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Oil/Gas/Jefferson County, OK Lease Offer


QUESTION: Mr. Scott, Do you have any information for the below plot of land? An oil company is offering $55.56 for a 3-year lease on our portion of mineral rights at 3/16 royalty. Many thanks!

South Dixie 31-1: E/2 NE/4 of Section 31, Township 3 South, Range 4 West, Jefferson County, OK

ANSWER: You should be able to do better than $55/acre here I would think. Others in the immediate area have been at least $100/acre and a few miles away leases have been bought for $250/acre. I'd shoot for $150/acre and make sure they include a "depth clause" in their lease. If they won't go for that I'd hold off leasing to them until they come to their senses. There are several oil wells in other parts of your section 31 that aren't bad for this area. One in the SW/4 is still producing over 2000 BO per month from a 40-acre spacing unit. One acre in that unit would get you about $750/month in royalty.

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

---------- FOLLOW-UP ----------

QUESTION: Mr. Scott, Thank you very much for your response. I have found a little information about the "depth clause" you mentioned. Is this the same thing as the vertical "plugh clause?" Is there anything specific this clause should state on the contract? Our share is actually only 1/3 of an acre. Is it worth requesting a depth clause on this little of land?

Also, the actual contract describes the land as 80 acres which is the total gross acres of land. Shouldn't our contract state only our 1/3 acre share?
Thank you for your kind and efficient assistance.

You actually want to ask for either a "depth" clause, or a HORIZONTAL Pugh clause. Since even oil companies commonly misinterpret vertical vs. horizontal Pugh clauses, I'd stick with "depth" clause since everyone knows what that means.  

With only 1/3 of an acre to lease, my advice would be to ask them for 1/4 royalty and no bonus. I would also request that the lease be for only ONE year. Since there's no bonus involved they shouldn't have a problem with that. Rather than letting them include an extension clause (which they may ask for) tell them you'll probably be willing to renew again in a year if they need more time but aren't willing to include an extension option in your lease.

If you can't work a deal with them, and they decide to drill a well, they will eventually apply to "force-pool" you at terms they work out with the Oklahoma Corporation Commission's attorney.One of the options you'll have at that time will likely include the 1/4 royalty idea above. You could just wait to be pooled and choose one of the options presented you, but there is no guarantee they will pool the section. In fact they will only apply for it if they either can't reach an agreement with everyone in their proposed unit, or if they can't locate everyone.

If you can reach an agreement to lease that would be best, and I would suggest the 1/4 royalty, no bonus, and 1-year term.

As to the 80-acres being stated on the lease I wouldn't worry about that. The lease simply states the tracts they are leasing IN, not what you own in them. Everyone who owns under that 80 acres will get the same description on their lease.

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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