An oil and gas lease is a legal document that binds a mineral rights landowner. There is nothing simple about negotiating an oil and gas lease. Usually the landowner is approached after the landman, a key representative of a production company, has done the basic work of establishing the geological formations, researching the local area and lease ownership. The landman establishes the rate of production for other existing wells in the area. The landman has established that the landowner possesses ownership of the mineral rights and the surface rights.
The landman for the oil company has found other companies with possible trades and agreeable to joint ventures. Whenever the landman approaches the landowner, all the basic groundwork has been established. The landman brings the lease to be signed.
The landowner can and should thoroughly read the oil and gas lease, which is a binding contract. If there are items or proposals in the lease that the landowner does not agree with, then those clauses should be discussed and possibly changed or adjusted. Oil and gas companies write leases that are beneficial to the oil and gas companies.
The landowner of the mineral rights should look closely at the terms, both the primary and the secondary term, and the royalty. The royalty can and is paid in many different ways. Landowners can look at what the royalty percent is and how often paid.
Simply asking one's neighbor about their agreement-lease may not be any real advantage. The neighbor may not have taken time and effort to research the terms and clauses and just accepted the lease as presented. Not all leases are written the same, therefore the landowner's neighbor may have a somewhat different lease.
Negotiating a fair and equitable oil and gas lease requires research and sometimes having an attorney sit in on the negotiations.
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