How do I go about accepting a lease? (Texas Haynesville play)
I'm posting this for my grandparents that is not computer literate. They have a few hundred acres in Shelby County and were given an offer of >$4000/ acre @24%. Now a landman (who is also a long time aquaintence of the family) stepped up and said that he could shop the land for us to get a higher price. In order to do so, we need to lease the land to him (an "open" lease where the lease price isn't on the books) and he would find a better deal. Actually, the lease wouldn't be in his name, but a third parties name, because the landman didn't want to make and enemies by using his own name since we works will all the companies in East Texas.
From my description you can probably see that I'm not experienced in the oil lease business. I have read on these boards that many leases are going for the $4-5K rate, but don't know if theres more to be made, and if this landman is being honest with us. When we began to question him, and he did not give the family a hard sell. But he did say that if we want to do it, it needs to be done fast. From experience I've learned to not trust people who try to force me into quick decisions . . .
So, is what this person wanting to do a common and valid practice? Or is this something that will give him money but not help us? Isn't $4300 + 24% a pretty attractive offer already? Any advice is appreciated
From my description you can probably see that I'm not experienced in the oil lease business. I have read on these boards that many leases are going for the $4-5K rate, but don't know if theres more to be made, and if this landman is being honest with us. When we began to question him, and he did not give the family a hard sell. But he did say that if we want to do it, it needs to be done fast. From experience I've learned to not trust people who try to force me into quick decisions . . .
So, is what this person wanting to do a common and valid practice? Or is this something that will give him money but not help us? Isn't $4300 + 24% a pretty attractive offer already? Any advice is appreciated
Views: 203
Replies to This Discussion
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Permalink Reply by Cathaus on -
RUN, DON'T WALK FROM THIS GUY! Anyone that tells you something has to be done fast knows that he has precious little time to get his CON in on you. 24% is low as the average royalty is usually 25%.
If you have doubts about this guy and if you didn't you wouldnt be reaching out on this forum, tell him to go find another sucker. LIsten to your gut. Ask around about this guy. Better yet, put his name into Google and see if anything interesting comes up!
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Permalink Reply by easttexas12 on
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Don't mess around with this, get an Oil & Gas attorney in Center Tx. The woods are crawling with creeps trying to take advantage of anyone with mineral rights, let alone the elderly. Just my 2 cents
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Permalink Reply by RL on
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Stay away from this deal! With the amount of money you are talking about, you can get a good oil and gas attorney in your area. However, hire him on a fee basis (you pay him a flat, one-time rate) no on a percentage of anything!
Do it this way and you will really be taking care of the grandparents!
Best wishes.
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Permalink Reply by DrWAVeSport Cd1 on
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AMC:
You and your Grandparents are why this "gohaynesvilleshale.com" was meant to be!
Read everything you can per these great "shalers." They know from where you are coming from! Most have been there already without this blog's benefit.
THE ANSWER TO YOUR QUESTIONS IS, not NO, but HELL NO! (please pardon my language). $4,300K and 24% is old school. Get legal advice! And, one piece of advice from me....NEVER do business with "friends of the family." You need an unbiased opinion and from someone who is not a landman (who by nature is biased toward his pocketbook) in my opine. A "friend of the family" may be a good guy, but YOU are at a great disadvantage, as you will not ask enough questions, take enough time, or get a SECOND OPINION, because you might feel you are stepping on the "friend's" toes.
Again, FINAL ANSWER: NO! Tell the "friend" it is nothing personal, but this is TOOO BIG for you to make a decision before you get GOOD LEGAL Counsel!
And, We are all breathing a sigh of relief for you...and happy you found "gohaynesvilleshale.com."
Do everyone you know a big favor too. Tell them about "gohaynesvilleshale.com," you will be helping them far beyond your wildest imagination! Get a Coke or a great big cup of coffee...you will be here for a long time!
