St. Helena Parish Question
Our property is in the southeast portion of St. Helena Parish and has been under a lease since 6/12 with an option to extend in 6/15. We are leased to what we think is a speculator and we, along with several other neighbors, are already being contacted by our Lessor. They propose that instead of them executing the option to extend the lease in 6/15 through 6/17, they will not extend the lease at that time and are wanting to execute a new lease exactly like the first; for three years and an option to extend for another two.
Besides adding a year to their initial lease, the only difference is the bonus payment. If we agree to the new lease they will pay us only $100 more per acre than what they will pay on the original lease by extending it for the last two years.
My thought is that the additional $100 is great but why in the world are they contacting us more than 9 months before our original lease expires in 6/15. If we agree to their initial offer they want a signed commitment from us now and will forward us 10% of the bonus payment they will pay in 6/15 when we can actually sign the new lease.
I'm extremely concerned that they know something about what might happen in the next 9 months that would make them want to negotiate now. We certainly don't want to be greedy (half of something is better than all of nothing) but we don't want to be taken advantage of either. We just want a level playing ground and to be treated fairly in these negotiations. Lol, are we asking too much?
Views: 360
Replies to This Discussion
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Permalink Reply by Skip Peel - Mineral Consultant on -
marilyn, terminology wise, you are the lessor and the company that you lease to is the lessee. It would be helpful to know who your current lessee is. What they are offering is actually called a "top lease". Whether you benefit from a top lease or not is largely based on the terms in your current lease vs. what better terms might be reasonable to expect in negotiations for a new lease. The bonus is the least important of all the lease terms.
Location is important in determining your options. You should post the location of your minerals by section-township-range (its in your lease) so that we can tell you which companies are active in your area. Before signing any lease you should determine if there are any other companies that would care to compete for your lease.
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Permalink Reply by marilyn warren on
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Yes, sorry I had that backwards. The location of the property in St. Helena is Sections 27, 34 and 50, T3S, R6E. Of course there is lots of talk in the area and I'm not sure who else is leasing, I've heard talk of Comstock. Our lease is currently with Jet Energy Partners, LLC and the royalty is 20%.
If we do not agree to the top lease, what is the likelihood that they will still exercise their option to extend for the last two years of the existing lease? And as long as they have that option and they choose to execute it, we're locked with them until 6/2017, right? Or is it possible that another company might could buy out the remaining time on their lease?
Sorry, this is all very new to us but thank you so much for the response!
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Permalink Reply by Skip Peel - Mineral Consultant on
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No apology required, marilyn. I'm not familiar with Jet Energy Partners and, yes, it is their right to exercise the existing extension option if they so choose. But then it begs the question, what do they stand to gain by top leasing you? Without knowing the details of your current lease it is impossible to speculate how Jet benefits. Jet has the option to assign your lease to any company as long as it remains in force.
TMS related activity currently does not extend as far south as your mineral location. It could very well do so in the not too distant future. Yes, Comstock is the TMS operator most active in St. Helena. I wouldn't lease to anyone without contacting them however don't discount the possibility that they could be behind the offer from Jet.
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