Mineral owners are contacted every day in regards to leasing oil and gas mineral interests. There is a ton of upside to this, but unfortunately, many of these mineral owners fail to do their homework and miss out on an opportunity. Those who are willing to do their research can maximize the benefits of their mineral rights—and in this article—Adam Ferrari, CEO of mineral acquisitions company Ferrari Energy, gives critical information that explains how to do so.
Considering All the Factors
The negotiation process for an oil and gas lease takes time. It requires knowledge, patience, and a balanced mindset. Many individuals who receive an oil and gas lease proposal in the mail immediately start gushing with emotion and make early signing decisions based on price alone. However, bonus payment and royalty percentages are not the only things that matter. Everything in the lease is negotiable. There may be cases when you own both surface and mineral rights, making certain term implications quite important—possibly even more important pricing structures.
Never sign a lease deal until the deal is thoroughly discussed, negotiated, and understood. Oil, gas, and mineral lease negotiations progress through time. Once you sign the lease, you are tied into a legally binding document—you want the terms to benefit you. That doesn’t mean you have to rush out to hire a lawyer (as hiring one too early can lead to unnecessary incurred fees), but you will want to open discussions before you jump in.
Determining Important Aspects of the Deal
Upon receiving an oil and gas lease proposal, you should see if other family members have been contacted. Other members of your family will likely be in the mix, and speaking as a unified voice to the oil company will allow you to come up with a more thorough plan in negotiations. Especially if the mineral interest is considerable, you’ll be more likely to get a better deal.
You should also understand exactly who you have been contacted by in regards to your mineral rights. It could be a contract leasing agent independent from the oil company, an employee of the oil company, or an entrepreneur/middleman looking to flip the land for profit. By knowing who you are in contact with, there will be increased leverage opportunities during the negotiation process. This can be as simple as conducting a Google search of the name of the person who has contacted you.
As always, be as respectful as you can. Good manners, courtesy, and integrity can go a long way in building a relationship headed into negotiations.
Negotiating oil and gas lease proposals takes time. If you have been contacted about mineral deposits, it’s essential to gather all necessary information and be patient throughout the process. With the right approach, you have the opportunity to walk away with a large sum of cash that you may not have even known you had!
About Adam Ferrari
Adam Ferrari is the founder of the mineral acquisitions company Ferrari Energy. He is a chemical engineer by degree and is an accomplished petroleum engineer by profession. He also has experience in the financial sector through his work at an investment banking firm. Under his leadership, his company has supported numerous charitable organizations, including St. Jude Children’s Hospital, Freedom Service Dogs, Denver Rescue Mission, Coats for Colorado, and Next Steps of Chicago.