Lithium Brine Lease letter from Red Oak East, LLC - Location Cass County, TX, near Naples, TX
I received a letter from Red Oak (apparently associated with Primrose South LLC in some way). I have been told both are new to this area.
They asked me to contact them if I was interested in a lease. They gave no real information.
Have any of you heard of these companies or know anything about them leasing in this area?
Thanks for any information you can provide,
J D Capps
Skip Peel - Mineral Consultant
When a lease offer comes with "no real" information, it is a red flag. Those usually come from speculators who look to flip leases. The usual approach is to offer a somewhat higher bonus to lure those who do not understand the real money, usually, is in the royalty. The royalty offer is lower than what the company is looking for. The spread is their profit. When at all possible, lease to the operator of the brine plant. Directly or through a "land" company that represents them. In that case, more often than not the land company will reveal who their client is.
JD, it would be helpful if you would ask them to send you a lease for your review. I think many members would be interested to know the terms.
May 7
Skip Peel - Mineral Consultant
The O&G royalty is good but the real issue is whether there is any real interest in O&G. If I was guessing, I would say NO. If Exxon thought that your location had economic oil and gas, they would not have waited until they were chasing lithium. I'd take it but would totally ignore it for the purposes of negotiating a royalty on brine elements. It is possible that Exxon is using the high O&G royalty to lure mineral owners to accept the brine royalty they prefer. If the outcome of the Texas question gives the rights to the surface owner, your O&G quarter royalty may very well be worthless.
Another question would be, does the Arkansas lithium royalty of 2.5% now have any implications in Texas? We have had reports on lithium royalties in E TX as high as 10% however those leases are open to deductions. What deductions lithium producers will impose on their lessors is unknown. I suspect that there will be some.
Jun 9