Hunter Energy Lease Offer

Our family has been under lease with several companies but most recently Weatherly which declared bankruptcy.  Just recently we have been approached by another company to lease the property.  What are the going rates?

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Permalink Reply by Skip Peel - Mineral Consultant on November 26, 2019 at 16:23

Ann, specifics are important and there is no such thing, for me, as a going rate.  Much depends on the location, the number of acres, the lease terms being offered and whether there is potential for competition for your lease.  Weatherly has/had? leases in section 15 - 17N - 12W and sections 17, 20 & 29 - 17N - 11W which would be valued for the Haynesville Shale.  The company has rights in other sections in this general area of the Sligo Field which ma also include the deep rights.  Much depends on which section your minerals are in regarding which company would value them the most.

Permalink Reply by Ann Edgerton Darling on November 26, 2019 at 17:11

Thank you for the information. Our original lease was with Chesapeake and 3 days before that lease expired they began installing the equipment and drilling.  We received royalties for a couple of years and they put it in a shut out so all royalties stopped.  It was then sold to Weahterly.  We are in the Ashland Field and have 26 acres of the 640 acre Guin property.  Does this help?

Permalink Reply by Skip Peel - Mineral Consultant on November 26, 2019 at 17:17

Yes, it helps but not what I was hoping for.  Since most of what Weatherly has is in the Sligo Field, I was hoping your minerals were there.  There has been nothing in the way of new wells since that handful of early Chesapeake wells in the Ashland Field.  I don't see any current interest as far as drilling but it is nice to have a lease offer.  If you can share the terms being offered I will give my opinion but I doubt there would be an opportunity to set up a competition with other potential lessees.

Permalink Reply by Ann Edgerton Darling on December 14, 2019 at 10:59

The lease offer is with Hunter Energy out of Ruston, La. The offer was $250 per acre and a signing bonus of around $3000.  All of the equipment is still on the property. 

Permalink Reply by Skip Peel - Mineral Consultant on December 14, 2019 at 11:07

Ann, the least important term in a lease is the bonus per acre offer.  If the other lease terms are good, $250/acre might be a reasonable offer.  $3,000 won't last long or do much.  If one or more producing wells were to be drilled under a bad lease on 26 acres, the difference in future moneys to you might be tens or hundreds of thousands of dollars. A heck of a lot more than $3K.

Permalink Reply by Ann Edgerton Darling on December 14, 2019 at 11:10

Thank you...but what would good terms be?  I don't have the lease in front of me right now and can't tell you what they are.  Where is the lease would it say? 

Permalink Reply by Skip Peel - Mineral Consultant on December 14, 2019 at 11:22

Ann, there are too many possible terms some which would be appropriate for your particular situation and some that would not.  With a mineral right covering 26 acres you have enough at stake to get some help from an experienced O&G attorney.  Yes, there will be a cost.  Maybe a few hundred dollars.  It is worth it, a good investment.

Permalink Reply by Ann Edgerton Darling on December 14, 2019 at 13:00
It’s a 3 year lease on 56 acres at 3/16’s with a renewal after the 3 years if we wish. Is this the information you meant
Permalink Reply by Skip Peel - Mineral Consultant on December 14, 2019 at 13:14

That's part of it.  With a little negotiation you should get a slightly better royalty.  A three year term is fairly standard as is a renewal which should be factored into the bonus, so no renewal option for $250/acre.  Ann there is a whole lot more to an O&G lease then what you may see in a standard lease form.  O&G leases often have an Exhibit A that expands upon or clarifies certain lease terms.

I'm not going to review the lease for you but if you wish to cover your bases and avoid any future disappointments, get a copy of the actual lease form.  Let me know, and I will do two things.  Refer you to an attorney that can provide you with an Exhibit A. As I mentioned that may cost you a little money, I'd guess $200 to $400 for a quick review and an Exhibit A. I'll also give you my opinion of how you might negotiate a little better lease.  From what you have told me, this company is fishing for a cheap lease.

This is all pretty easy and straight forward and something that I would encourage you to do especially since you now state that you own 56, not 26 acres.

Permalink Reply by Ann Edgerton Darling on December 14, 2019 at 16:12

Thank you Skip.  I really appreciate the advice.  My problem is that I don't have the actual lease in my hands right now since i am out of town and dealing with getting the information from my siblings via text messages.  I will be home on the 19th and can send you the Exhibit A then.  I would certainly be willing to spend some money for an attorney to give it a quick review and suggestions of the best way to go.  I am not certain what and Independent Landman does but I certainly am appreciative of your help.  Is there an email that I can send that exhibit or just upload the file here?

Permalink Reply by Skip Peel - Mineral Consultant on December 14, 2019 at 16:27

Ann, I prefer not to post my business email in open discussion.  I posted it on your personal page.

Permalink Reply by Ann Edgerton Darling on December 17, 2019 at 14:47

I haven't gotten used to this site yet so I don't know how to go to your personal page but I wanted to let you know that I just emailed that lease to you.  My email address will be on the email along with my brother and sisters' email address.

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