Replies to This Discussion

Permalink Reply by Skip Peel - Mineral Consultant on May 31, 2010 at 2:54

CU, for lease negotiations, I do not feel any percentage agreement is the optimal path to a lease. Competent, experienced Oil & Gas attorneys charge by the hour. Those that I know offer free initial consultations and give some projection of the hours involved. Unless a mineral owner is demanding terms that are unreasonable for their location and tract size, an Oil & Gas attorney can often finish negotiations and get the lease executed with 2 to 4 hours work. If you are paying a very competent and successful O & G attorney that may cost you $800 to $1600. Now compare that expense to 5% of your projected bonus amount. In most cases the hourly attorney charge is significantly less than the percentage agreement. One word of caution: not all attorneys who would offer to negotiate on your behalf are real O&G attorneys. If they have not practiced O&G law prior to the Haynesville Shale Play, they do not qualify.

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Permalink Reply by Henry on May 31, 2010 at 2:56

I'll recommend that rather than pay 5% to a company, you consider hiring a good attorney, who charges by the hour, and go that route. You can make sure you get exactly what you want in your lease, and it probably won't cost nearly what 5% would cost. But note: I said a "good" attorney -- get someone with experience in the Haynesville Shale. A good, Haynesville-experienced attorney will know what are reasonable rates, and will also know what are reasonable protections to put into your lease.

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Permalink Reply by Coyote Ugly on June 1, 2010 at 4:18

Thank you ALL.

If this Land Management firm says it will remain with the landowner down through the years. And do things like verify the accuracy of each royalty payment, the 1099s, the well locations, the water for drilling, etc., and be with him during all future wells that affect the land owner, would that make a difference to any of you?

The 5%, to be clear, is for the Bonus only. No royalties involved.
And there are about 350 acres involved.
They are Land Managers. Not just Lease negotiators now.

I don't think any lawyer would do this part, would they?

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Permalink Reply by Skip Peel - Mineral Consultant on June 1, 2010 at 4:34

CU. You don't need a lawyer for future royalty accounting purposes, you need a CPA familiar with royalty income. Interview a couple and determine their hourly rate and projection of annual cost to you for their services. Then compare it to 5% of your projected bonus. Depending on the location of your mineral estate, 5% may be +/- $150,000. And what assurance do you have that the management company you reference will be in business in the future? Or will send you a letter that they have been sold and the new owner will impose a fee for those continuing services? Paying a premium up front for a service that may or may not be available in the future reminds me of all those who purchased pre-need funeral services and then found out it would not pay for what it was intended when the need arose.

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Permalink Reply by Henry on June 1, 2010 at 4:57

CU,
Here's one thought. If you think a good O&G attorney will not fight to get you the highest price, make it worth his while. Tell him you will pay him an hourly rate AND 2% of everything he gets you over a certain price. This way, you know you are protected by a good attorney, and you know he is going to fight for a high price.

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Permalink Reply by HBP on June 3, 2010 at 1:28

I want to throw my two cents in support of the attorney route.

It is usually the best result and cleanest transaction. Regarding Argent - look into the experience they have (or may not have) doing this type of work. You can never go wrong with some of the attorneys that have been listed in here - Davidson, Summers, also Downer, etc...

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Permalink Reply by sesport on June 4, 2010 at 1:46

GoshDarn - re. "per the huge front-loaded bite of 5% "

Your thoughts about a "BACK-LOAD?"

IMO, I could see the possible need for some who are less savvy, less experienced, who have time constraints having the need for such. Still, they should keep their eye on the ball and be as knowledgeable as they can, stay well read. And, I agree with checking credentials & references in the specific areas of service(s) provided.

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Permalink Reply by sesport on June 4, 2010 at 9:49

lol, Okay, take a breath, GoshDarn. Your lucky I don't mind "scenic routes."

Thanks for the thoughts on "backend" fees or %. My main point for asking was that I could see this as a possible "new" need in the realm of future occupations (though not mine, I like "playing with words" too much to ever give it up) and how it might fit into the big picture in economic development.

Certainly, there has been for many, many years services offered by real estate agencies that manage surface property for those who own residences where they don't reside. And I'm sure there is some kind of prop management services offered for rural acreage, too. Many military families have done this and it's an option that's probably becoming more necessary and/or attractive as our society becomes more highly mobile.

I just did a "hmmmmm" when I thought how similar management MIGHT be applied to a mineral estate.

thanks again 80)

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Permalink Reply by Keith Mauck (Site Publisher) on June 3, 2010 at 3:30

The only one who can look out for your best interest is YOU. You'll need to get your hands dirty, ie hunting down the CPA as Skip mentions, finding the attorney, negotiating with the producer. We were in a comparable situation as you 300 acres and we decided that it was worth the time to keep that 5%... Depending on what you end up leasing for, that 5% could potentially be worth $175,000. From where I come from $175,000 is worth getting your hands dirty.

Ultimately, the negotiator is loyal to themselves...even the most honest and trustworthy one. After all, they have to make payroll. The primary goal of this site is to help reinforce the do it your self mentality through sharing of info.

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Permalink Reply by sesport on June 4, 2010 at 1:48

Of course, read up, stay informed, network. And always, always share the info. Might step on some toes, but share in the hopes of helping. Thanks always, as this site is such a wonderful source of no-cost resources to the laymen (and women). My hat is always off to you for all you do to provide this for us.

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