Replies to This Discussion

Permalink Reply by Skip Peel - Mineral Consultant on October 23, 2014 at 2:31

Ettie, congratulations on receiving a lease offer.  The current conditions in San Augustine are quite different than a few years ago so it is not surprising that the offer is lower.  In order to provide any opinions or suggestions it would be helpful to know what company is offering the lease, the royalty and bonus and the location in San Augustine County. 

Use the following links to get tips on where to post specific questions and how to read past discussions for San Augustine County.

http://www.gohaynesvilleshale.com/page/ghs-how-to

http://www.gohaynesvilleshale.com/group/sanaugustine

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Permalink Reply by Ettie Ruth Pate on October 23, 2014 at 3:21

Skip, I am new at this forum and trying to learn the right way to post. The property is in the H.H. Hall Survey, A-404, San Augustine County. XTO is offering 500.00 per acre and 22.5%. Our other property was leased at 5000.00 an acre. Seems a lot of difference. The land lady is calling back today to see if we (my siblings) are willing to accept. My brother is the one negotiating with her and has tried to get more money for the bonus but so far she is not willing to offer more. Just wanted to find out if we should hold out or accept. She says if we don't lease then they will work around us. It seems they are set on those terms. Thank you for replying. Can't get a lot of information and was thankful to find this forum. Thanks again. 

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Permalink Reply by Skip Peel - Mineral Consultant on October 23, 2014 at 3:29

Ettie, forget the $5,000 bonus.  It is history and has zero relevance today.  $500 is a reasonable bonus per acre as long as your land is not the drill site.  The term that I would focus on in negotiations is the royalty.  I would attempt to negotiate a quarter.  And I would accept a lower bonus to get it.  Of course the number of acres owned by your family members is also a factor.  Especially concerning XTO's ability to "work around" you.

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Permalink Reply by Ettie Ruth Pate on October 23, 2014 at 4:18

Thank you, Skip. I appreciate the advice. We will go for the 25%. She was not willing to go over 22.5% the last time the offer was made. At first only wanted to go 300.00 per acre and 20%. My brother wouldn't accept. She then made the offer of 500.00 per acre and 22.5%. Will be in touch with her today. Hope the outcome will be in our favor!! We are also in the pool for the Terrier Well. According to reports it was put in operation in April. We have not heard a peep from anyone about it. Was told by different land owners in the area it could be 6 to 9 months before we draw royalty on it. We haven't received a Division Order ( to be the next step). Getting antsy about what to expect. Ha. Thanks for your advice. Will keep in touch. 

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Permalink Reply by farmbrad on October 23, 2014 at 4:49

Ettie,

Congratulations on getting an offer. We too got $5000 p/acre in 2008. Our lease expired & there's been no offers since. Skip is an expert & knows the business much better than I. Personally, we could accept the lower bonus with the right royalty. I wouldn't sign for 22.5% w/ $500 bonus money. It would have to be 25% w/ great terms but you have other properties to work with. Good luck!

Tim Bradberry

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Permalink Reply by Skip Peel - Mineral Consultant on October 23, 2014 at 5:43

Ettie, your negotiating leverage depends on the size of your mineral interest.  If your total mineral acres are modest in number you are more likely to be left out of the unit.  I'd check with jffree1 because the mineral code in Texas allows for a Rule 37 exception to exclude a tract from a unit.  That undercuts the ability of small mineral acreage owners to negotiate.  Since the XTO leasing that we are discussing here is recent I don't have any proof that they have agreed to any 25% royalty leases.

Also be advised that XTO has been in no hurry to report wells completed or to commence paying royalty.  I know one mineral owner in a San Augustine XTO unit that recently told me his well had been producing for two years and he had not received a royalty payment or Division Order.  Anyone leasing to XTO should be prepared to wait for an extended period of time before receiving royalty payments.

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Permalink Reply by jffree1 on October 23, 2014 at 5:58

They were notoriously tight on bonus even back when EnCana and Exco were handing out $5K bonus money. I know of a farmer who was negotiating with XTO and EOG, back in 2010, on 400+ acres just across the river in Nac and he finally settled for $1200/acre and 25% with XTO. He owned the surface but had an undivided mineral interest with other family members.

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Permalink Reply by Spring Branch,mineral owner on October 23, 2014 at 5:56

I am certainly no expert, but am leased to XTO in the Morgan Berry, A-59, which is just south of H. H.  Hall, A-404.  If XTO won't budge off the $500 and 22.5 %, rather than go un-leased, consider asking for a 22.5 % cost-free royalty.  On a net basis, it will be comparable to a quarter royalty lease without the cost- free provision.  If agreeable to XTO, make sure the wording of the cost-free provision is correctly done.

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Permalink Reply by jffree1 on October 23, 2014 at 5:41

XTO has no competition to drive the offers higher. If you don't own 100% of your minerals and they have the majority of other owners leased they can drill and get what is known as an SWR 37 Exception to exclude your interest and produce the minerals for those other, leased, owners. That is what she meant by "...if we don't lease then they will work around us". It is in your best interest to find terms you can live with because being an unleased interest in a well unit in Texas is not usually a good place to be unless you own a large or strategically located block of minerals and have the money to hire a good attorney.

Terriers DU #1H was completed back in April. It's a good well and when they finally get around to Division Orders you will get a check for several months of production. It has made 1.759 bcf (billion cubic feet) from April through August so it should be a nice check (depending on the size of your tract) when you finally get one.

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Permalink Reply by Ettie Ruth Pate on October 23, 2014 at 7:01

Thanks for the info. Your comments have helped me in making our decision. I am thankful I found this forum and will keep in touch with you guys! 

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Permalink Reply by Ettie Ruth Pate on October 23, 2014 at 14:10

Mike, thanks for the info. We will definitely look into the cost free royalty. I hope on my previous two leases it is 22.5% cost free royalty. Would it say in my contract if it is otherwise? We were under the impression that it would be cost free. Thanks again.

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Permalink Reply by Nat Gas Engineer on October 24, 2014 at 13:27

Ettie,

We are in the A Speer survey (South of H H Hall).  We were approached a couple months ago by XTO to see about an extension (18 months) to our current lease.  Our lease expires next month.  At that time, they started with an offering of $150 per acre.  The rest of the terms of the lease would stay the same.  FYI, our current lease has the cost-free royalty clause in it.  Since then, we haven't heard any more from them (XTO).  The scuttle-butt around the area is that they intend to let all leases in our immediate area lapse and then offer to lease again with different terms of course.  We are hearing that they would be planning to offer peanuts compared to previous bonus offerings.  As Skip said, those multi-thousand per acre bonuses are not happening now.  We are also hearing that they are not offering the cost-free royalty that EnCana did for us before.  I guess we will have to wait and see what they come back with.

I(we) would be real interested in how you finally settle with them if you are willing to share the info.

Good luck!!

Jody

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