Anyone having to deal with this BS? Here in North Texas, the oil drilling/energy companies have gone bonkers because we sit atop the Barnett Shale formation...which is heavy in natural gas. Anyway, I got an offer in the mail today from one company. Lease bonus of $15K per mineral acre; lease term for 36 months; 22.5% royalty of gross volume of oil/gas produced, saved, and sold attributable to your net mineral interest in a pooled gas unit; no surface use/activity. It sounds reasonable but I know residential communities have been coming together, getting representation, and negotiating more. It's obvious who's taking home most of the money in this situation...them. The best I've heard of for a deal is around $25K bonus; 25% royalty. My understanding is there is also a possible (or likely) fee you have to pay to your mortgage company when you sign a lease like this and that it's best to get the energy company to pay that. I honestly don't feel like screwing around, or wasting time dealing, with this. Part of me wants to know what my neighbors are getting and what they are doing. But, in this situation, the drilling companies can pretty much do what they want if I sign or don't sign (given enough signatures from others in the neighborhood) and I could lose out. My understanding is the risks of such operations are minimal although the drilling process might represent an inconvenience/nuisance depending on the drill site location to the neighborhood (but it usually only lasts for 30-45 days). Worst case seems to be...they want to bury a gas line in the front yard (instead of just horizontal drilling under the property; would constitute a non-surface area I imagine). Anyway, with my measily .25 acre lot, I don't think we are talking a lot of money here. Royalty checks are hard to figure. Bonus would be around $3k before taxes. Supposedly, most gas is drawn from a well site in the first 3 years with the amount drawn growing less by year. The only thing is I've heard about others getting 5 year leases and this one is only 3. I'm not eager to sign...to be honest. There should be some competing offers coming in I would imagine. The Fort Worth / Tarrant County area is literally booming right now as far drilling the Barnett Shale. I don't think it can be stopped and local cities have very little say in the matter as it is all state and federally enforced. They can even get properties taken over if the homeowner doesn't sign in some cases, i.e. condemnation. It's insane but I imagine this place is going to be littered with drill tower sites. There are already quite a few around...and it is only the beginning. Anyone have any experience in this? Thoughts? Surf
Good idea -> check out comparable royalty rates in your county. I wouldn't wait too long though. As long as prices stay high, E&P guys will continue to seek out every last drop of nat gas.
You didn't say if you live in an incorporated area. Try to find a local organization: Garden Club Homeowners Association local church etc that will give you an opportunity to quickly network with people in your neighborhood so it will be easier to share info. Even if you are not an active member of those type of organizations, you probably have at least one neighbor who is and they probably have the same questions that you do. The numbers being offered to you sound really good.
Those are good numbers in the Barnett Shale. If you were a few miles outside of the formation, you might get offered $250 an acre.......being in a residential area, you might not get an offer at all as it is such a pain in the rear. You're lucky to even have minerals as your developer was a dumbass for not reserving them. Are there people getting better figures than you are being offered? Sure........but unless you have a bunch of people itching to get together to try and put the screws to the landmen for a bit extra bonus and royalty, I wouldn't bother with it. If you aren't close enough to the drill site, and if they have plenty of land already (to form their unit), they might walk away and leave you with nothing. I know that is a common landman threat, but it isn't like you're being offered five bucks an acre.
There was a story last week in the NY Times about this exact same phenomenon that is happening in Louisiana right now where people in the De Soto Parish are becoming overnight millionaires due to the natural gas findings. Check it here: http://www.nytimes.com/2008/07/29/us/29boom.html?incamp=article_popular
agreed all the way. you're getting a pretty solid deal right off the bat, and you're definitely lucky your neighborhood developer didn't obtain the mineral rights to begin with ( ) take the deal, stop worrying about it, and enjoy the money.
