Oil and Gas Lease Bonus

Oil and Gas Lease Bonus

July 17, 2014adminLeasing Mineral Rights

Oil and Gas Lease Bonus

Are you trying to determine what a fair oil and gas lease bonus is?  If so, we can help!   There are a few things to consider if you have an offer to lease mineral rights.  The oil and gas lease bonus is an important component of your lease and it’s important that you get a fair lease bonus.

What is a Lease Bonus?

An oil and gas lease bonus is a payment made to you for the right to drill on your property for the term of the lease.  When you sign a lease, the oil and gas company (operator) pays the lease bonus as a way to compensate you for the time they are allowed to drill.  During the term of the lease, the operator has the right to drill at any time, or they may elect not to drill at all.   You can think of a lease bonus payment the same as you would rent on a rental property.   The lease bonus is paid up front for the entire term of the lease.

Fair Value for Oil and Gas Lease Bonus

One questions we frequently get from mineral owners relates to whether a lease bonus offer is fair.  If you have received an offer to lease your mineral rights, you want to determine if the lease bonus is fair.    You could search for hours trying to find out what a fair value, but you would be wasting your time.

The fair value for a Lease Bonus will be affected by the following:

Timing

State

County

Location within the county

Surrounding Production

Who the operator is

State regulations

Current oil and gas prices

And many more…

With all those factors affecting the value of an oil and gas lease bonus, the prices can move extremely quickly!

Price Changes:

We have spoken with many mineral owners who refuse to lease their mineral rights at current market prices because “My neighbor got $x dollars and I should get the same”.    Unlike the housing market where homes in the same neighborhood are worth a relatively similar price, that is not the case with mineral rights.  In addition, timing plays a critical role in how much an oil and gas lease bonus will be worth.   Companies may have paid $1,000/acre 6 months ago and based on certain conditions, will now only pay $200. The value of your lease bonus is based on how much the market is willing to pay TODAY in current conditions!

Best Oil and Gas Lease Bonus

via Oil and Gas Lease Bonus.