Replies to This Discussion

Permalink Reply by David Cain on September 29, 2022 at 9:09am

NC MAN,

These companies seem to be waiting to sign people up only when they are planning to drill.  This next lease you sign will probably be the most important of all for you and your family.  I would want to make sure it is done right if I were you.  I would hire a really good oil and gas attorney to review the proposal.  These land men can get us confused with all the details they throw at you and these details can make all the difference between having a bad lease and a good lease.  For instance, you say you will get $16,000 per year for the next 5 years.  What if they drill next year?  Would you still get signing bonus for years 3-5?  I would also try to get a no deduction royalty.  A lot of things get subtracted out on these gross leases.  I believe you said that KWGD was representing the  surface owner on your land at one point in time so I wouldn't use them. But there are other good oil and gas attorneys out there.  If you and your brothers go together you should be able to get a good attorney that won't be too expensive and will ensure that you aren't taken unfair advantage of.  This is my 2 cents and only my opinion.  I hope it all works out for you and good luck.

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Permalink Reply by nc man on September 29, 2022 at 12:34pm

Hi David,

Thank you so, for all your good advice and the sharing of your thoughts with us!

Would like to contact the Purple Land Management, before we contact an attorney, that we want the remaing years of the signing bonus, and we want it in one lump sum, if, the drilling starts before the 5 year contract is up?

Sound good or to harsh?

Can you reccomend a good attorney, David?

This is very interesting for sure. We have waited 10 years to be drilled and now there is a chance for that to come true!

What is the ususal amount of raoyalties you get per month?

Not really that familiar with drilling figures.

Hoping to hear others experiences with Land Men and their recent sign up #'s.

Thank you, again!

nc man

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Permalink Reply by David Cain on September 30, 2022 at 7:52am

NC MAN,

Glad to share what little information I have.  This is a topic that I have been following off and on for the past 10 years and find pretty interesting.  

You should do whatever you feel comfortable with since you are the one being affected by your actions.  Personally, I wouldn't hesitate to try and negotiate with the land man.  Better yet, I would let my attorney do it for me.  The land man represents the driller, and even if you do find one that is honest and fair they still aren't there to protect your interests.  They represent the driller and that is their first priority.    

I have heard royalties in the range of $500-3,000 per acre per month, but the most common numbers seem to be in the $750-$1,000 per acre per month range.  I have no first hand knowledge of this since, like you, my property has not been drilled yet.  One very important note that I can't stress enough is that these wells start to deplete rapidly and significantly.  If you start out with royalties of $1,000 per month then don't be surprised if royalties drop to $500 per acre after the first year and then to $250 per acre the year after that and then maybe level off at $150 per acre for the next 10-15 years afterwards.  Don't get accustomed to those big initial checks - it won't last forever!  That is why I have been pretty happy just renewing leases up until this point.  I have made 5-6 times what I payed for my property and they haven't even put a bit in the ground yet.  If I never get drilled I still come out ahead.

I used KWGD as my attorney on my last lease and was happy with them.  I remember reading on this site that someone else recommended Atty. Emens from Emens and Wolper out of Columbus, OH (https://ewjjlaw.com/ ).   Again, I don't think you should use KWGD because I remember you mentioning before that they were doing something for the surface owners where your minerals are located.  So there could be a conflict of interest there.

If I were in your position, here are the 3 steps that I would concentrate on.  Feel free to do what you want with this information.  You don't know me from Adam and I may or may not be giving worthwhile advice.   I wouldn't be offended if you do or don't.

1.  Get a good oil and gas attorney to represent you.  Talk fees and get a ball park of how much will be paid and how the payment will be made.  (when I used KWGD, the driller cut one check for me and one for my attorney.).  Sign a contract with the attorney for representation.

2.  Send your attorney a copy of any lease offer and/or emails that you have received from Purple Land Management.

3.  If I am correct that you were contacted by KWGD on the surface owners behalf, then I would gather that information and also send it to your attorney.  I don't remember the details of what was going on there but it sounded like the surface owner may have been trying to gain control of your mineral rights.  That could be a big deal or it could be nothing.

Good Luck!

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Permalink Reply by nc man on September 30, 2022 at 10:47am

Hey David,

I am  pleasantly "intimidated," by the words of wisdom you have, so, diligently learned and sharied with me  these last two days.

