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re: Oil & Gas lease offer for a recreational property in SW Miss. - what to look out for
Posted on 5/13/21 at 4:35 am to dcw7g
Posted on 5/13/21 at 4:35 am to dcw7g
1/4 royalty. And 50 bucks an acre is laughable. They will always lowball first offers. Your neighbors have been contacted with a higher offer. You just don’t know. 350 per acre.
0
Posted on 5/13/21 at 6:52 am to bulldog95
Reading this thread makes me realize how much disparity there is in peoples economic upbringing... Some get taught about how to optimize their oil royalties on their family onwned land, while others like me are taught how to save half the pack of ramen noodles for dinner so I don't go to bed hungry... It sucks but it is what it is, I suppose I can be happy knowing my kid will have a helluva better childhood/inheritance than me. The only thing I'm inheriting from my parents when they pass are funeral costs lol....
Posted on 5/13/21 at 7:34 am to dcw7g
How far down SW MS most stuff in around Laurel is oil, High water cut low oil production but it goes on for ever. The shale that is way S MS and La (forget the name) is way to $$$ and hard to frac, many have tried and many have failed. Denbury and Rockall are the main players in that area, and neither of them are aggressive in a drilling program.
Best advice is get an O & G attorney, the one mentioned later on Heidelberg? They are good and have been around for a long time. Will not cost that much to seek advice.
This is not Haynesville comparable, Chesapeake F'd all that up back in the day by offering outrageous prices. BUT gas is on the rise and there are more and more rigs moving in there as well as the GOAT play Barnett Shale in N. TX :)
Overall good for you, maybe they will be onto something and you can get mailbox $$ for a long time.
Best advice is get an O & G attorney, the one mentioned later on Heidelberg? They are good and have been around for a long time. Will not cost that much to seek advice.
This is not Haynesville comparable, Chesapeake F'd all that up back in the day by offering outrageous prices. BUT gas is on the rise and there are more and more rigs moving in there as well as the GOAT play Barnett Shale in N. TX :)
Overall good for you, maybe they will be onto something and you can get mailbox $$ for a long time.
Posted on 5/13/21 at 7:39 am to dcw7g
Ask for a 1/5 royalty at least. Another thing to keep in mind is long term if they discover oil is to ask for a yearly surface use fee.
Posted on 5/13/21 at 8:16 am to Tigerpaw123
quote:
most rights were bought uo years ago by big companies who will never let them go
The Kennedy clan of Mass owns a ton of mineral rights in SW MS. Joe Kennedy back in the 30’s and 40’s “bought” a huge swathe of mineral right for pennies during the Great Recession.
Posted on 5/13/21 at 8:26 am to Strannix
Assuming this is wildcat TMS stuff, and you only have 50% i don't think $50 is unreasonable. Maybe do a one year for $50 and a bonus option after one year for another $25. That is a really light royalty if there's no other burdens. I'd fight for a little more of that. That is where the $$$$ is if something pans out.
Posted on 5/13/21 at 8:32 am to bulldog95
quote:
$50. I got $5000 an acre back in 2009.
I’d hold out for a lot more per acre and I’d rather 1/8 royalties before any production costs etc .... instead of 3/16 after production cost.
I wouldn't listen to this guy.
Posted on 5/13/21 at 9:10 am to TigerDog83
It’s possible, but not likely that even a conventional drill is something of interest right now. Most of the shallow has been explored. I’d be asking the leasing company lots of questions. Nonetheless, the bonus payment should be at least $100/ acre for the effort and consideration with 1/5. If Mississippi has a SONRIS webpage like La, I could help more.
Posted on 5/13/21 at 11:33 am to Manchac Man
quote:
bonus payment should be at least $100/ acre for the effort and consideration with 1/5
Appreciate the advice. Honestly, we're not talking about a lot of acreage, and I've only got 50% mineral interest in that. The difference between $50/acre and $100/acre is only about 3 grand (which is not nothing, but not much in the scheme of things). The difference between 3/16 royalty and 1/5 (or 3/15) doesn't seem huge either. Getting an attorney is always good advice, but with the small amounts we're talking about, even a cheap lawyer will likely eat half my bonus in fees. The contract they provided does provide protections against damage, etc. They'd have to pay me for any lost timber, for example.
