As a Texas oil and gas attorney for many years, I have seen many booms come and go. During a “boom” period, prices for oil and gas increase. The increase in prices encourages exploration of new sources of oil and gas and development of existing sources. Mineral owners tend to see much more leasing activity during boom periods, and oil and gas companies are much more amenable to entering into leases that are fair to both mineral owner and operator. Conversely, when prices of oil and gas are low, exploration and development sags, leasing activity falls off and when a mineral owner is offered a lease, it is usually a very one-sided lease that favors the oil and gas operator and is very unfair to the mineral owner.
We are just coming off a very down period for oil and gas exploration and development in many areas of Texas. I have counseled many mineral owners over the years during these down periods who were offered leases that were, frankly, onerous. In most cases, my client decided to decline the oil and gas company’s offer, and await a better offer. So far, each of these owners was ultimately offered a better deal, a fairer lease, and a lease with better compensation for their minerals because they waited.
As in life, there are no guarantees in the oilpatch. For example, there is no guarantee that you will be offered another lease, although it is certainly likely that you will. There are some cases in which even a poor lease might be better than no lease at all, especially if you are faced with a situation where your minerals may be drained without compensation if you don’t execute a lease. It is also important to realize that even in boom markets, you don’t always get everything you want in a lease. It is always a matter of give and take. Frankly, only someone experienced in this area can give you the input to help you make an informed judgment about whether to lease or not, and if you do lease, on what terms.