 25% is the typical royalty rate.
Since it sounds like you may own the surface, listen to the advice given and contact a reputable real esate attorney. My full time job is managing minerals for a bank trust department and I cannot stress enough the importance of finding and using a competent oil & gas and real estate attorney to help with more complex negotiations.
If they are good, they easily pay for themselves by negotiating more favorable terms.
Best of luck with your family place.
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