Wife received an offer from an Oil and Gas co wanting to lease and have sent over an agreement.

I have never negotiated a lease of this type. I am assuming that hiring an attorney to review the offer and counter is the best route. Do you agree with this step? If not, what is the next one?

Care to make any recommendations? We are located in Houston if that matters. Property is located in another state.

Thanks.

SB

What state is the property located in? Having an attorney familiar with the real estate and oil and gas laws in the state would be the way to go.

Mississippi

Depending on the size of the lease .... you may want to research a continuous drilling clause. Basically they have to drill another well within 2 years of the completion of the last one, or you can lease the remainder to someone else.

* this is not legal advice

Tumble Weed said:

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Depending on the size of the lease .... you may want to research a continuous drilling clause. Basically they have to drill another well within 2 years of the completion of the last one, or you can lease the remainder to someone else.

* this is not legal advice

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This is a really good point. I'll add it's not just drilling a new well - have the lease such that if they don't drill and someone else will drill they can take over the lease if the first doesn't within a certain time of notification. That way you avoid those who lease only to keep the competition from drilling. And, I'm not an attorney.

Old RV Ag said:

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Tumble Weed said:

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Depending on the size of the lease .... you may want to research a continuous drilling clause. Basically they have to drill another well within 2 years of the completion of the last one, or you can lease the remainder to someone else.

* this is not legal advice

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This is a really good point. I'll add it's not just drilling a new well - have the lease such that if they don't drill and someone else will drill they can take over the lease if the first doesn't within a certain time of notification. That way you avoid those who lease only to keep the competition from drilling. And, I'm not an attorney.

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While this would be a home run to get into a lease agreement, I've never seen CDOs (Continuous Drilling Obligations) actually end up in leases outside of extremely large, contiguous mineral positions. Think Briscoe Ranch in South Texas.

Additionally, Mississippi is a "Forced Pooling" state, which means that any unleased minerals at the time of drilling a well will be pooled into the unit as defined by the operator's pooling application to the state, and you will receive whatever the MS court and operator deem as current market leasing rates, giving you zero negotiation power. If you refuse to lease because you're not getting some provision you want and your mineral position isn't hundreds or thousands of acres, you will be force-pooled if someone really wants to drill.

The unconventional play in MS right now is the Tuscaloosa Marine Shale (TMS), which is not generating very good returns for any company whose acreage isn't in the very small core-of-the-core of the play. It's tough and expensive to drill and complete, and the well results aren't that great. No idea where your mom's land is, but I'd be surprised if it's in the good stuff for the TMS as all of that is already leased. Could also very well be that this is prospective leasing for something else other than the TMS. I don't know MS geology very well at all.

*This is not legal advice

Trolley Problems said:

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Old RV Ag said:

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Tumble Weed said:

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Depending on the size of the lease .... you may want to research a continuous drilling clause. Basically they have to drill another well within 2 years of the completion of the last one, or you can lease the remainder to someone else.

* this is not legal advice

---

This is a really good point. I'll add it's not just drilling a new well - have the lease such that if they don't drill and someone else will drill they can take over the lease if the first doesn't within a certain time of notification. That way you avoid those who lease only to keep the competition from drilling. And, I'm not an attorney.

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While this would be a home run to get into a lease agreement, I've never seen CDOs (Continuous Drilling Obligations) actually end up in leases outside of extremely large, contiguous mineral positions. Think Briscoe Ranch in South Texas.

Additionally, Mississippi is a "Forced Pooling" state, which means that any unleased minerals at the time of drilling a well will be pooled into the unit as defined by the operator's pooling application to the state, and you will receive whatever the MS court and operator deem as current market leasing rates, giving you zero negotiation power. If you refuse to lease because you're not getting some provision you want and your mineral position isn't hundreds or thousands of acres, you will be force-pooled if someone really wants to drill.

The unconventional play in MS right now is the Tuscaloosa Marine Shale (TMS), which is not generating very good returns for any company whose acreage isn't in the very small core-of-the-core of the play. It's tough and expensive to drill and complete, and the well results aren't that great. No idea where your mom's land is, but I'd be surprised if it's in the good stuff for the TMS as all of that is already leased. Could also very well be that this is prospective leasing for something else other than the TMS. I don't know MS geology very well at all.

