Oil and Gas Lease and Sale Negotiations
Have you received a letter or phone call offering to lease or buy your minerals? If so, the following information may be helpful to you.
When a mineral owner enters into negotiation with an oil and gas company, it can sometimes feel like the company offering to lease or buy your minerals is not making you a fair offer. We represent mineral owners and their families to ensure that they have the knowledge and experience necessary to obtain the best possible terms for their lease or sale.
As a mineral owner, you possess the exclusive right to explore, produce and market the oil, gas and other minerals underlying the surface. Due to the cost of exploration, most mineral owners cannot drill and operate their own wells. So they lease that right to an oil and gas company in exchange for a lease bonus and a percentage of the profits from production—that is, they receive a royalty. The Oil and Gas Lease memorializes that agreement.
When negotiating your lease, it is extremely important that you consult with someone who is experienced with the prevailing bonus payments in your area, as well as the terms needed to protect your surface interest, your future payments, and your minerals for years to come. At Graft & Walraven, our Oil and Gas Team maintains an extensive database of lease bonus payments in order to help our clients obtain the best possible bonus. We also work diligently to ensure that the lease contains the most up-to-date clauses to protect your surface interest, your royalty, and your right to lease again in the future.
Oil and Gas Leases are constantly being modified by the oil and gas companies. Our Team continuously updates our leases to address changes occurring in the industry. Why is this so very important? If you own the surface over your minerals, changes in lease language can allow or prevent a company from putting disposal wells on your property. Changing certain terms in your lease can also be the difference between having 25% of your monthly royalty check taken out for post-production costs instead of receiving full value for your royalty. The way the lease is written can even alter whether, and when, you get to lease again in the future, depending on the appropriate depth, commencement, and shut-in clauses.
The Oil and Gas Lease you sign today could remain in place for generations—that is, for the life of the well or wells drilled under the terms of that lease. Because the impact of this document is so far-reaching it is important that you have the right advocates at your side during the negotiation process.
Due to the fact that the price of minerals has risen sharply over the last few years, many mineral owners have considered selling their minerals. Unfortunately, the large influx of mineral buyers, out-of-state investors, and entities looking to “flip” minerals has created a situation in Oklahoma that is ripe for abuse. When navigating this arena, it is very important to work with a trusted advisor who is familiar with current pricing, terms, and companies in your area.
Just as with an Oil and Gas Lease, we recommend that you never return an original, signed document to a potential buyer until you have had your agreement reviewed by an attorney who is familiar with the terms and conditions prevailing in your area. While the overwhelming majority of mineral buyers are honest, mineral sales is an area where we see frequent exploitation of mineral owners. This usually comes in the form of (1) purchasing minerals for well below their fair market value, (2) purchasing minerals when the owner is due unpaid production from an operator, and, perhaps worst of all, (3) entering into a contract to buy minerals when the buyer does not have the ability to close on the sale but hopes to “flip” the minerals to another buyer prior to closing with the mineral owner.
At Graft & Walraven, our Oil and Gas Team can help you negotiate the terms of your sale, review the documentation to protect your interests, and ensure that you do not give up your rights in the minerals prior to receiving payment.