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Oil/Gas/Understanding Lease Terms


Mr. Scott
we have a small acreage in cleburne county ar. ( less than 10)section 6, T-11-N,R-10-W  we are currently under a lease which will expire in the spring and have been approached by another land service for another lease arrangement. they propose 3 options with a "kicker". a 5 year lease and a 5 year option.
the less upfront gets a larger royalty and a higher upfront gets a smaller royalty.there is currently a producing gas well in the adjacent reviewing their lease agreement there are several concerns.i) the 5 year option "kicker". 2)there are no depth restrictions. 3)lots of language about their reimbursable prior to figuring the royalty payment(more aptly called"paying quantities".4)shut- royalty ??? 5)leasee's right to "pool" or "integrate" with a formula for figuring royalty payment.
any guidance you might offer in understanding this proposed lease would be greatly appreciated.
thank you

I wouldn't suggest agreeing to a five year extension option unless they are willing to pay you at least TWICE what they are offering for the first five years if they decide to extend. A depth clause shouldn't be a problem. If they won't agree to that I wouldn't lease to them.

It appears you are not familiar with many of the common lease terms such as paying quantities, shut-in royalty, pooling and integration clause etc. I really don't have time to explain them all here in detail on this free forum but you can find explanations for of them by doing an Internet search I'm pretty sure.

If you really want an in-depth explanation of what you are being asked to sign you should contact a qualified OIL AND GAS attorney who, for probably a hour's time, will walk you through it, explain what everything means, and may even have some suggestions to improve the offer.

Hope this helps you out.
Frederick M. "Mick" Scott CMM RPL
The Mineral Hub  


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Frederick M. Scott


Oil and gas leasing, lease negotiations, how to best deal with the oil and gas companies or their representatives, buying/selling mineral rights, forced-pooling, correlative rights, deeds and conveyances, and "post-production" costs. I am most experienced with Oklahoma properties and laws, but am able to answer questions concerning other oil and gas producing states in many cases.


I am a Certified Professional Mineral Manager (CMM) certified by the National Association of Royalty Owners (NARO) in Tulsa, OK. I am also a Registered Professional Landman (RPL) with the American Association of Professional Landmen (AAPL). I have managed my family's oil and gas properties in Oklahoma for over 10 years and have dealt with many landmen, title analysts, attorneys and other oil and gas professionals in the process. I have written several articles which have appeared in various oil and gas industry magazines and newsletters. I have negotiated and drafted leases, prepared deeds, affidavits, and other legal instruments relating to my own minerals, as well as performed title, legal research, and curative work for same. I have acquired a good deal of knowledge on the subjects of oil and gas law, mineral appraisal, and landwork over the past ten years, and also worked as a professional landman and lease buyer for a time. I've seen the business from "both sides" and therefore feel confident I can help out most of the folks who ask questions in this forum.

National Association of Royalty Owners (NARO); American Association of Professional Landmen (AAPL)

National Association of Royalty Owners "Action Report" (ROAR); NADOA Magazine, The Mineral Hub, Landman Magazine, and several royalty owner association group's newsletters.

Certified Mineral Manager (CMM), Registered Professional Landman (RPL)

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