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Permalink Reply by Kyle Nuttall on July 17, 2015 at 6:15am

Nice to know they offered you $300/acre. My client in Wayne County was just offered $250/acre. I was planning on working them up anyways, but if they've offered you $300/acre I'm sure they'll go over $300/acre in negotiations. Putnam and Wayne aren't all that different, after all.  We're at the beginning of the Rogersville shale play.  If you can wait to sign a lease it might be a good idea to do so.  Bonus amounts and royalty amounts should go up in the next couple of years.  It's a pretty good idea to tie them in to a lease while they're interested, though.  Sometimes they lose interest in an area.

I'd ask for 22% royalties, and gross proceeds.  You'll probably end up at about 18%.  In most of the northern counties you can get 18% when you negotiate, sometimes more.  Do not treat royalties lightly.  You'll get more money in royalties than bonus, by far, over the life of a good well.  Sometimes you'll get more royalties in the first year of the well than you got in a bonus.

Don't forget to negotiate other terms.  Gross proceeds is important.  Ask for Indemnification, No Warranty of Title, a Pugh clause or formation limitation, and make some changes to the shut-in clause.  Try to get no automatic extension of the primary term.

If you live on the property, ask for free gas.  It's not common any more, but it doesn't hurt to ask.  Also make sure to get no surface use, or if they're going to use your surface, get detailed plats and surface damages determined beforehand.

I've done this kind of thing a few times (I'm an oil and gas attorney).  Keep asking questions and do lots of research.  

Permalink Reply by Daniel on July 18, 2015 at 3:33am

Do u have any ideas on what there offering land owners in Putnam? Now that the well is producing. That's what I would like to see what I'm up against. I don't think the forced pool will affect anyone if they stay intersted in the negotiations do you?