Leasing expertise needed!

My family owns 80 acres of unleased property in north central PA and we have been contacted by Carrizo regarding leasing our land as part of a 640 acre production unit. The offer was for 15% royalty and a bonus of $50 per acre. They have 3 wells drilled in the area and seem to be the only player in the region. Pipeline right of way has been cleared and I am told pipe is on order.

I have tried to negotiate a higher bonus and a no surface clause with little success. The agent assures me that our land is not ideal for a well site and that they have a neighboring land owner who is pad friendly so we have nothing to worry about.

Just looking for some feedback from those who have more experience with this. The bonus for me is not so critical, but not having legal assurance that our land will not be disturbed is a potential deal breaker. Additionally, we are getting pressured to sign quickly as they are supposedly getting close to fulfilling the 640 production unit at which time I am told we will be permanently locked out of any lease offer.

Thanks for the help!

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Replies to This Discussion

Permalink Reply by martin on November 2, 2013 at 9:40am
Eastern Ohio. 7200 / 20. I would try and wait for a reasonable offer.
Permalink Reply by Rock on November 4, 2013 at 11:15am

Martin where are you referring to when you say Eastern Ohio? Can you please provide the county? 

Thank You 

Permalink Reply by Mike C. on November 4, 2013 at 1:18pm
Central PA is barely happening. If you are getting any kind of offer I would be doing back flips. Comparing eastern Ohio to central PA is like comparing a Ferrari to a Kia.
Permalink Reply by David Perotto on November 2, 2013 at 9:52am

Dutch,

Where are you located?

Dave

Permalink Reply by Dutch Hollow on November 2, 2013 at 9:54am
Clearfield Co.
Permalink Reply by Jed Clampett on November 2, 2013 at 12:20pm

I think you could do better.  They always say you "must sign quickly or else.."  Talk to your neighbors. Look at plat maps to try to figure out where the 640 acres is, are you one the edge or right in the middle?  Makes a difference as to how important your land is to the unit. Tell the land man that if your land is not ideal for a pad, and they have a site picked on neighbors land, then they really don't want or need to use your surface.  Perhaps they do need your surface for an access road or even pipeline.  Are you willing to allow a pipeline to service the well on the neighbors land?  If so, maybe a limited surface use - line only for a pipeline for the well you are part of.  "permanently locked out", a don't think so, unless they already have all the land around you and have enough room to keep the horizontal well bore away from your property.  They key will be finding out if you are already surrounded, so again talk to the neighbors.  They should be willing to talk, after all you might be delaying their royalties.

Permalink Reply by Tim Tarr on November 5, 2013 at 6:45am

The offer was for 15% royalty and a bonus of $50 per acre.

I would not even waste time talking to them !

 $50 an acre is way too low . That sure would be a cheep pad location and/or access for them.Let alone all the other rights they acquire with a lease. You may even get more than that for a pipeline ROW. 

Be very careful about what rights this lease would give them. Storage being just one of them.

   

Permalink Reply by Jim Litwinowicz on November 5, 2013 at 7:46am

First, if the landman said there was no problem on placing the pad elsewhere, I would say "Great, then you should have no objection to putting that in writing" Also, be very wary of pipelines and/or roads or other surface use. Storage, retention ponds, etc.

The bonus fee is very small. If the 80 acres is in the middle of the unit you can get much more. If its on the edge you risk being left out if you push for too much. Perhaps you can ask for a delayed rental fee paid yearly. This would help get you into the unit and royalties are much higher....if the lease is good and they actually put the well into production. I would rather try to get a better royalty with no deductions.

Are there other wells in the area? By the same company?  If there are good producing wells around you, you are better off in a unit with a good royalty.Do you know if all the neighbors are leased? What they got? How recently? Try working with anyone not leased.

Good luck.

Permalink Reply by Isabel Rogers on November 5, 2013 at 8:33am

Include a strong damage clause that delineates EVERYTHING that could be damaged(include water sources, trees, fencing, guard gates, etc.) or mis-used (e.g. - hunting/fishing should not be allowed).

I think that PA has some strong environmental regulations (request notation of those in the lease). Ask about water treatment facilities and storage facitiies and where they will be located (include in the lease). Ask about including a Pugh clause to limit the time for production and limiting access to your property.

Include a written notification requirement for work that would fall outside normal operations or operations as specified.

Whatever you consider needed can be added as an addendum to the lease (as long as it doesn't conflict with state or federal regulations or is direct conflict with other clauses).

Get a quick assessment from an oil and gas attorney about the lease (before you sign, if allowed).

Permalink Reply by Matt on November 5, 2013 at 10:53am

Contact an attorney immediately! DO NOT agree to those terms...

Permalink Reply by Lisa McKenzie on November 5, 2013 at 11:04am

Any term that is important to you MUST be in writing in the lease agreement.  Get an attorney.  We only have mineral rights and they are in WV, so I can't add anything more specific.

Permalink Reply by Hal Whitlatch on November 6, 2013 at 1:38am

Get everything in writing! The offer seems low but check with the neighbors and see what the going rates are. To expect a lot more over the going rate you would need to be a pivot-able  part of the unit.

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