Replies to This Discussion

Permalink Reply by Skip Peel - Mineral Consultant on January 22, 2014 at 3:24

It must be a mistake.  Ryan, the lowest common royalty other than a specialty interest such as an Over Riding Royalty Interest (ORRI) was one-eighth or 12.5%.  That is the historic beginning of wide spread oil development about 100 years ago and has improved over time.  Modern royalty is in the range of three-sixteenths to one quarter but as more and more development is concentrated in unconventional reservoirs that range is one-fifth to one-quarter.

• ▶ Reply

Permalink Reply by Ryan Mott Oliver on January 22, 2014 at 4:15

Actually is 1/5 Royalty. Just sering if fair market value.

• ▶ Reply

Permalink Reply by Skip Peel - Mineral Consultant on January 22, 2014 at 4:35

I could be but there is no way to know without more information.

• ▶ Reply

Permalink Reply by Ryan Mott Oliver on January 22, 2014 at 4:57

Shale no Oil in Lufkin
Texas. 91 min acres.
Offer $300 per acre
with 1/5 Royalty No Option
on 5yr lease.

• ▶ Reply

Permalink Reply by Skip Peel - Mineral Consultant on January 22, 2014 at 5:28

Not bad but could use some negotiating.  I prefer 3 year primary terms but would strongly consider 5 for a better royalty and bonus.  Personally I would accept a 22.5% royalty and $500/acre for 91 acres.  It would be good to know the energy company behind the offer and royalty and bonus are not the only important terms in a lease agreement.  You've got enough at stake here to consider the assistance of an experienced O&G attorney.

• ▶ Reply