To lease or not to lease
I am presently in a 560 acre section where a well is presently being drilled. It is for the Cotton Valley sand, so they are calling saying they can write in a exclusion to where I still keep my Haynesville Shale rights. I only have 8 acres, so I am wondering whether to lease at all since they are only offereing $300 an acre. Any thoughts on the matter or what should I look out for? The company is Will-drill(spelling) and they have a guy that keeps contacting me to sign. He is saying I am the only one not to sign, so am I better off not signing, as I see it, I really have nothing to lose by not signing but $2,400 and I could do much better in the end by not signing. What are the calculations I need to be looking at if I do not sign?
Thanks for any info.
Thanks for any info.
Views: 59
Replies to This Discussion
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Permalink Reply by The_Baron on -
$300/acre for cotton valley and up is pretty good. Depends on the royalty offered. Depending on where you are located, the cotton valley might be productive or not. Look to see how many producing wells are around you. If you are not near or in an established field (wildcat), you will want to lease, as the chances for a dry hole are much higher. HAve someone knowlegeble with the geology in your area check your depth restriction before you sign. Avoid a specific depth and refer to the formations involved by the names accepted by DNR. Also include a vertical pugh clause.
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Permalink Reply by The_Baron on
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You miss the point KB,
As stated in the intial post, Will-Drill is seeking to drill a cotton valley well, they are willing to exclude the deep rights.
The economics are very different for a CV vs. HA. You can ask for more, and should ask for more.
However, I would be amazed to see a 30% royalty. I would say a royalty of 1/5 is more resonable. I can not bew more presise with out knowing more about the area.
If most of the section is leased, as stated in the initial post, look at those leases. See what royalties they got.
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Permalink Reply by The_Baron on
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That is probally as good as you will get on the royalty side. Even maost of the recent shale leases are for 1/4 royalty.
Try not to worry as much on the bonus side, just get a good lease. A good lease with terms you want is better than a high bonus.
You may want to exclude pipelines operations in your lease, get a cost-free royalty, etc.
Consider if want the possibility of surface operations or not. Also if you get your water from a well, consider protections to your water supply should operations lower the level in your aquifer.
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Permalink Reply by The_Baron on
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This has nothing to do with the HA. It is for CV rights. You can not use assumptions based on the demand for the HA in this case.
I agree that it doesn't hurt to ask for more (see my above post), but I think this is a good offer for CV rights.
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