I did a little research and found our city has formed an alliance (called the North Richland Hills Mineral Owners Alliance (NRHMOA)). I am going to join them as they will be negotiating a better collective deal (more bargaining power in larger numbers) versus what individual homeowners can get. It doesn't stop me from signing a lease on my own if I want. I'll try and squeeze this for more than what I have been offered. Besides, there are little details that these lease offers leave out that can come back to bite you if you're not careful. This alliance has volunteers and attorneys working for free to hash out a better collective deal. This paragraph seems to spell out the kinds of deals groups have been getting: "By forming a neighborhood negotiating unit, we expect to achieve success similar to (or even better than) neighborhoods in Fort Worth and Arlington where leases have been negotiated with $15,000-$25,000/acre signing bonuses plus 25-30% royalties, and with customized leases designed to protect the mineral rights owner." So, the lease I was offered is on the low end of that. I know when they originally started moving in...they were lowballing people trying to get them to sign for much less. These alliances came into play and they realized they better start making better offers from the start...or they will end up paying more because people will balk at these offers and get together to fight for more. I guess they were essentially trying to prey on stupid people. And, once you sign, that's it. Lots of people signed for peanuts and missed out on the negotiated contracts via these alliances. Surf
Glad you're holding out, Surf. My mom was one of those people who signed for peanuts- she was flat broke and the money sounded good at the time. I advised her to wait because her neighborhood was getting one of these alliances together, and I even offered her a loan, but she signed anyway. I don't know the details of the lease. If it's time-based, maybe she can renegotiate later. Anyway, if you can give us updates, that would be awesome. Good luck!
Petroleum Landman here... You should also research which operator/lessee is trying to buy this lease from you. Some operators have a cap on their budget and won't offer more. By all means, I hope you get a better deal than you were offered by deciding to hold out.... but you are taking a massive risk. All this operator is trying to do is get enough acreage to pool into a gas unit. Facts: 1. You have a 0.25 acre lot. I don't know the spacing requirements for your area or the minimum acreage allowed to drill for a unit (I never worked Dallas or Tarrant County, but I've worked dozens of Texas counties). 2. Texas does not have forced pooling, like Oklahoma. The operator could easy just skip you over and "drink your milkshake." As long as there isn't a well on your tract or pipeline going through it, there really isn't a reason to include you in it other than to make the required size gas unit. This can be prevented if all lessors banded together, but this is also risky in itself. In Oklahoma, if your land is sitting inside the boundary of a gas unit, then your interests must be accounted for. In Texas, your 0.25 acre tract could be a "donut hole." I would ask the operator some questions. If they are a good operator, you'd like to get some production in and start collecting those royalty checks. The up front bonus payment is BS compared to what you'll make on the royalties. Just because someone got 25k/mineral acre bonus, doesn't mean that sets the bar for every property. 15k/mineral acres is definitely not bad at all. Good luck
screw that. I just watched a couple of episodes of Black gold on TruTV. I don't think it would be too hard to get out yourself. I've got a couple of shovels and pick axes
Update: I'm now getting competing offers for $20k per mineral acre and 25% royalties for 3 years with 2 year option (more bonus money...$18,500 net acre). I'm checking into the alliance and neighbors to see what their deal is before I do anything. If I'm getting the same offers from different companies, then they can raise those offers to make their offers more favorable. Else, how does one decide on which one?
you can always ask to put in a 'favored nations clause" which basically states if the oil company offers a higher royalty/bonus to another lessor within a specified amount of time and distance, you can ammend your lease to match those terms. but probably not likely. Dont forget shorter the lease the better, its not likely the commence drilling right away, so if you get a shirt lease you have a higher chance of terminating the lease for non production and signing another, therefore more bonus.
I deal with lease offers on occasion. I never take the first deal and counter at the highest offer I can locate for the area. They usually come back with a counter and I take it. I think of it as minimally playing the game but not looking a gift horse in the mouth. You never want to miss out completely on free money. There is usually some information about going rates on the message boards @ http://www.naro-us.org/
Is the company Marathon Oil? I know they have a lot of plays in the Barnett Shale up there near Hamilton County.
