Replies to This Discussion

Permalink Reply by Jim Litwinowicz on September 16, 2011 at 3:31am

This is a tough decision, unless you can get both.  Limiting the size of the unit to 640 acres would mean that your share of royalties would be less diluted among other landowners. But it also means that they may drill first on an adjoining unit instead of yours.

 

Right of first refusal means they have to match other offers.  One would assume that offers will go up in five years with a reasonable assurance. But it is possible they go down if a well is drilled nearby with disappointing production numbers.

 

If I were faced with an either or here, depending on your personal situation, I would take the five yr option as a priority .  It is very possible that they will not drill at all in the first five years as there is so much land to explore and little infrastructure in the area. This makes any renewal clause very important.

 

Curious to hear what other people think.

Permalink Reply by Bob Moran on September 16, 2011 at 4:44pm

Jim,  Thanks for the comprehensive answer. 

Permalink Reply by Rick Cancelliere on September 17, 2011 at 11:44pm

The other thing you need to consider with the "Production Unit" language is if you are included in a Production Unit, but not a drilling unit it may be enough to hold your lease longer than the 5 years it states with no royalty payments. You will not be entitled to a royalty because you are not part of a "Drilling Unit" when a well is in production.

Permalink Reply by Stephen Burger on October 5, 2011 at 3:13am

Bob I work for a group that negotiates mineral rights across the country. We've been very successful in meeting the needs of our clients while simultaneously increasing the payout of the lease. If your interested in hearing about what we do and how we can help shoot me a message for my contact info.

Permalink Reply by Lana Boyer on November 3, 2011 at 1:13am

any of the leases that I have seen are automatically renewed if activity takes place.  Once the drilling activities start they are life time leases, or at lease (40 years)  This is why you need an attorney for the life of your lease.