Expert: Alan H. Coogan - 10/24/2009

Question
I recieved and oil and gas lease proposal today.  It is for 54.47 gross acres, 13.6175 net mineral acres in the Joseph Harper Survey, A-235 and 48.446 Gross Acres,24.2230 Net Mineral Acres in the John Trimble Survey, A-482 in Upshur County Tx.  The offer listing is 1)Paid Up five year primary term 2)150.00 per net mineral acre bonus = draft payment for $5676.08 3) 3/16 royalty. This appears on the offer page but in the actual lease it is listed at 1/8? How do I know if this is a good deal or not?  Is it common to negotiate these types of deals?  I have looked all around and haven't found if they are finding oil and gas around this area?  Just looking for a little insight.

Answer
Dear Kyle:
1. I can't keep up with the variety of offers across the country either. Local info (you neighbors) is a up-to-date source of what the market is like

2. The Texas RR Commission web site is a good place to start on what has been drilled.

3. This could just be speculation by a leasing company--the driller will be an assignee.

4. Looks like 1/8th is what you get unless changed.

5.5 years is likely too long.

6.Counter offer 2 years--see what happens.

7. If you don't live there and don't care much, take the cash.

Good luck
AHC