Any land owner who is leasing acreage to an oil and gas company, or is considering signing a new lease, will risk a high probability of leaving a pile of money on the table unless he or she takes a close look at six of the most common danger signals in oil and gas leases, according to Fort Worth lawyer Mark Humphreys.
“Oil and gas companies – and their landmen – can take unfair advantage of inexperienced people on the others side of the deal, people who do not know the details that need close scrutiny before a lease is signed,” according to Humphreys. The reason is that companies’ experience has taught them that lessors often simply rely on a neighbor for an opinion. Or worse, they trust the oil company.
“Unbeknownst to the land owner, this can risk thousands, and sometimes millions, of dollars,” Humphreys says.
Here’s Humphreys’ short list of six common danger signals that is his starting point in evaluating whether a client’s oil or gas lease should be broken, or its terms renegotiated.
- The lease is more than 10 years old.
- Your royalty payments have stopped.
- Royalty payments are small or infrequent.
- There is only one well on your property.
- Your royalty rate is one-sixth or smaller
- There’s new drilling activity in the area.
“For a lease that meets any of these critieria, it’s time to carefully evaluate the potential benefits of breaking the lease or negotiating improved terms,” Humphreys notes.
Land owners often don’t realize that, when they initiate a renegotiation or if they’re being asked to sign a new lease, they have significant leverage, he adds.
At that point, the Number 1 rule is: Everything is negotiable.
And Rule Number 2 is: Only an oil and gas attorney knows the provisions, language and negotiating maneuvers need to get the best lease, and the most cash flow.
That’s why the National Association of Royalty Owners Association highly recommends hiring a lawyer with expertise in mineral rights leasing. In their words: “It will be worth the money to have someone in your corner explaining to you your options and leading you through the negotiation process so that you receive the best terms possible.”
More detail on the danger signals to look for in oil and gas leases is available on YouTube at http://www.youtube.com/watch?v=qoYTO-uagMM. A no-charge review an oil or gas acreage lease is available from the Mark Humphreys Law Firm, 972-263-3722, or firstname.lastname@example.org. And a free information brochure can be downloaded at http://www.TexasGasLeaseNegotiator.com.