Lease offer received. Now what?

Just got my lease offer.  My question is how do they come up with these figures?  What is a "net mineral acres"?  How do they determine what to offer for a signing bonus?  What about the royalty percentage?  Not knowing all the other parties involved in the entire tract, how do we know that what they are offering to each of us is fair, and that they have in fact offered all of us, as a group, what is due?  Thanks.

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Permalink Reply by Nancy Mosley on April 19, 2018 at 3:41am

What state?

Permalink Reply by Jennifer Mather on April 19, 2018 at 4:08am

Tyler County, WV

Permalink Reply by Becky Moore on April 19, 2018 at 4:10am

Is your acreage in Wetzel County, WV? 

Permalink Reply by Jennifer Mather on April 19, 2018 at 5:05am

No.  Tyler County, WV

Permalink Reply by Nancy Mosley on April 19, 2018 at 5:29am

Hi Jennifer. To answer a few questions as I understand things:

Net mineral acres is total acres divided by someone's percentage ownership. Example: the total tract is 100 acres (maybe it was great grandpa's farm in 1900.)Your interest is 1/10 or 10%. Thus your net mineral acreage is 10 (1/10 of 100). It can get complicated, seeing how you ended up with your percentage (or maybe not) but that is the basic idea.

How they determine what to offer for the bonus and royalty percentage: they know what other people have signed for in the general area, and often use that as the first offer. Some people just sign what is offered without doing any research. As I understand it, the landman (term is gender neutral, related to the terim "land management") has some discretion in what to offer, and in some basic negotiation. If you and he/she are not able to come to an agreement, you may be passed on to another person. If you have a good oil and gas attorney, you can pass the negotiation to him/her, and in most cases the attorney can get a better bonus and terms than an individual, and more than make up the attorney fee.

Here is a link to the Tyler county records

It might be a little hard to use but ask if you have questions.

You can start by looking up names that might be involved.

You can go to the Tyler county group  and read what is there.

Permalink Reply by David Perotto on April 19, 2018 at 12:45pm

Get to an oil and gas attorney. DO NOT sign anything without consultant an attorney that works in this field. The oil and gas companies are not going to present an agreement that is favorable to you, therefore you need representation.

Permalink Reply by Inchworm antenna on April 20, 2018 at 4:01am

I don't want to sound like a jerk here but how many attorneys gave their blessing to their clients to sign leases with a market enhancement clause?  Most of what I've seen is attorneys putting in a few cookie clauses to the amendment to make it look like they did something special and maybe be able to get extra bucks on the bonus, which I can't say is any different compared to the guy down the street who waits another week or two for a better offer.  In some instances I've even seen attorneys in my opinion completely wreck what otherwise would have been a more positive situation without their involvement.  But of course so I don't get sued here I must depart by saying......may always be a good idea to see an attorney.

Permalink Reply by Bullfrex on April 20, 2018 at 10:42am

Jennifer,

It would be wise to determine if this is an E&P that is active in your area, not someone looking to lease you and then flip it.

Try to get educated about what is happening in the area of your holdings....then, yes, an attorney....a GOOD one....again, you can ask around. Inchworm has a valid point.

Permalink Reply by David Allen Lilly on April 21, 2018 at 1:40pm

I have defended the market enhancement clause too many times.

The more pertinent question is why you would seem to try to sway someone from obtaining legal help, as they absolutely should. (Not a question)

Permalink Reply by Dott on April 21, 2018 at 12:42pm

I too agree with inch worm. My mom did not use an attorney and has a "Market enhancement clause" which means the O&G company can charge any deductions they want. So try and get a NO Deduction lease and please use an attorney.  There are so many parts to a lease that sound okay to us but when different scenarios actually play out you will see the weaknesses in your lease.

Permalink Reply by David Allen Lilly on April 21, 2018 at 1:38pm

I have a market enhancement clause but it states that in no manner am I to receive as a royalty less after market enhancement than I would have received with post market enhancement.

Not all market enhancement clauses are bad.

Permalink Reply by David Allen Lilly on April 21, 2018 at 1:44pm

Jennifer,

On the internet one can pretend to be anyone they wish and their advice may or may not be great. I wouldn't really bother with it until I had someone capable read my lease and advise me on it.

I am glad I did, I got a $5800 an acre bonus and a 20% gross royalty.\

This was 6 years ago in Guernsey county Ohio, terms will be different now due to market but the advice is as sound as you can get.

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