We are new to this gas and oil leasing siutation and had a few questions on how to figure out if we are getting the most we can out of our lease before we sign anything.
Located in Belmont County, Ohio Zip code is 43950. We only own 2 acres in a little cul-de-sac area. They have recently established a well pad about 1 mile from our home and are expected to go directly underneath our house. The name of the wells (that i can see they have permits for on the GIS map) are they SKYHAWK 2,4,6,8,10 and 12 wells.
Rice Energy orginially offered us 3500 and acre and we didn't really get back to them after they mailed us that lease document. They called us back this week and offered 4500 an acre. He was a little pushy about us agreeing this time around because he said Rice Energy is merging with another company next month and he is concerned they are going to stop leasing new land and because we are in this wells path they may just force us to sign something. Also sounded like he was worried he may not have a job after this merger so maybe he just trying to get everything wrapped up so they don't get rid of him after the merger?
Does this seem like a reasonable offer considering we are directly in the path and they are going under us? As far as we know, the neighbors beside us have not signed anything and have no plans on signing anything so it is hard to us to get comps....This land was previously leased for around the same amount. I know prices are down but i also know things are supposed to be picking back up around here
any and all help is appreciated!
thanks...we have asked a couple of our neighbors and none of them have even been approached yet. One guy said he won't sell no matter what the offer. We aren't really looking into selling outright...too much of the "what if" would nag at us...especially if it ends up we could have gotten more from royalties than what we sold out for.
The person contacting us originally tried to say the offer was lower than others because they have to include the time in researching the title of the property to make sure we own the mineral rights which was a boldfaced lie...they have to research every property title on their own even if someone has proof of ownership.
As far as i can tell, from what I have read, we want gross royalty and not net...and we want to get rid of the market enhancement clause but thats all i know lol. Also to limit the shut in/delay in market clause and the force majeure length/ time period.
I would ask them to delete everything after the word "hereunder" in the fourth line of the market enhancement clause. I think that specifically precludes you from having deducts of any sort. (Exhibit A)
I would also as that the Shut-in time period be reduced to 18 months. (Exhibit A)
(A) The Delay Rental of $5 per year after it is shut in for 12 months is ridiculous IMHO.
(C) Delay in Marketing - probably needs work as well since it basically gives them the right to shut the well in forever and only be forced to pay you $5 per annum (refers back to Delay Rental).
(D) Shut-In - Again refers back to Delay Rental as penalty for shut-in and at $5 /yr that is not good for you.
Honestly with 2 acres you don't have alot of stroke but I'd ask for the changes to something you feel is equitable.
thanks! the shut in and delay rental are the 2 main things i definitely do not understand
Pro Geo - I have a question about that! I am glad you mentioned it. Define "for a while" in regards to the decline. we've been in production since Nov 2016 and already seeing a dramatic reduction. NOW it is possible they are throttling the well back, but I am not sure. Any input?
One thing about selling your mineral rights is that they are forever out of your control. So your surface property will be sitting above the minerals/coal/oil/gas that belongs to someone else. For the one time amount of money you receive, you will have traded off somebody else deciding what goes on literally under your feet. Something to consider.
As for up front money, the offer made to you is in the ball park.
However, I have "heard" of payments of $7, 500 an acre and more.
I have also heard wild stories of companies paying extremely high
up front money because they had to have the acreage.
just an update after being hounded by this guy from rice energy everyday with phone calls..he also started texting saying this needs settled ASAP.
After telling him that we were looking everything over and needed some changes to happen before we sign anything. He asked what changes and we mentioned the gross royalty vs whats in the lease and he responded saying that will NEVER happen and never happens around here.....is this true? he basically said get lost if thats what you want so we told him thanks for your time have a nice day.
he is pretty much the rudest and most arrogant person my husband has ever had to deal with and my husband is an extremely nice/likeable guy lol he is just lucky he hasn't had to talk to me yet!
I never understand why landmen get like that unless the land owner is jerking them around, which it definitely sounds like you are not.
Lots of times they will say that they can never do something for you, but if they want it badly enough they will change it for you eventually. The guy you are talking to may not have the authority to offer you what you want, but he can certainly talk to someone who does. Just depends on how bad they want your property. You have to try to evaluate what further bargaining power you have vs when you should accept the offer and sign. It can be a tough call.
Personally, I'd keep the lines of communication open and reiterate to him what you want. If he's really being that rude you could just straight up tell him that it's making you not want to work with him and he needs to chill out.
Yeah we are giving him the silent treatment at the moment...waiting for him to come around which i am sure he eventually will seeing as how persistant he has been over the last month. We just mentioned are thoughts on what we wanted and he instantly shut it down...rudely. Like he could have atleast said ill see what i can do and then, later on, said sorry its not possible.
There is another company wanting to buy our rights and royalties outright for one lump sum...its up to 22,000 at this point, We haven't given it much thought though because we didn't really want to go that route..too many unknowns.
To be fair, 20% is a great royalty. But you need to get an idea of how bad the deductions from that 20% can be, and try to minimize or eliminate them if possible. I can't speak to the signing bonus because I am not that familiar with your area.
There's no "forcing you to sign." It is your property, you can sign or not sign. Ohio does have force pooling though, so you should look into that. Not sure that it's used all that often.
As far as selling your rights, I personally believe that option is right for some people and not right for others. By selling, you can avoid the headache of trying to decipher deductions in the future, and you can get a lump sum now. You could also get an attorney to include something in the deed that states that the buyer has absolutely no rights to the surface of your property for development of their minerals. Obviously, you will probably get more money in the long run if you keep your minerals, because the idea for the buyers is that they will make money on the purchase. However, you'll probably have to wait years to see the amount they are offering you. Who knows how long it will be before they even drill the well once you are leased? You could also sell a portion of the minerals and retain a portion, but for a two acre property, the buyers most likely will not be interested in that scenario, nor would you be. I know some people are very passionate about not selling their minerals, so I'm sure I will get torn apart for even suggesting it's an option to consider haha. But that's just my two cents.
Yeah, we had alot of very agressive, ultra rude landmen, too. We just told them flat out no. I think they're trying to bully you into signing quick, then you're stuck with this no-good legal commitment and these landmen move on to whoever is next on the list.
They told us the same thing about no way in heck could we change the lease language. Turns out that wasn't right and we made the changes we needed. The leases they offered were lousy in our opinion. But you are the owner of these valuable minerals. We did hire a lawyer in the end and we got a much better lease.
Be sure to include a "no-net back" clause that says they can't go back and deduct costs, etc. from sale price. Don't know if just excluding the Market Enhancement clause and putting in "Gross royalty" is enought to cover you from all the deductions. They seem to find clever ways around the clauses somehow so include every bit of language you can to protect yourself.
Besides trying to maximize the value of your oil/gas, it's good to put in other clauses that protect you from any damage they cause to your land and any neighbors around you. Cause once you sign can't go back and fix it
One thing we thought of concerning selling is that: now you only own the surface above the minerals someone else owns forever and they have the right to do anything and whatever they want with it no matter how it affects the top owner.
Just an older person who has seen others get taken advantage of. I'm glad my parents were cautious about deals they made.
Our signing bonus just happened to end up being more than we were offered to sell our gas/oil.
Of course, each person has their own situation. 11,000/acre is definitely more than what we were offered.