If you own mineral rights in the Eagleford Shale, you may have considered leasing them. Many mineral owners don’t think about leasing mineral rights in the Eagleford Shale until they are approached to lease their mineral rights. As a mineral owner, you want to make sure that you get the highest possible value when you lease mineral rights. To do this, we recommend that you try and negotiate on some important points when leasing.
Negotiating a lease in the Eagleford Shale
There are some key things you need to negotiate before you start leasing mineral rights in the Eagleford Shale. Below are some of the common things you should work on negotiating:
Lease Bonus: The most common point mineral owners look at is the lease bonus. This is the amount you will be paid up front when an operator leases your property for 3 to 5 years. You will be paid a lump sum amount per acre that covers leasing your property for the whole time period. Because this is the amount you receive the soonest, many mineral owners negotiate for the highest possible lease bonus and forget about the rest of the lease.
Lease Term: The lease term is usually for 3 to 5 years. As a mineral owner, you want to negotiate for the shortest lease possible. When you lease your mineral rights, they are tied up for a period of time and you can’t do anything with them during that time. The shorter the lease term, the quicker you get back control of your property. We recommend negotiating for a 3 year lease + 3 year extension. Don’t forget to negotiate a higher lease bonus on the extension than the primary term!
Royalty Percentage: Many mineral owners will pay little attention to the royalty percentage and end up with a small royalty of just 12.5%. Since most mineral owners in Texas are savvy, they know that they need to negotiate for the highest possible royalty percentage. While it doesn’t matter right now, once your property is producing the amount you receive every month will be determined by the royalty percentage. The higher the better! We recommend shooting for 20% minimum but you may be able to push it to 25%.