*This is not legal advice

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You don't have to be big to get a CDO ( a section in the right place may get you there), but you do have to have an attorney worth his salt. OP hasn't stated acres yet.

I am not familiar with forced pooling, as I am in Texas.

OP, you also need to get 25% gross. You own the oil, and the technology to extract it gets better everyday. Make them pay for it.

*not a lawyer, just a dumbass on texags. Go get a lawyer from that state

I actively advise clients in multiple states in multiple basins. You cannot apply the same economic thinking to every one. It's simple enough to say things like "get 25%" when your experience is in West Texas or South Texas. If you try to get 25% in some basins, you are pricing yourself out of being leased. There is always a balance between bonus and royalty. Most lease acquisition groups are also looking to buy the minerals. If you aren't interested in dealing with the complications of ensuring your royalties are paid accurately and on time, you may also consider that route.

The best advice on this thread is to find a local licensed attorney that has a reputation of knowing the business. It's not always easy as almost every general practitioner thinks they know enough to review an oil and gas lease, but they rarely actually do. I'm not licensed in Mississippi and I don't know how their state bar works. If they have board certification for oil and gas law and the lease bonus offer makes it worth the cost, you should probably seek a specialist.

Keep in mind, when you sign an oil and gas lease, the process is not over. If you also own surface, there will likely be further negotiations over surface use and rights-of-way. Additionally, if production is obtained, there may be title curative that you are asked to participate in, and you will want to verify and monitor your royalty calculation and production data. A good attorney will be able to help you protect your property rights during each step. A bad attorney will sour your relationship with the operator and, in the worst cases, could lead to you losing property rights you owned before the process started.

You aren't getting a quarter royalty in Mississippi, especially if you want a free royalty.

Continuous development clause is improbable. And you would want 180 days, not two years.

joemeister said:

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I actively advise clients in multiple states in multiple basins. You cannot apply the same economic thinking to every one. It's simple enough to say things like "get 25%" when your experience is in West Texas or South Texas. If you try to get 25% in some basins, you are pricing yourself out of being leased. There is always a balance between bonus and royalty. Most lease acquisition groups are also looking to buy the minerals. If you aren't interested in dealing with the complications of ensuring your royalties are paid accurately and on time, you may also consider that route.

The best advice on this thread is to find a local licensed attorney that has a reputation of knowing the business. It's not always easy as almost every general practitioner thinks they know enough to review an oil and gas lease, but they rarely actually do. I'm not licensed in Mississippi and I don't know how their state bar works. If they have board certification for oil and gas law and the lease bonus offer makes it worth the cost, you should probably seek a specialist.

Keep in mind, when you sign an oil and gas lease, the process is not over. If you also own surface, there will likely be further negotiations over surface use and rights-of-way. Additionally, if production is obtained, there may be title curative that you are asked to participate in, and you will want to verify and monitor your royalty calculation and production data. A good attorney will be able to help you protect your property rights during each step. A bad attorney will sour your relationship with the operator and, in the worst cases, could lead to you losing property rights you owned before the process started.

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1. OP, don't ever sell your minerals.

2. A bad attorney will sour your relationship with the operator LOL!

If you own the surface, dealing with the knuckleheads at the oil company takes considerable time and effort. They are always screwing something up, whether it is right of way, pipelines, oil leaks, etc. You have to manage them like you would an employee. They have a checkbook, and make it worth your time and effort.

What county?

Mississippi force pooling laws are VERY operator friendly.

We operate in MS and there isn't much drilling going on there. I know of a good law firm (we use them) in Jackson that I would recommend and knows everyone in MS.

Don't listen to tumble weed if you want to be leased. Some mineral owners truly aren't worth leasing because they think their tier three acreage is core of core Permian. Unless you have a big tract, continuous drilling is absurd. Guessing he will next suggest going for favored nations.

Really, I'd go for a highest royalty others are getting in your area (I'm guessing that is lower than 25%), and. A horizontal and vertical Pugh.

The only good advice in this thread to is find a competent, local, O&G attorney to review the lease.