I will check with my neighbors to see if they're getting any offers.
Posted on 5/13/21 at 1:43 pm to UpToPar
quote:
wouldn't listen to this guy.
It’s ok my family has been doing very well the last 4 decades with timber and oil/gas wells. I banked during the haynesville shell boom but by all means listen to you. It’s not my $$$$$ to lose.
Posted on 5/13/21 at 1:50 pm to stewie
quote:
My one simple and important suggestion, hire an attorney.
quote:
It’s worth the money to have great legal representation in these matters.
those two are necessarily always the same
lawyers are just like mechanics, they can all do the simple shite but only a rare few really have skill and know wtf they are doing to not be cheated and taken advantage of
Posted on 5/13/21 at 1:51 pm to bulldog95
Lease Provisions
When determining whether post-production costs are deductible from the royalty, the lease should be carefully examined. Sometimes the lease terms will specify whether post-production costs are deductible. For example, as part of the royalty clause, a lease may provide:
Lessee shall have the right to deduct from Lessor’s royalty on any gas produced hereunder the royalty share of the cost, if any, of compression for delivery, transportation and/or delivery thereof.6
But what if the lease does not include a provision such as the one above? Or what if the lease provides for the payment of royalty based on market value or net proceeds “at the well”7 but does not spell out the types of post-production costs that are deductible before the royalty is calculated? Is that enough?
“At the Well”
The following is an example of a gas royalty provision with “at the well” language:
Royalties to be paid by Lessee are: . . . (b) on gas, including casinghead gas or other gaseous substance, produced from said land and sold or used, the market value at the well of one-eighth (1/8) of the gas so sold or used, provided that on gas sold at the well the royalty shall be one-eighth (1/8) of the amount realized from such sales[.]8
Why I said 1/8 royalties at the well head is better than 3/16 royalties after production costs have been deducted.
When determining whether post-production costs are deductible from the royalty, the lease should be carefully examined. Sometimes the lease terms will specify whether post-production costs are deductible. For example, as part of the royalty clause, a lease may provide:
Lessee shall have the right to deduct from Lessor’s royalty on any gas produced hereunder the royalty share of the cost, if any, of compression for delivery, transportation and/or delivery thereof.6
But what if the lease does not include a provision such as the one above? Or what if the lease provides for the payment of royalty based on market value or net proceeds “at the well”7 but does not spell out the types of post-production costs that are deductible before the royalty is calculated? Is that enough?
“At the Well”
The following is an example of a gas royalty provision with “at the well” language:
Royalties to be paid by Lessee are: . . . (b) on gas, including casinghead gas or other gaseous substance, produced from said land and sold or used, the market value at the well of one-eighth (1/8) of the gas so sold or used, provided that on gas sold at the well the royalty shall be one-eighth (1/8) of the amount realized from such sales[.]8
Why I said 1/8 royalties at the well head is better than 3/16 royalties after production costs have been deducted.
This post was edited on 5/13/21 at 1:54 pm
Posted on 5/13/21 at 2:58 pm to dcw7g
O.P., Which oil company? Asking for a friend 
Posted on 5/13/21 at 8:57 pm to dcw7g
Which company?
Posted on 5/13/21 at 11:56 pm to dcw7g
Ignore them.
If they want it, the price and royalty will go up.
If they want it, the price and royalty will go up.
Posted on 5/14/21 at 7:43 am to nolaks
quote:
i don't think $50 is unreasonable. Maybe do a one year for $50 and a bonus option after one year for another $25. That is a really light royalty if there's no other burdens. I'd fight for a little more of that. That is where the $$$$ is if something pans out.
If they don't find any grease then the money for the mineral owner is the leasing cost. Never take fifty bucks an acre for leasehold (that's so 20th century). Oil and gas landmen sit in an office and talk about the lowball first offer. And they don't want a 200 acre unleased track right in the middle of their business. Get more lease bonus!
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