Replies to This Discussion

Permalink Reply by Nelson Roe on August 18, 2011 at 1:49pm

Careful in saying that.  In most instances this is true.  However, I have heard of some cases where the delay rental/sign on bonus is paid on a yearly basis.  So, say they offered 2500 per acre for the primary 5 year term.  That would be 500 dollars per acre per year.  It is my understanding that in cases like this, it is paid on a yearly basis & they only pay the delay rental until the well is actually drilled.  So say they complete the well in year 2, then you would end up only receiving 1000 dollars per acre because they would not have to pay the delay rental in years 3, 4 or 5.  This does not appear to be common practice in Marcelus and/or Utica as most out there are offering "paid up leases", however depending on the wording of the lease it could still pop up out there somewhere.  Read the lease carefully, and perhaps involve your own legal counsel is all that I can recommend so that you are 100% sure of what you are signing.

Permalink Reply by Jon Henderson on August 18, 2011 at 8:53pm

That is an interesting twist. I didn't realize that if they drilled that ended the bonus payments. Good to know. Thanks.

Permalink Reply by scott peterson on August 18, 2011 at 9:06pm

paid up lease is the key

Permalink Reply by Nelson Roe on August 18, 2011 at 10:33pm

Jon, that is only in the case that the lease is NOT worded as a paid up lease.

Permalink Reply by Finnbear on August 22, 2011 at 11:55am

It depends on the type of lease they offer. A "Paid-Up Oil & Gas Lease" gives you the entire signing bonus in one lump sum. A "5 Year Oil & Gas Lease" will give you a set amount per acre per year for 5 years. When they drill, they can quit paying the yearly per acre amount because they change your status from "Leased" to "Held by Production". The devil is in the details - get a good Oil & Gas familiar attorney to review any offer you are considering. It will be money well spent and is one of the very few things you can deduct dollar for dollar from the tax liability you will have after you sign and get paid.

Permalink Reply by Lisa Johnston on October 10, 2011 at 4:56am

We as well signed with this company almost 2 years ago. The rep showed us a map with the neighbors highlighted as to whom already signed with them. Everyone around us was already signed according to him. We trusted him which was a mistake. We recently found we were misled and many neighbors had indeed not signed. They recently got up to 100 times more than we did. We too were fleeced. Do we have any recourse? I wish we had gotten legal representation before signing. Lesson learned.

Permalink Reply by Finnbear on October 10, 2011 at 12:25pm

Follow the money. Who pays them? Whose interest are they looking out for? It certainly isn't yours.  Landmen will tell you whatever it takes to get you to sign. Their sole function is to lease as much land as possible, as quick as possible,  as cheaply as possible, for the companies that employ them.

Permalink Reply by Lisa Johnston on October 10, 2011 at 4:15pm

Thanks. We realize that now. Unfortunately we were just to trusting. Thanks

Permalink Reply by Finnbear on October 10, 2011 at 5:44pm

In terms of the signing bonus, you probably did learn a costly lesson. You should still make some money on the royalties side if they ever drill and put your land in a unit.

Permalink Reply by Christiane Marshall on October 11, 2011 at 4:42pm

Whatever you end up signing, make sure you don't sign until you read it yourself. No matter how much pressure they put on you to sign now, don't believe them. Go home with the lease and read it, then have an attorney look at it. Did they tell you they are offering you $4,000 an acre? Make sure that is actually spelled out in the lease. We got an offer, but after reading everything, we realized that if we signed it, we would have been giving the company permission in advance to renew in five years without any payment if they had not drilled yet. That's a 10 year lease couched in 5 year lease language! Be careful! There is no end to the tricks.

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