My husband acquired a mineral interest in Texas in 2005. In working to get all of his interests organized and up to date, we recently discovered that 4 horizontal wells were drilled in the section the interest is located back in 2015, and two more in 2023. The operator never sent him a lease.
After digging through county records and getting a partial opinion from the operator, it appears they put the interest under the previous owner’s name and a relative may have claimed they owned the minerals some time last year and managed to get them to release payments.
After 6 months of back and forth trying to confirm my husband’s ownership, the operator has finally accepted he is the correct owner of the minerals and has sent division orders.
We’ve never had this happen before, so what exactly is the protocol? Is it normal to receive a DO instead of some type of retroactive lease in this situation?
What about royalty rate? Based on the royalty interest amounts on the DOs, my rough calculations are coming up with about 12%. How is that determined and is it still negotiable after all this time?
Our main concern is that they may be attempting a transfer of ownership that would take effect once the division orders are signed and lock in the 12% that may have been established by the wrongful owner vs starting from square one with us due to sloppy title work. Every document they requested/required has been on file with the county for well over a decade and the change in ownership is very specific and straightforward.
We don’t want to sign anything that could interfere with our ability to access revenue that could be in suspense or that was escheated to the state. Looking for any thoughts on how to navigate this.
If an old lease has not expired and is still in effect, then anyone acquiring the mineral interest is subject to that lease. You need to get a copy of the original lease, which should be recorded in deed records under the names of the original lessor and original lessee. It is the responsibility of anyone acquiring minerals to make sure that the appropriate deeds are recorded and are sent to the operator(s) for producing wells. The lease will set out the royalty rate negotiated at that time, which can range from 1/8 (12.5%) to 1/4 (25%). Keep in mind that effective royalty rate will depend on your fractional ownership interest in the minerals. For example, if the mineral interest is in 100 acres and the royalty rate is 25%, but you only own 1/2 of the minerals, then your royalty on the 100 acres would be 25% X 1/2 = 0.125. So you need to know what fractional interest the prior owner owned at the time of sale (historical title) and look at your deed to see if you got 100% of this interest. The prior owner cannot sell you a greater interest than he owned. For example, if the seller owned 1/4 of the minerals and his relatives and others owned the other 3/4, then you will only own 1/4 of the minerals. It is not uncommon for the minerals to have been substantially subdivided over time, among family members and due to prior partial sales. Ask the division order analyst to send you a spreadsheet with the calculations of your royalty DOI…
Do you know how many acres he owns and how much the 6 wells have produced that the relative recently claimed? Seems like a very muddied situation that youd definitley need to hire an attorney that specializes in oil and gas to resolve and possibly go after the funds paid out.
I’m gonna send your husband a LinkedIn message with my email address. Feel free to reach out to me so we can discuss all the details and see if I can help you out a bit.
Ok, I suspected that’s what was going on regarding the royalty rate, but wasn’t sure. There is a lease from 1945 covering the section with the minerals and other surrounding sections, but the online records don’t go that far back for us to see the actual lease. We assumed it had expired, but it looks like there may have been just enough of an overlap between the now inactive wells and the newer wells to keep it in place. I will see if we can get ahold of it to check the rate, but the numbers are making more sense so far. We will definitely be asking how they arrived at their numbers on the DOs to make sure everything is correct. Thanks for your help!
Fortunately, the majority of it was escheated to the state under the previous owner’s name and we are currently going through the claims process. The timeframe between the documents the relative submitted to the operator to claim ownership and when we contacted them to dispute it just happened to be a very small window, so I don’t think they ended up with much, if anything. If they received any payments at all, it probably isn’t enough to make hiring an attorney worthwhile. For now we are mostly just interested in picking up what has been left with the state/anything in suspense and establishing an account with the operator so hopefully this doesn’t happen again.
