Oil and Gas Leasing/Negotiations

Oil and Gas Leasing/Negotiations

Oil and GasDo not fall for the old landman trick that this is a “standard oil and gas lease.”  There is no such thing.  There are many “standard leases” and most totally favor the oil and gas company.  A good oil and gas agreement should be fair for both sides.  The agreement should represent an attempt to balance a producer’s right to economically extract hydrocarbons with the Landowner’s right to be paid and continue to operate on their land.  For example, a farmer should have the right to cultivate as much of his land as possible even though one or more wells may be drilled on the property and the farmer should have the right to access the records of the company to make sure he is getting paid what he should be paid.  A good lease will therefore permit the Landowner to have input into what evolves into a good surface use agreement between the parties.  Entering into an oil and gas lease is much like entering into a partnership, where the ultimate goal is the successful extraction of profitable hydrocarbons and both the operator and mineral owner share in the generated income.  
Even if you have total faith and trust in who you are dealing with, it pays to be smart and to make sure you have good terms.  The person you are dealing with now may very well not be the operator of the well a year from now.  You need to negotiate a good oil and gas lease.  Encumbering your valuable mineral rights with an oil and gas lease is a significant undertaking. Do not be penny wise and pound foolish.
LandownerFirm is well versed in negotiating oil and gas deals and protecting the rights of those involved in the business.  Trae Gray started the practice of law in Coal County in the fall of 2006 during the gas boom of the Woodford Shale play.  It was not uncommon to have mineral owners lined up out to the street when the office opened every morning wanting advice on oil and gas deals.  Also, it was during this time that Trae was counsel for a company that started one of the first oil and gas leasing auctions in Southeast Oklahoma.  Through this experience, Trae was responsible for negotiating nearly ten million dollars in oil and gas deals.  Although these results are not typical, some Landowners received as high as $30,000 per acre for the sale of their minerals and some signed leases with bonuses as high as $10,000 per acre.  What was learned in all of this was not just the importance of the amount of money, but also the importance of good terms for the mineral owners.

Some considerations when doing oil and gas deals:

  • Depth clauses
  • Pugh clauses
  • Length of term
  • Royalty payment
  • Commencement terms
  • Termination terms
  • Use of surface
  • Water
  • Sub-surface rights
  • Delay rentals
  • Shut in rights
  • Legal liability
  • Accounting issues
  • Production issues

Please contact us today if you want some help getting the most out of your next oil and gas deal.
Call us at 888-HEY-GRAY (888-439-4729) or contact us online.