DrWAVeSport V
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Permalink Reply by AMC on
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Thanks for all of the advice guys. I've learned a little more about the situation. The royalty rate was actually 25%, but the land man friend was going to take 2% as his commission, hence the 23% (it was a typo when I wrote 24%).
About finding an oil and gas attorney- is it normal for their fees to be a percentage of the royalty, or will most do a fee basis. I'm not sure, but I think the third party whose name was going to be on the lease was an associate of an oil and gas attorney. From checking out this attorney, I know that he only does cases where he gets a percentage of the royalty.
Honestly, I don't know any reason why I should trust any oil and gas attorney over the "friend of the family" or the Oil and Gas companies. They can just as easily take advantage of the situation unless I know whats the going rate for them.
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AMC,
Now you are talking. There are still O&G attorneys who will read over your lease for a flat rate. But you will HAVE to educate yourself. You will be the one who has to know what you want and do not want in a mineral lease. This website can really give you some great info on same...just download, print and start reading. No matter who you seek advice from...you have to be prepared. Find someone on this site and have a buddy system so both of you can share ideas, ask questions and e-mail each other. Kassi and Snakestewart are quite friendly and well informed members of this site. They will try and answer any questions you might have...or they will attempt to get you the answer from a good authority. Visit their "pages" and say hello. You can trust their comments and they will point you in the right direction with a very shale-friendly attitude.
And at the bottom of the "Haynesvilleshale.com" discusssion page, you will find several items that will help you become educated in the world of oil and gas leasing. Called "Haynesville Shale Presentations."
Good Luck. You are already ahead of many others out there.
DrWAVeSport 7/22/08
P.S. No one here recommends paying anyone a percentage of your royalties.
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Permalink Reply by Kassi on
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I can understand charging a small percentage of a sign on bonus to negotiate a lease for someone. Especially if it involves land and landowner protections not typically found in the standard lease That said, anyone taking part of your Grandparents royalty is an oportunistic parasite not a friend...
Oh and your grandparents can definitely get a much better lease if they hold out and get the right representation.
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Permalink Reply by insomniacnla on
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AMC,
I know several people that signed leases where they got really, really, really, rotten lease terms. What these people have in common with each other is they all leased to a "family friend" "distant cousin", etc.
Also, I think the worst part of your deal is having a third party named in your lease. Any friend at all would stop you from doing that, much less request that it be done. This landman you know sees your family as a business deal and a way to make some money.
Please do not feel that all attorneys are on the take as it is just not true. Some attorneys do get paid with a percentage of bonus or royalty, but there are many that will only charge you a flat fee or hourly rate. Most attorneys would have no reason to do anything but the best job for you. They do not have to make backroom deals with o/g companies to earn money. They can make a good living representing landowners.
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Permalink Reply by Carter on -
Bill Griffin (936-598-6385) or J Ken Muckelroy 936-598-6110 are two reputable real estate attorney's in Center, TX that I would trust with my business. Ask for a flat or hourly rate for advice. You don't need an oil and gas attorney, just a good real estate attorney who is local and has a hand on the pulse of whats going on locally.
Despite what folks on this blog would have you believe, $4,300 and a quarter is a darn good lease in Shelby County. 99% of the people that have leased in Shelby County in the past few weeks have not got $4,300. This includes Pros, Joes, Leasehounds, Timberhounds and Foxhounds. I have heard of some new competition coming online up around Timpson and the open parts of North Shelby County starting people out at $5,000. Would help if I knew where your minerals were.
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Permalink Reply by Carter on
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Good Area. Devon, Noble and Chesapeake are out there. A new player named Celero is buying leases around up there a bit.
$5,000 and a 1/4 would be a good lease. Make sure the term is three years only. Not a 3 year primary with an option.
Ask for a Pugh/Freestone clause. Ask for a depth clause. Ask for a surface damages clause. Ask for a hard minerals only (oil and gas only clause). Thats really the main ones that you need.
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