Oil/Gas/How Much Per Acre Is My Lease Worth?
I own royalty rights to a tract of land in Oklahoma County, Oklahoma. Could you tell me how much I should demand when I lease the drilling rights to an exploration company?
Your question about, "what amount of per acre signing bonus should I demand," is an excellent question.
You are probably familiar with legal proceedings which you have seen on television. In court, opinions about the value of leases are provided by expert witnesses. Lawyers then provide arguments about the law and analysis of the testimony. Accordingly, as an attorney, to negotiate a lease or to litigate a case about damages, I would hire a landman or geologist to provide an accurate opinion about the per acre value of a lease, rather than attempting to provide that opinion myself. Perhaps you have done something similar by hiring an expert appraiser or relying on the lender's expert appraiser to provide a solid appraisal of the value your house when you sold or purchased it rather than relying solely on an educated guess of a real estate agent.
In the oil and gas context, landmen and geologists are the type of consultants who are able to provide the most accurate and up to date opinions about lease values in specific locations. It is important to obtain the advice of such consultants because leases which are located very close to each other may differ greatly in value, depending on the underlying geology and the urgency to drill the location. One property may be worth one hundred dollars per acre while another nearby property may be worth thousands of dollars per acre. Therefore, I would recommend that you seek the opinion of a geologist or a landman about the value of any specific lease.