Making the move into oil and gas investments for any company, either a current energy producer or a new company in the industry, starts with having a firm foundation in business strategies.
No matter how good you are at planning, locating and drilling, if you aren’t effective in negotiation with landowners for mineral rights it will be difficult to have a viable business for very long. Incorrectly negotiating leases, failing to capitalize on leases or making costly purchases with low productivity can all result in significant problems for investors at any level.
In areas where there is current and active oil and gas or mineral production, or in areas where there is a very high probability of high return on investment, competition in the area of oil and gas investments is fierce.
Knowing how to talk to landowners and how to appeal to their needs is critical. For many landowners and mineral owners simply comparing offers from different companies will give them a very clear picture if your offer is fair, low or generous.
The key is to be in the fair to generous area, but with the backing that the area is a good investment with a high probability of levels of production that will meet or exceed your projections. This only comes with research, experience in the industry, and an above average team to verify the information you are using to make your decisions.
Whether you are the landowner talking to a company interested in your property for oil and gas investments or the Landman on the other side trying to get the sale or lease, having strong negotiation skills is essential.
Knowing the current market and what you can expect today is only part of the picture. By understanding trends, reading market signals, and having experience in the industry you have a much stronger negotiating position on either side of the table.
While it is true that most negotiation is going to be a numbers game, there are other things to consider as well. For example, you may want to consider issues such as retaining part of the mineral rights on the property, or discussing issues with surface rights which can be an essential component on the property.
For both the landowner and the oil and gas company, having the most accurate information during the negotiation process is always critical. It gives both sides an accurate perspective on the deal and helps to eliminate unreasonable expectations.