re: Going rate for leasing land for exploratory drilling.

<---@yahoo.com

CajunCricket has some good advice. Knowledge is power. While he's right that not leasing could be better in the long run, the well has to pay for itself a few times over before you start receiving money, and who knows how long that will take. The system is designed to incentivize leasing.

The job of the landman is to walk away with the land tied up for the longest period of time, for lowest bonus and lowest royalty. He's not necessarily out to screw you, but if you say I'll take $100 and 5% for 10 years, he's not going to fight you.

He's going to tell you to go to hell for a favored nations clause. But it's not a bad thing for him to know you know what that is.

Finally, like somebody mentioned, if this is seismic work, that's a whole other ball of wax. They're just looking to see the formations below the surface. In that case, if the seismic is positive, someone would be back later to lease the surface and minerals.

Again, sign nothing at the meeting. Tell him you need to have it reviewed. Let us know what he tells you.

quote:

---

Not true. Not if he's unleased.

---

Take a look at the Risk Fee Statute my brother. 200% nonconsent penalty, as I recall.

If it's an unconventional play (long reach horizontal with hydraulic fracturing), you are unlikely to get paid if you go nonconsent on a Risk Fee letter. The well costs are just too high.

ETA: Uptopar correctly and professionally pointed out that Risk Fee doesn't apply to unleased interests.

quote:

---

seismic work

---

Usually a seismic permit has a lease option attached. There's a good reason for that.

If I spend ten or twenty million on a seismic shoot them have to go lease, every jackass block buster in the world is going to start leasing around me. Also, when I go back to lease a landowner after a shoot, the landowner knows I've found something, and the lease is going to be a lot more expensive.

Locking up the acreage with options solves those problems.

Leases in the SW Louisiana area were in the $250-$300/ac with 1/4 royalty a few years ago. These terms depend on activity in the area and if the those leasing the property are packaging up a play they plan to sell to someone else to actually drill/produce it.

quote:

---

He said if anything was found a seperate company would be the ones to negotiate royalties.

---

This is strange for a drilling lease. If above is true, it sounds like a deal to do seismic work as someone already posted.

Regarding leasing versus not leasing to get a larger share. I would sign the lease. Holding out is usually a losing deal. They may not do anything unless they get everyone leased. Besides, many times, the well is never drilled or if it is drilled, it is a duster. Even if they hit pay, production unit boundaries can be pretty subjective. If your property is near the edge without a lease, it is in their interest to cut you out. Then your option is to hire a geologists and things get expensive and complicated.

Got it. I'll shoot you an email in a little while.