Hints on Negotiating an Oil and Gas Lease

Hints on Negotiating an Oil and Gas Lease

images (2)Judon Fambrough
Senior Lecturer and Attorney at Law

Introduction
Visions of oil wells conjure images of wealth.Consequently,mineral owners may fall victim to an oil company’s bidding to sign an oil and gas lease as quickly as possible,and without changes.The quicker the signature is obtained,the quicker the drilling starts,according to the oil company.However,a hastily executed lease may turn a mineral owner’s dream into a nightmare.Before any operations commence,the mineral owner(lessor)and the oil company (lessee) must agree to certain terms and conditions regarding the rights, privileges and obligations of the respective parties during the exploration and possible drilling and production stages.Attempting to negotiate these items may be the mineral owner’s first exposure to an oil and gas lease.Because of the complicated legal nature of the transaction,an inexperienced mineral owner may be somewhat at a disadvantage when dealing with an experienced representative (landman) from the oil company.This report attempts to acquaint mineral owners with the more common provisions contained in an oil and gas lease.It explains the legal ramifications of each clause followed by suggestions to help the mineral owner protect his or her property and property rights.This report,however,is not a substitute for legal counsel.
The report focuses primarily on privately owned land in Texas.It does not cover leases on state-owned land or Mineral Classified Land where the state relinquished a portion of its mineral interest to the surface owners.To learn more about Mineral Classified Land, see Mineral Law West of the Pecos,Real Estate Center publication 2026.

Hints on Negotiating an Oil and Gas Lease

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