I know I have a long way to go, to even come close to your degree of knowledge, pertaining to the oil/gas industry!

All I know is what I have learned on the Marcellus site and today's "lesson" was a great one!           n

The ten years of your time has been a true success!

Congratulations!

Your knowledge to detail is overwhelming!

Seriously, you remembered more about our past events than I did!

When I read your words, you jogged my memory bank!

Do you know me/us?

I am curious how you remembered all the intricate facts of my past posts?  

Are your facts, of others, as precise? 

Your last paragraph was almost too much for me.

There are 6 of us, now, that will be on the proposed lease, so, I will pass on your suggestions to the others and I, too, will study it!

David, thank you so much, for the sharing of your thoughts.

You pretty much summed it all up in a nut shell!

May your oil/gas endeavor turn out better than you could ever imagine.

nc man

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Permalink Reply by nc man on October 3, 2022 at 4:38am

Hi David,

I just have a few more question, please, if you don't mind.

The Purple Land Management rep says Ascent is not giving gross royalties, just net.

They have offered us 20%  net royalties. 

Do you think there is a chance they would agree to 15% gross or are we cutting off our nose by asking for that change?

We have no idea what is involved in the drilling costs or what they would be deducting, money wise, from our royalties.

Are you familar with these numbers or can you give us some idea on the expenses?

They have agreed to pay us the remainder of the lease, if there is drilling started before the years are up.

We want to be paid for the remaining years in one lump sum, not yearly, as they have proposed to us.

Does this sound like something they might agree to?

At this point, the rest that are involved with the mineral rights, are not too keen on the attorney, so I thought you might share your knowledge of these questions.

Thank you so much!

nc man

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Permalink Reply by David Cain on October 4, 2022 at 3:42am

NC Man,

I haven't received any royalties so I can't say which is better.  I have just heard that a net lease allows the gas company the ability to deduct a lot of costs, but I don't know if the 20% net will get you more or less than a 15% gross.  It probably also depends on how aggressive the gas company is in charging costs back to the landowner (transportation, separation of liquids, processing, etec.)   I also understand your family not wanting to pay attorney fees.  But my opinion is you can't afford NOT to have an attorney.  What if the attorney could negotiate a 17.5% gross lease where the best you can do on your own is 15% gross?  In this scenario, you would actually be making money off the attorney.  My experience, though limited, has been that these oil and gas companies are more willing to negotiate when you get an attorney involved.  Maybe if you talk to an attorney and just get an idea of how much it will cost and whether they think they would be able to get you a better offer you can then pass that info on to your family and they can make a decision accordingly.

As far as getting paid yearly .vs. a lump sum that would depend on a lot of factors.  I personally would like it split up over the years so that I would hopefully pay less in taxes.  But if you have expenses that need taken care of sooner then I can understand asking for it all up front.  There is also the "time value of money" to consider (where $1 today is better than $1 a year from now)  However, I would want to make sure that if I went with the yearly payments that the lease terms are rock solid that all payments would be made even if a well is drilled before all payments are made.  And again, the only way I would feel that the lease is solid would be to have an attorney review it.

Of course the final decision belongs to you and your family.  However, my point of view is that I will never sign a lease unless an attorney representing my interests reviews the document and explains to me exactly what it means.  I will admit I am a little biased in favor of attorneys though.  My wife is an attorney but has no experience in oil and gas.  She does adoption work.  

Best of luck to you and your family.

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Permalink Reply by Joe C. on October 4, 2022 at 10:07am

Purple Land Management is a Brokerage company representing a main operator like Ascent. They will bring you the lowest offer first. Counter back and ask them for the same terms from your old lease. Purple will have to take your offer to the operator they’re representing to try to get approval. 

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Permalink Reply by Dott on October 7, 2022 at 5:30am

NC MAN,

I just leased with an O&G company in Tuscarawas County and they are offering most Lessors $2,000.00-3,000.00 for a 5yr/5 yr and 15% Gross.

Now there may be others that are getting more or less from them but that is the average. Most companies these days are going to drill what they lease. No more spending speculative money. DON'T get into a Net Royalty situation. Some companies will not be fair in what they deduct.  Most companies are Giving Gross  leases these days if you hold out.

