Oil and Gas Leasing

Oil and Gas Leasing Oil and gas leasing has become a popular trend in America and other parts of the world. It is a great way for landowners to earn capital without having to let go of their land. However selling oil and gas leases is not a piece of cake and takes energy, research and wisdom. Oil and gas leasing can be quite scary when one is approached to sign a contract or an oil and gas lease. This is particularly because the contract itself involves so many factors that factors and legal implications, which may require the help of a legal expert.

Usually, oil and gas leases are similar to each other, which means they have similar legal language too. However, in some unique cases some the need for a lawyer becomes even more significant because the legal language may be too complex for a layman or a normal landowner to understand. Moreover, it is always essential to read all parts of the lease before getting into the contract and understanding it to know what precisely every clause means. Sometimes it is recommended to get the entire contract and its terms and conditions reviewed by an attorney to ensure the process of oil and gas leasing is smooth and safe. The benefit of getting an attorney to review the contract is that the attorney will pinpoint and identify if there is any

clause that can potentially harm you later. It is just a safer way of getting into an oil and gas lease.

The most significant factors of an oil and gas lease include the royalty, price and the term of the lease. While there is no denying the fact that every landowner wants the best of all these three factors, but one has to be competitive and look at what the market is offering. Moreover, the quality of the minerals, oil and gas reserved in the land also play an influential role in determining these three factors. It is understandable that every landowner wants to get the best deal on all these three factors but for that a lot of negotiation may be needed and market knowledge is essential in order to strike a better deal.

These are the three most important parts of an oil and gas lease.

Term The term of the contract essentially means how long the lease will be valid.

Normally, a term of 3 to 5 years is common for most oil and gas leases. However, the term of the lease can be extended if both the parties intend to.

Price This part of the lease is one of the most integral parts that determines how much money the landowner will receive in return for giving the right to an oil and gas company to extract the natural reserves from the land. The price could be in terms of a fixed amount or an oil and gas royalty, which is a percentage of the earning from the reserves of that oil and gas.

Royalty As mentioned earlier, the royalty is a percentage of interest that the landowner receives for giving oil companies the right to use the land. The maximum royalty paid these days is around 30% but that is rarely the case and the most common percentage of royalty usually ranges between 12% to 25%.