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Old 07-06-2008, 01:47 PM
1 posts, read 16,728 times
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I own land in KY that has been suggested as a possible site for oil exploration. I have been offered a lease that will be no expense for me. The drilling company will stand all costs involved in exploration and drilling. If oil is found, I would get 12.5% of the gross income. If nothing is found, I will be out nothing for the drilling. Is this a typical lease?
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Old 07-06-2008, 06:53 PM
Location: Tennessee
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I can't really say if it's a typical lease or not because I have never been involved with an oil lease. But, one thing I would be looking for in the lease/contract if it were me is..." If they do exploratory drilling on your property and find no oil will you be paid for the damage to your property"?

I would make sure it was stated very clear in the contract that you would be paid for damages if they find no oil, otherwise they may just ride off into the sunset and leave you with a big mess on your hands to deal with. I don't think I could trust an oil company on their word unless it was in writing.
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Old 07-06-2008, 08:15 PM
Location: In the Pearl of the Purchase, Ky
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Plus, if you decide to sell the property on down the road sometime, you may want to have it in the sale contract that you retain all mineral rights. People I bought a house from a few years ago did that.
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Old 07-06-2008, 10:03 PM
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Be very careful and have an attorney with experience in mineral rights and real estate look over anything you are asked to sign. There have been fly by night scams in this in Kentucky off and on for years...not saying this is the case, but be careful.
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Old 07-07-2008, 08:22 AM
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There were oil leases of this sort in Illinois a few years back. A lot of oil companies will buy up leases. This gives them the option to use them if they ever want to. However many years can go by before they ever act on the lease if they ever do. Also, as people mentioned above, there are a lot of scams involved with this sort of thing. I know people up in Illinois who fell for the lease deal and 15 years have gone by with no action what so ever. I'd be very leary and careful if it were me. The advice of having a lawyer look over anything is very good.
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Old 07-13-2008, 11:32 AM
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Default Oil & Gas Leases

Ms. Vaught:

I am not an attorney and have never been involved in any lease in KY. However, for more than ten years I was an executive with a registered Oil & Gas investment firm in Texas. I hold two federal and one state license and have been registered in KY as an investment professional. I am no longer involved in the business and have no financial interest in any Oil & Gas ventures. I would not say i'm an expert in oil lease but I was privy to many of the details for many of the leases we drilled in south Texas. It is not unusual for drilling companies to offer to purcahse a lease for the purpose of drilling for oil and/or gas and absorbing all the costs involved. however, in my experience, in Texas, 12.5 % sounds quite low. We purchased many high quality leases for as much as 25-30% of the gross revenues, before expenses. The drilling company retained an additional 3-7% and the remaining percentage was paid to investors less expenses. This is a typical roaylty arrangement. Now, i also knew that the amount of percentage retained by the lease holder, or royalty interest, largely depended on their knowledge of the potential for production and ability to negotiate. I urge you to not be pressured or bullied, especially with the cost of the price of a barrel oil skyrocketing. I think retaining an expert attorney in Oil & Gas law in KY is a really good idea. One responder also noted that you should get assurances, in writing, that the driller will return the property to it's original condition after drilling is complete. I don't know the depth of the target zone, but a typical rig drilling to, oh say, less than 12K feet will require a "pad" of at least an acre or two. This means clearing the land, grading, etc.. Be aware, drilling can take place over a week to many months. a drilling rig will typically make 800 to 1000 ft. of hole per day, but completion can take months. You will have trucks and workers crawling all over your land for years to come. They will also have to lay a pipeline through your property to the trunkline if they find Natural Gas. If it's oil, they will need to set up a tank battery (large holding tanks) and tanker trucks will need to pull into your property to empty the tanks every few weeks or perhaps every few days, if you are on of the few lucky ones. World wide, the success ratio of any drilling venture is rarely better than 1 out of ten, I don't care what anybody says. There is also an issue of time. I would only give them a year or two at most to begin drilling or they lose the lease. They should be able to provide you with financial documents that prove they have available funds for drilling or a realistic plan for raising the funds. The raw cost for drilling even to 4-5K feet can run into the several hundred thousand dollars. If they plan to raise funds from investors, this will typically take from a few months at best to a few years. I did this for ten years so I am defintely an expert at that. also, the price that is usually reported thru the media is not necessarily the price you will get for your oil. Typically, oil produced from on-shore wells is of a much lower grade and can be priced anywhere from 20-50% less than the price on the NYMEX. You may want to reserach the nearest "hub" and they will usually publish on the web the going price for a barrel of oil. Also, leases can be sold to a certain depth. You may want to consider selling the lease only to a certain depth that way if your lease turns out to be productive you can strike a better deal down the road for deeper or even shallower leases. Also, you can ask for a lease hold bonus. Basically a set amount paid up-front for the purpose of holding the lease while they get things figured out. This should be non-refundable. also, many lease holders require a rent paid monthly until either drilling or production is establised. this will also work to motivate the driller to get'er done sooner rather than later. The rent and bonus should be above and beyond your royalty share. Of course, an attorney will be able to speak far more expertly to all these issues. I hope this helped. email me at [EMAIL="bigro2006@yahoo.com"]bigro2006@yahoo.com[/EMAIL] if you ahve any other questions.
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Old 11-11-2008, 08:37 AM
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Dear Ms. Vaught: TEXRO is for the most part right. What you describes is very common in KY and TN. I only pay $ 1.00/acre for a lease in KY giving 12.5% in royalty interest to the land owner. Most leasing companies have no idea what they are leasing, they are just looking for large tracts of land and hoping oil is there. The reason leases are less in KY than in TX is the risk. In KY oil wells are either large producers for only 2 to 3 months and rapidly decline in production to stripper status (less than 5 to 10 barrels of oil per day), or they start out as stripper wells and only produce small quantities of oil. Thus increased risk of an economic well means paying less for leases. Most wells in KY are less than 3000 feet in depth and are drilled using Air Rotary methods which do much less damage to the land than mud rigs (No Mud Pits). They are much like a very deep water well. If oil is encountered, then yes space is required to add oil storage tanks and well pump heads. It is usually less than 1/2 acre in size. If you have any additional questions, I can be emailed at [email]atlgeo@bellsouth.net[/email]. Who knows, maybe I'd be interested in leasing your land.
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Old 11-15-2008, 09:56 AM
Location: FLORIDA
1 posts, read 16,139 times
Reputation: 11
Default Natural Gas.

Originally Posted by Rebecca Vaught View Post
I own land in KY that has been suggested as a possible site for oil exploration. I have been offered a lease that will be no expense for me. The drilling company will stand all costs involved in exploration and drilling. If oil is found, I would get 12.5% of the gross income. If nothing is found, I will be out nothing for the drilling. Is this a typical lease?


Please be very careful as to who you lease your land to.

Mineral Right Leases are very complex if you do not choose the correct
Gas or Oil Drilling Firm.

What will they do to reclaim your land after drilling....very important..


We are active in Natural Gas Production in both west virginia and kentucky.


EM: motels@aol.com
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Old 06-19-2012, 01:09 PM
1 posts, read 11,391 times
Reputation: 11
Default I also own KY land

Rebecca - I also own land in KY and may want to do something similar. How did you go about finding out if your land had potential for oil?
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Old 06-20-2012, 10:55 AM
9,665 posts, read 7,629,801 times
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sig2012, this is a four-year-old thread. You may want to start a new thread in order to get more current info.
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