Old lease expires, yet ties us to renewal at same $$ rate.

We signed a lease 5 years ago for close to $700 p/acre.  It expires soon.  Language gives Co. the option of re-signing for 5 years at the old rate.  Know of any way to increase?

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0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on June 21, 2013 at 3:57am

Wager the $700/acre on a sure thing horse at Mountaineer?

Permalink Reply by kkw on June 21, 2013 at 4:01am

Bud a Bing!

Permalink Reply by craig on June 21, 2013 at 4:20am

Nope

Permalink Reply by Chris on June 21, 2013 at 5:26am

Time traveling Delorean

Permalink Reply by evan on June 21, 2013 at 6:49am

Sounds like your stuck

Permalink Reply by john doe on June 21, 2013 at 7:19am

if you dont hear from them before expiration,well !!!   if it was me i would run to an attorney...

depending on your location,i bet people outside of the hot bed of activity would love 700..per..

Where are you located??

Permalink Reply by Samuel J. Orr on June 21, 2013 at 8:04am

When you got $700 five years ago it was a great deal. You are likely stuck at that rate for another 5 years. The good news is that they may drill and if gas is found and sold during that period, the royalties are likely to be substantial and you will not be concerned that you only got $700/acre in lease renewal money.

Permalink Reply by Justmeinpa on June 27, 2013 at 4:25am

I keep saying to people that the real money is in the royalties, not the signing bonus money.  Why fight with them for more per acre when you can be receiving $700+ each month in royalties down the road?  Some companies aren't even renewing leases at all.  Besides, I look at it this way, it's more money than I had the day before, I am grateful, and I never dreamed there would be money coming to me each month for something miles below my property.

Permalink Reply by shorty79 on June 27, 2013 at 5:29am

Wow,five years ago,I got 2,500 an acre,It went up to 4,ooo an acre,which I refused,I let mine expire,I was not happy with the 15%royalties,when my neighbors got more,You win some,You lose some,It is what it is,Find out what your neighbors are getting,and before you sign a contract go to a lawyer,Dont believe words,see what is in the contract it self,That way you wont be surprised later.And be careful who you get advice from.

Permalink Reply by brian kulp on June 21, 2013 at 10:15am

if they let your lease expire your good but chk the fine print to make sure they don't have 30 or 60 or 90 dates after the date to renew

 

Permalink Reply by Kathleen on June 21, 2013 at 10:48am
Another thought. I once read, and thought this was brilliant, do not call the oil co., and remind them your lease is coming due. If for some reason your lease is not on their radar you could by making a call to them alert them to the lower resign amount.
I agree, read your lease and follow it to the letter.
I disagree that a sign on bonus doesn't seem like much if you get roaylities. Even if I get drilled (I have a couple acres in a unit just sitting right now) my sign on bonus was life changing and I only have 19 acres. I now consider royalities a bonus, and trust me I hope they will be a BIG bonus.
And, what if you never receive royalties? I'm big on the sign on bonus and lease language.
I wish you luck and remember if you get the second bonus at 700 its still better than so many around. I hope you can get more though.
Permalink Reply by Samuel J. Orr on June 21, 2013 at 11:07am

I wasn't intending to say that bonus money was not important. What I was intending to stress is that when natural gas prices were somewhat lower,  you could find formulas that suggested that an average horizontal well could yield over its lifetime of 25 to 30 years an average royalty income of $200 per acre per month. Of course because of decline curves the well would yield much higher royalties than that in the first few years and much lower royalties later. Using just 25 years as the well's lifetime and taking your 19 acres multiplied by $200/acre/month yields income of $45,600 per year. That sum  multiplied by 25 years equals $1,140,000. The calculations assume that gas prices do not rise over 25 years which is unrealistic. Therefore, the actual royalty income should be considerably greater. Enough said!

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