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Old 05-03-2010, 11:09 AM   #1 (permalink)
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Question about mineral rights....

My wife has recently been contacted by a petroleum landman who wants to lease 18 acres for 3 yrs in Madison county in Mississippi where her mother owned mineral rights.

Her mother died 2 yrs ago, last company that her mother dealt with was in search of GAS on this land. The company this landman works for wants to drill for OIL, contract states $100.00 per mineral acre for 3 yr lease. ($1800.00) and 3/16 royalty. I believe her mother( along with her aunt and uncle--also deceased)had around 355 acres total at this location.

Question is should we investigate before signing any leases. There could be some hidden parts to this we don't really understand.

Just looking for any info some of you might have on the subject.

Shay
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Old 05-03-2010, 11:46 AM   #2 (permalink)
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Yes definatly research alot more, around here they were paying people $45 an acre that didn't know any better and people are getting anywhere from $1000-2000 plus royalties for just surface rights. And there are alot of different ways they try screwing you, do a google search there is a lot of sites out there dedicated to this, some of them have local offer trackers where you can see what local people are getting around you.
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Old 05-03-2010, 11:54 AM   #3 (permalink)
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Find out what other people are getting, drive a hard bargain, but make sure the deal goes through.

If you price yourself out, they will set up a well right beside you mineral property and suck the gas out without paying you a dime. Gas pockets are like water pockets. The ideal location may be your property, but they can set up a well right next to you and draw from the same pool.

So I would tell the land man that you are very interested, but his price needs to come up.
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Old 05-03-2010, 12:11 PM   #4 (permalink)
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The BIGGEST thing to watch out for is an 'automatic renewal' clause. This gives the landman the right to automatically renew the lease at the same lease conditions. Basically, he can renew forever, and never drill. This basically means you have sold your rights to this guy at a very low price.

There was (is) a scam like this going on in Texas over water rights. We almost got caught up in it.
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Old 05-03-2010, 01:03 PM   #5 (permalink)
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Make sure there are pervisions in the lease for to make sure any drilling activity is properly cleaned up if no oil is found, We did a one year lease on some of our land and also had pervisions to OK well locations and tank location on the lease area as well as access roads. We didn't want them to mess up the CRP portion of the property. Also the royalties are complete negtiable... Make sure your not allowing them free run of the property and the mess without proper compensation.
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Old 05-03-2010, 01:13 PM   #6 (permalink)
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I work for an E&P company and much of what has been said above is true.

Your best bet is to find a landman or attorney and have them work your side of the deal. Make sure this is what they do for a living.

You don't want to price yourself out and have them drill next door. This happens more often than you would think. However, you don't want to give away your rights.

If you have surface rights, think about things in regards to hunting season, noise, etc.

Also think about the commitment to drill. Many contracts state that a well must be drilled every 6, 12, or 18 months or they forfeit the lease. Otherwise they can never drill and you get no royalties. Not too mention you are under contract so you cannot lease to someone else. The automatic renewal clause is another one to watch for.

There are so many things to look out for you do best to pay a professional to work on your behalf.
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Old 05-03-2010, 01:52 PM   #7 (permalink)
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Quote:
Originally Posted by jpmassey View Post
The BIGGEST thing to watch out for is an 'automatic renewal' clause. This gives the landman the right to automatically renew the lease at the same lease conditions. Basically, he can renew forever, and never drill. This basically means you have sold your rights to this guy at a very low price.

There was (is) a scam like this going on in Texas over water rights. We almost got caught up in it.
LOL, I have land in the UP of Michigan. About ten years ago, I got a notice informing me that the mineral rights that were about to expire on the second 99-year lease were being automatically renewed-with no $ coming to me as it was stated in the original lease 198 years ago.

I doubt they will ever come after the copper, iron or oil under my land, but it pisses me off to no end that I only own plow-depth.
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