Oil & Gas Lease Question

What parish?

Also, me personally, if an average sized lot that’s obviously less than an acre, unless he’s hurting for money and needs an extra 1,600 right now, I’d decline signing and have the operator carry me in the pooled unit as a non-working interest partner.

The well will have to payout, maybe 200%, before he’d see a dime. However, after payout, he’d be receiving 8/8th royalty rather than 1/5 or whatever was negotiated.

If he declines are they gonna just run the the pipe through his neighbor instead?

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Is the "paid up" lease part good or not so good?

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IMO paid up is better. Otherwise, operator can not pay in year 2 or 3 ...they lose the lease, but your son misses out on more bonus.

Much (including bonus) depends on how successful you feel the prospect will be. Does your son have any way of getting access to this information and evaluating it? The advantage of a lease is that you get to keep the bonus even if the well is a dry hole or is never drilled...and you get to keep the royalties even if the well never pays out.

The other comments are all correct, I have seen this question many time through the years and I believe that it is generally better for a mineral owner to be a lessor unless they are really want to speculate on the success of the project and have a good idea that the well will payout (and then some). They will also likely get pencil-whipped by the operator as a non-operating working interest owner - that can still happen but it is harder to do with royalties.

Bonus and royalty should be commensurate with what others are getting in the area. For example, if the prevailing rate is 1/4, ask for that.

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if the prevailing rate is 1/4, ask for that.

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Hell, ask for 3/8s.

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Royalty is usually 1/4.

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Maybe 20-30 years ago. 1/5 and 1/6 is fairly common in Louisiana right now given the current environment

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Is the "paid up" lease part good or not so good?

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Paid up Producers 88 was pretty standard in North Louisiana when I was active up there.

The Bath 6 rental lease form was more South Louisiana activity.

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The well will have to payout, maybe 200%, before he’d see a dime. However, after payout, he’d be receiving 8/8th royalty rather than 1/5 or whatever was negotiated.

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Lol see how that works our for you, those MFers are criminals and own the courts, he will never get a dime

You need to listen to Daniel Plainviews “Milkshake” example.

I would sign the lease. Participating in a well involves liability, a book keeper and a ton of correspondence to sift through for the information that matters to you.

Most companies that are non-operators prefer receiving a ORRI (overriding royalty interest) that involves receiving payments off the production with no actual ownership or liability of the well/minerals.

This would be double hard to manage from overseas.

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Last year I advised a friend with acreage in Natchitoches Parish to counter a 1/5 offer with 1/4, and the Lessee accepted it without a fight.

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This is generally accepted in proven areas.