Lease Negotiation in a Down Market

by David Luke, Heritage Mineral Mangement

There is always a challenge of balance when it comes to negotiating lease opportunities during a time of falling commodity prices. This is especially true when activity has been high and prices have been very strong – this is exactly where we stand today.

It goes without saying that an owner’s minerals and their power take a hit in an environment like today’s…the key is to analyze how long or short term we believe the decline will last, the recent and historical bonus and royalty rates in the area (from both offering and non-offering parties), as well as knowing the primary commodity product that will likely be produced from the given location of negotiation. At Heritage, we feel we provide expertise and real value to our client base at all times, but especially in times similar to today’s when some of the owner’s asset power is reduced.

The attached charts represent some of the world’s hottest topics – the volatility of the natural gas price and the drastic fall of the crude oil price…especially since the beginning of October. During this same time frame, a large amount of Heritage client owned acreage has been involved in valuable lease negotiation. The Heritage Mineral Management Team has used our experience, teamwork, research, vast contacts, and old fashioned common sense to lease (or not to lease) minerals at what we believe to be very fair to strong terms.