Would you rather...

((as of today, if you had unleased minerals))  Sign a standard lease with a net royalty and a 4k bonus per acre (all paid upfront), leasing all layers for 5 years

OR

Wait until O&G prices rise and hope you get a better deal then?

Why?

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Permalink Reply by Jonathan H on August 19, 2016 at 9:20am

I I had an offer for $4k per acre paid up front, I would give it serious consideration - in my area, current offers (what few of them there are) are for $750 to $1200 per acre per year, and sometimes they are not even paying out on those!

While I like the idea of waiting for a better lease, I agree with the old saying "A bird in the hand is better than 2 in the bush" - if I had a good offer, I would likely go with it instead of waiting for an unknown and may be non-existent future offer.

Permalink Reply by craig on August 19, 2016 at 12:53pm

I would never sign a "standard lease" even if it had a net royalty provision.

Show me actual net royalty legalize that does work and will work, then I might think about it.

0ym9x5ag7ury2Permalink Reply by 0ym9x5ag7ury2 on August 19, 2016 at 3:44pm

Never sign an O&G company lease.

You will never see: 1) a spud fee for drilling a well on your property. 2) A Pugh Clause to allow removing acreage not under production from your lease at the end of the Primary Term.  3) Free Gas or a payment for free gas.

4) A fair royalty, which even the 16 pages of protection provided by the ALOV and SURE Leases which Chesapeake signed, then began reinterpreting what was in the lease to make the lease look like their 1 page leases..

I could go on all night, but if you trust a domestic O&G company enough to sign their lease, then sign that ROW contract when it comes through your neighborhood. It will be like renting your home and land, someone else will own your surface rights.

You won't be getting paid for well products or payment for the pipelines being placed on your land.

This Oil & Gas is theft is of a Biblical Proportion (ask Bible johnny ), and no one is at home to stop them in OH, WV or PA, or across the US for that matter. You are on your own.

Better get smart quickly or lose your potential wealth.

Those of us who did everything right are being stolen from, that's domestic oil & gas, the dirty secret no one speaks of or prints in the News.

Permalink Reply by Barry D on August 19, 2016 at 4:45pm

EM,

The answer is an unequivocal, it depends. It depends on a variety of factors, so many of which you have not provided.

My first question would be, what is a standard lease? Could you provide us a copy? I would reserve further comment until after reviewing the lease.

Permalink Reply by Educate Me on August 20, 2016 at 1:11am
Hi Barry, not really enough acres to justify an attorney. Since I am more of a "bird in the hand" person, I would take the deal and hope they don't drill.
Permalink Reply by Bluflame on August 19, 2016 at 10:36pm
EM,
1. I would strongly recommend getting advice from an O&G attorney. You can find several who have been recommended by folks on this website. The E&P's will negotiate terms with you. This is a major decision that will effect you for decades. The expense of an attorney will pay dividends.
2. Be particularly cognizant of any "market enhancement" clause that may appear in the "standard lease". This is a "catch-all" provision that the E&P's use to justify all sorts of deductions. An attorney can provide you sound advice in this area and can negotiate for you.
Good luck and congratulations on the new lease!
BluFlame
Permalink Reply by Educate Me on August 20, 2016 at 1:16am
Thanks Bluflame. This was just kind of a musing, wondering what people would do at this point of time. I have very few acres, so really I am just a "dabbler" in this and the bonus money is a sure thing, the royalty (or another opportunity, is not).
Permalink Reply by David Allen Lilly on August 20, 2016 at 1:12am

Don't sign a net lease.

Permalink Reply by David Allen Lilly on August 20, 2016 at 1:23am

There are few easy answers.

You need to consider your particular situation. What is happening around you ? In Ohio we can go to the state's web site and get some idea of what is permitted around us. I have noticed that drillers are stacking units and drilling them but leaving slivers of ground between the units which are then impossible to be drilled by any other producer, thus holding the land by production without production.

If you find yourself in an area where there is little ground around you that is leased you would be wise to wait. If the ground around you is all leased you may consider what forced pooling would mean to you versus taking what is offered.

I never concerned myself with the up front bonus nearly as much as the lease terms themselves, especially the royalty payment terms.

A net lease is a legal out to gut your royalty payments. My sense of it is that a net versus a gross is a difference in realized royalties of a third to maybe a half, that is how much more valuable a gross lease is over a net.

All things being equal this is a very poor time to be making lasting decisions about your mineral assets. Most everyone in the industry expects pricing to improve in the last half of this year through 2017. I wouldn't count as much on it in this current year because it seems the over supply is not being worked down very much and this is holding prices down. The economies of the world, ours included, are pretty pathetic right now which is holding back consumption and there is an OPEC power struggle with Iran over reducing or capping production to ease the over supply and improve prices.

I would wait if I could but I would avoid a net lease if at all possible.

Permalink Reply by Educate Me on August 20, 2016 at 1:40am
makes excellent sense.

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