Just saw a new permit granted to Lynx for sec 21 10N 11W. Any insights on a return to exploration by Lynx in Caddo? Martha Barnes, would love to have a private chat with you.
I saw that as well. I am seeing permits have much longer time frames on them now. Lynx has been in business since at least 2018, but the leadership as quite a bit of experience as they were formally with Chesapeake and American Energy Partners (which was an Aubrey McClendon company as well.) The new permit goes until March 2022. That would give time to get financing in order.
They already have spacing and horizontal approval from the OCC. The well location is in sec 21, so track it from there on the OCC well records site. Fleet Admiral 20-16-10-11 1XHL. Hoxbar well
Hello Martha- you may have seen my prior post about a letter I received from Nelson Bolen. I have 100 nma in sec 30 which was under lease to Lynx. The primary term expired in May. Our lease had an option for a second term with a hefty increase in the bonus (3x). The first letter from Lynx tried to invoke force majeure. We responded quickly challenging that the conditions for force majeure had been met- mainly that there had been no government orders impeding exploration. We then got another letter asking for us to extend the primary term with no lease bonus as a goodwill gesture. I countered in early July saying that the lease had expired and proposing that we negotiate conditions for a second term. I proposed these options:
| Lease Bonus as a factor of Primary term bonus | Royalty Fraction | Term | Renewal Option | Other terms | |
|---|---|---|---|---|---|
| Option1 | 300.00% | 3/16 | 2 years | None | Same as original, but eliminating any and all deductions for production, transportation, marketing, etc |
| Option2 | 250.00% | 1/5 | 2 years | None | Same as original, but eliminating any and all deductions for production, transportation, marketing, etc |
| Option3 | 200.00% | ¼ | 1 year | 1 year option, same terms | Same as original, but eliminating any and all deductions for production, transportation, marketing, etc |
As of today, I have no response. With the recent Lynx permit in sec 21, it seems that Lynx may be ramping up operations. What I am interested in understanding better is what my next step should be. I could just wait, in which case either they might make a counter to my proposal or they might just work toward a pooling order. If we do go to pooling, I worry that some of the clauses in our original lease language may be lost. Do I have any way to keep these clauses or would we be pooled into a generic lease? Another approach I could take is to contact them, letting them know that I have seen the permitting activity and asking them if they will respond to my proposal. What’s your advice? (I read many of your posts and I think you have a lot of experience and wisdom on these matters.
Thank you,
Steve
I received this, but need to see the clause in your lease to be able to comment. Can you scan that piece please and post it here.
My only comment at the moment is these guys are all Chesapeake guys, so…they may hold you to the original lease since it was all in their favor. Can’t really say that until I see the original wording.
I have a huge church elders retreat that starts at 4:00 today and runs through Saturday, so will not get back to you until after it is over (and I recover 
)
Thanks Martha- I was a church elder for about 5 years. I know it is a lot of work and very often emotionally exhausting.
I will just attach the lease. Also, I wonder what you mean when you say these are all Chesapeake guys. I know that Nelson worked there before but you must expect certain negotiating behaviors because of that history. In any case, have a great retreat. I hope it will be more refreshing than exhausting, by God’s grace. Regards, SteveOGL Facsimile Bistro Energy LLC and Hunt Minerals LLC 17 May 2017.pdf (420.4 KB)
OK, back after a retreat and a break in Beta, the tropical storm currently flooding parts of Houston. Good thing we had the retreat two days ago. The freeway that we used to get to it is now under water.
I looked up Lynx and the principal owners were all Chesapeake or American Energy which was another Aubrey McClendon company. Just saying…
Thanks for sending the whole lease. I hate to tell you, but that lease has some serious issues which I hope you get to re-negotiate. The option to extend can hold you. The critical item is when they contacted you. Was it before May 16, 2020? If they did contact you before May 16, then they are bound by the 300% bonus and you are bound by the 3/16ths and the current lease. If they did not contact you before then, then you may be able to negotiate. If so, then there are some tweaks that I would suggest. I am not giving legal advice at all, just observational advice. Thank goodness you have the “no deductions clause” in there, but it could be improved. You want to strike that option to extend clause and a few other items if you get a chance.
Hi Martha- There were two letters. The first was a letter to try to invoke Force Majeure on 30 March. We responded saying that we did not agree that FM was appropriate under the circumstances. We had no further communication from Lynx on that point. The second letter was dated 16 June and it was an appeal to extend the primary term of the lease for 1, 2 or 3 years with no additional lease bonus which generated the response I outlined previously where I proposed the three options.
I am not an attorney, but I would think the original lease had expired since they did not come back with an offer until June when the lease had expired in May. If they want to lease again, then you need some better wording on the clauses to protect yourself.
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Thanks for your insights. As to the question of pooling, does a royalty owner typically get a worse deal by waiting for pooling? I am thinking more about lease clauses than bonus amount.
The answer to that depends upon timing and area and reservoir. Theoretically, the pooling is supposed to offer the highest bonus amounts in the contiguous eight sections within the last year. (maybe not all the time…) The pooling is for a specified reservoir(s) and not all reservoirs, so that ca be beneficial. It is for a short period of time such as 180 days or 365 days, so essentially a very short “lease”. The pooling wording determines the clauses, so that can change from pooling to pooling. Many people prefer pooling and many people prefer leases. If I cannot get a good lease with my terms, then I will wait for pooling.
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