I was recently told by a Landman who is a friend that if you are in Unit being drilled with 3 wells as a LOW estimate: $300.00 x 3= $900.00 x________(acres)= monthly check. Of course it depends on differences like number of wells, royalty amount, deductions, type of constituents etc. So this is just a ballpark.

I used Attorney Cody Smith from Emens Wolper Jacobs & Jasin 614-414-0888. I have used others in the past and called around for many free 30 minute consultations and by far I was happiest with Attorney Cody Smith. At least call for the free consultation. They also offer a good deal where they will work with you and your lease but you continue to be the person who negotiates with the Landman, hence the reduced  package price. So you get all the advice and questions answered. I was very happy with the results and the cost at the end.

Even if you negotiate Gross Royalties on your own it's prudent to  let an Attorney review the lease because there is language that the company can have in the lease that still allows them to take deductions. Lease language is so important.

I know Attorneys want a perfect lease for you and it could take many hours of negotiations and costs because the companies will fight hard against adding those addendums. So after my Attorney made his recommendations I took those changes to the company and they accepted a few. So then I asked my Attorney for the top 5 most important topics left to negotiate and worked with him on getting language that the company would accept and negotiated some more. So in the end I got something and the company got something. Was it a perfect lease? No but I was able to change the worst of a lease and I was happy and it didn't cost as much.

Hope this helps in your decision. 

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Permalink Reply by nc man on October 26, 2022 at 11:47am

Hello All-----

Well, after much thought, we have contacted an attorney and a very personable and helpful one, at that!

Thank you, Dott!

Want to thank you both, David and Dott, for all your words of knowledge and encouragement, you have shared with us.

It is too early to share anything with you other than we took your your advice and feel good about doing so.

When the time comes I will be back to share.

Right now, Ascent's $3,000 an acre and 20% net is what is being offered, over and over, from Purple Land Management. 

Most importantly, we would like to wish everyone, warm and happy holidays!

nc man

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Permalink Reply by Dott on October 26, 2022 at 12:32pm

NC, 

You are welcome. Just want to be able to help anyone in your position against the O&G companies because they can be ruthless.

Don't take their NET Royalties. MOST companies are gladly giving GROSS royalties now because people are demanding them.  Yes they may be lower in percentage, but you are assured they cannot twist words around so that they can charge whatever they want for deductions.  And with the cost of transportation going up especially if trucking the stuff who knows what that will be. 

Also if you do go with Gross be sure the Lawyer adds an Exhibit addendum with language he feels is rock solid because sometimes the language in the main lease will sound like there are no deductions but to a court the language may mean something else. Make sure the Lawyer approves of all of the Exhibits/Addendums language.

If you do decide to accept Net be sure that language is also scrutinized. The Lawyer may be able to estimate the percentage of the cost for transportation etc deductions.  But that was then what about now or the future.

Food for thought: Why would you accept a less favorable lease this time around, like Net Royalty and a Bonus that is not paid upfront. What are they afraid of? Everyone else these days are getting Gross and an upfront bonus. Something doesn't sound right to me.

What they want is to give you what is called a "Delay Rental" and pay you in installments instead of an Upfront bonus. What that means is if they drill in year 2 they legally do not have to pay you the delay rental for years 3, 4 or 5. So you lose money.

NC according to my calculations your family must own 25 acres. That is a good amount for you to be able to negotiate better terms. And they have now increase your royalty to 20%. Why? Because it is still NET and they will recoup with all of the deductions they can take. Stand your ground.

Glad you are going to speak to a Lawyer to get some direction.

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Permalink Reply by Dott on November 1, 2022 at 9:21am

NC and Everyone,

I made an error in past posts on Net and Gross Royalties. Of course you want your royalty to be Net. And Cost Free may be the better term to use. I mistakenly switched the Gross and Net. I hope this did not confuse too many and I wanted to correct my error here.

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Permalink Reply by jett on November 2, 2022 at 7:32am

If you get Gross royalties then NO deductions are taken from your percentage.  If you get Net royalties, the oil/gas company WILL take a big chunk for deductions out of your share. And that can really shrink your check by quite a bit. Gross royalties clauses are the best. Our royalty checks have nothing deducted because we have a gross only royalty clause. 
Also be careful of language put in the lease that basically invalidates true gross royalties.

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