Was signed with Ascent for 10 years (2-5 year leases)
Out lease was up last year and was not picked up , again, by Ascent.
Received a phone call from Purple Land Management a few weeks ago.
Our first lease, with Ascent in 2011, was $5,000 an acre for 5 years--20% gross royalty.
There was no drilling done throughout this 10 years.
The Purple Land rep , approximately 2 weeks ago, offered us -------$3,000 an acre + 18% NET for 5 years.
Each year we will get $16,000 a year for the next 5 years.
With the net you pay a share of all costs to drill and transporting the oil/gas.
I am wondering if y'all can give me your thoughts about this offer from Purplre Land Management.
How could we deal with them to receive GROSS royalties and not NET.
We have read in Marcellus that the going rate is around $3.000 an acre.
Bo, does that seem to be a good going/ good deal
I have always relied on your advice and I thank you for that!
Hoping to hear for y'all soon.
I am not sure how long Purple Land waits for our decision back to them.
Our minerals, only, are in Guernsey County, Londonderry Twp., Section 21, in case anyone is near us and might have been made an offer, too.
Would love hearing form you, also.
Thank you much
LOL. I guess I just confused myself because my earlier posts were indeed correct.
It can be confusing especially trying to decipher the language put into the lease by the O & G companies. That is why my lawyer added an addendum to the lease to make it clear it would be a Cost Free Royalty and to invalidate any language of the main lease.
COST FREE ROYALTY:
Lessee Agrees to pay Lessor’s royalty based upon 15% of the Gross Proceeds received by Lessee (or its affiliate) in a sale of oil, gas or other hydrocarbons produced and sold hereunder to the first non-affiliated third-party purchaser at the point of sale to said non-affiliated third-party purchaser. For the purposes of this Lease, “Gross Proceeds” means the total consideration paid for the sale of oil, gas, casinghead gas, casinghead gasoline, associated hydrocarbons, and marketable by-products, produced from the Leased Premises or payments for future production or delivery of production at a future time, or sums paid to compromise claims relating to payment obligations associated with the sale of oil, gas, casinghead gas, casinghead gasoline, associated hydrocarbons, and marketable by-products. Further, the royalties paid to lessor hereunder shall never be charged with any part of the costs and expenses for exploration, drilling, development, production, storage, processing, compressing, marketing, enhancement, or transportation. Lessee may only deduct Lessor’s proportionate share of any severance, ad valorem or excise taxes attributable to the production of oil and gas from the leased premises. To the extent there are post-production costs incurred between the well and the point of sale to the first non-affiliated third-party purchaser that are subtracted, netted, or deducted, directly or indirectly, from the Gross Proceeds paid to Lessee (or its affiliate), the such costs will be added back for purposes of calculating Lessor’s royalty
That clause looks pretty airtight, Dott! Thanks!
I do the same thing ;)
I can't thank you enough for all your help and all the time you have given us.
You gave us the right info, and even if you didn't , don't know we would have even realized it.LOL!
This is a learning process for us and no one is perfect but ONE.
We hold on to your every word and the others, on this site, that have shared so much good info.
Y'all are so knowledgeable and we have learned so much and one thing was ------the g/o companies are not very fair------beware!
We took your advice and contacted the attorney you think so highly of---so hold tight, here we go! :D
Thank you all!
Dott, that’s a great addendum! Thanks!
Purple Land Management is not the exploration and production company. They are the broker firm that the E&P company hired. Remember that the long term equity is with the royatlies and not the bonus. So...I would try and get the highest gross royalty rate at the expense of the bonus money. Trust me these land departments are on tight budgets and if they can get someone signed at lower rental rate they will probably do it. Hypothetically try a $1500/per acre bonus and see if they will take a 18% gross. Make sure in the lease if they rewrite it that there are no third party deductions. Probably best to have an attorney make sure they cant deduct. Maybe they will take a $500/per acre bonus and 20% gross royalty. Its late in the year and maybe budgets are tight....