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Question
Our family holds 74.72 net mineral acres in Section 31-8N-3W in McClain County, OK., and have recently been offered a 3/16 royalty lease for $250 per acre for a three-year term with a two-year option.   We are interested in learning what the current lease terms and royalty lease per acre would be for this area. Thanks!

Answer
Before leasing, I would read the Oil and Gas Leasing Tips article published in the Mineral Hub News. You'll find a lot of tips there on how to best explore your leasing options and deal with landmen.

As to what the going lease terms and royalty rates per acre are, the Oklahoma Corporation Commission (the regulatory body for oil and gas in Oklahoma) has a wealth of information available online relating to oil and gas activity and production in Oklahoma. You can look up such things as drilling permits, recent production information, well completion reports, forced-pooling orders, and anything else that falls under their jurisdiction. The bonus amounts included in forced-pooling orders are often indicative of what the average lease price being paid in the area was at the time the forced-pooling order was issued.

3/16 is the most common royalty offered, and is the one I usually accept. 1/8 is too little, and if they offer 1/4 it's usually at the expense of a much smaller bonus amount. You'll also see 1/5 offered at times. In general, all aspects/terms of an oil and gas lease are negotiable. With 74.72 acres you've got a good bargaining position if you know how to use it. The more acres you have, the less acquisition costs for the company, thus saving them time and money to get your lease. It's cheaper for them to lease one party owning nearly 80 acres than it is for them to lease 10 parties owning 8 acres each.

If you'd like to discuss this further, please contact me at the Mineral Hub. I occasionally negotiate leases for people in return for a percentage of the bonus received. Link below. It's not "rocket science" though, and I think most people are capable of negotiating a good lease on their own given the tools I've described above. Frankly I think $250/acre is a fair price for leases in this area currently, though you'd want to make sure the other lease terms are acceptable as well.


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

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Frederick M. Scott

Expertise

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.

Experience

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.

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

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

Education/Credentials
Certified Mineral Manager (CMM), Registered Professional Landman (RPL)

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