Oil/Gas/oil and gas royalty
I have been approached by a company with a $400.00 signing bonus and a 3/16th royalty. Should I counter the offer on the form sent to us,or call and counter over the phone? I was going to counter with 1/5th royalty.
Thanks for the great question. The proper way to establish a market value for an oil and gas lease involves some research to learn the nature of the prospect (production on surrounding parcels, for example), the likelihood of payout, and the expected quantity of payout; and perhaps obtaining the opinion of a geologist or at least talking to a knowledgeable landman who is active in the area, all of which takes time and money. One property may bear a lease bonus of $1000 an acre or more while an adjacent one may have a value of $100 per acre or less. Have any wells been drilled in the surrounding area recently? Have you spoken to the owners of the adjacent properties? Have you asked a landman what is the most he has paid for a lease in that county? Unfortunately, I cannot afford to answer questions like this one for free due to the aforementioned need to pay for research and hire experts.