Do I Need a Minerals Manager?

General Mineral Rights Discussion
1

I would like help to determine if I should use a minerals manager or not. I have had a proposal from one and asked my attorney to review it for my legal protection My attorney's first reaction was to wonder why I would want or need to pay someone to manage my minerals.

I would like some pros and cons and any personal experiences.

Reading through forum discussions has offered some help, but there are conflicting opinions.

I have had an offer to lease but don't want to proceed until I feel firm in my decision.

Thanks!

2

A mineral manager has probably negotiated alot more leases than a lawyer has. Lawyers probably don't have extensive geological experience. I know more than one lawyer that has made really poor deals for his own minerals although I'm sure their lease form was impeccably legal. I think the information that you would get from the mineral manager would be the main reason. The knowledge to critique a lease and what will and will not be important to you, the knowledge of what rates leases may be had for and the geologic/production experience to know when you can do better than the going rate, all under one roof. The mineral manager may have seen clauses that a lawyer has never heard of. How many lawyers subscribe to drilling info? In my experience, lawyers just try to get you what everyone else is getting and then the lawyer collects his fee. I'm sure there must be lawyers that do better, but even the $400 per hour lawyer I consulted once, was intent on getting me what everyone else got and heck, I bettered that myself.

3

Basically I feel the same way, but the attorney also felt the "terms" of management proposal were not acceptable. How would i go about finding out if the terms are considered average or above?

4

I don't know how you would determine whether the terms were average or not besides asking more mineral managers. Would you mind sharing an example or two of the unacceptable terms? Such as, did they want a percentage for managing your minerals or was it fee for service? Also you do realise that you could probably hire manager services on a fee for service basis when you need them? I would agree that there would be no point to your grandchildren paying someone elses grandchildren for the management of minerals that might not have required any managing in 20 years because they were all HBP.

I don't want to pry, but I guess I should ask you if your mineral rights would truly need or be able to bear the cost of management services? Mine would probably barely qualify, at least in my opinion.

5

On the flip side, some mineral managers are very poor writers and cannot properly draft or interpret a lease or title issues. Also, mineral managers do not have the same ethics requirements on conflicts of interest and not going into business with a client that attorneys have.

I am not picking a fight with mineral managers. If you have enough acreage to justify it, a balanced approach may be best. Mineral managers are supposed to supposed to stick to the business side of the transaction, not practice law. In short, you may want to use a mineral manager to market available acreage and negotiate deal points, and then use an attorney to paper it and make sure title is correct.

P.S. Some attorneys are pretty in tune with the market and are good negotiators.

6

Yes, one issue is the percentage. As I understand it, it would be forever.

I did not know I could hire services on a as needed basis.

I have no idea whether my mineral rights would be able to bear the costs. I haven't even accepted a lease offer, but thought if i were to do so, I'd prefer someone to negotiate on my behalf since I know NOTHING about leases, etc. I read the bad things that can happen and it makes me nervous.

7

SO, that would be an example of hiring a mineral manager on an as need basis as suggested by r w ??

Wade Caldwell said:

On the flip side, some mineral managers are very poor writers and cannot properly draft or interpret a lease or title issues. Also, mineral managers do not have the same ethics requirements on conflicts of interest and not going into business with a client that attorneys have.

I am not picking a fight with mineral managers. If you have enough acreage to justify it, a balanced approach may be best. Mineral managers are supposed to supposed to stick to the business side of the transaction, not practice law. In short, you may want to use a mineral manager to market available acreage and negotiate deal points, and then use an attorney to paper it and make sure title is correct.

P.S. Some attorneys are pretty in tune with the market and are good negotiators.

8

Maybe you can post the particulars of your offer and ask for comments ... then make up your own mind.

I agree with your attorney ... why would anyone want or need to pay someone to manage their minerals.

Good luck,

Pat

9

In support of RW and Wade's Comments, Whether to hire help or what kind of help to hire is really up to the mineral owner and their personal objectives. As a minerals manager and owner with a long history of building companies through the identification, acquisition, exploration and development of mineral properties of many types and kinds, I have needed the help of many lawyers to be successful. It was lawyers and law firms that brought me into the business of managing minerals for their corporate, trusts and individual clients. I need those lawyers to do my job and they apparently need me to fulfill their responsibilities to their clients. When I give expert testimony before regulators or in courts of law, I do so at the pleasure of the lawyers and the clients they represent.

The advantage of hiring a manager, an attorney or both, is the assurance that a fair transaction can be consummated. Fair transactions require both documentation and a strong sense of the business at hand. Examine the definition of "Fair Market Value" and you will find that both sides have "reasonable knowledge" of the asset traded and the language of the transaction. As Wade states, sometimes the advice can be found in one advisor. It is up to the needs and experience of the owner and the owners degree of risk aversion.

If an owner like Mr. Kennedy, who has learned the business from experience, study and intelligence, needs to fill a gap in his background, he will hire that advise rather than guessing. It depends o the situation. If I need to clear title on a property or document a business transaction, I will use an attorney that I'm confident will document my business and economic needs.

It is a wise owner that understands that he or she didn't necessarily inherit the ability to protect the inheritance they received in an industry transaction. It makes no difference what the industry, they are in business to make the best deals they can without regard to fairness to anyone but their shareholders. So, if the owner wants to make a quick profit, they may not need anyone but if they don't know the industry on the other side of the transaction and want to protect their assets, they will be wise to hire someone who is experienced in the business. It is up to the owner to get the best protection he or she needs.

It has been my experience in working in the new Unconventional Shale plays that lack of knowledge of the business diverts the income from minerals in the ground away from the owners and into the pockets of leasing agents, buyers, speculators, and operators taking advantage of regulation that work with everyday. That income lost to the legitimate mineral owner range from 200% to over 400% of what the inexperienced mineral owner actually receives. A fee to a mineral attorney, local attorney with extensive experience in the new oil business, or a technically based, business experience manager or combination is small if large acreages are involved. What a fair fee may be must be determined by the owner.

10

Generally, a mineral manager is good when you have enough mineral acreage that you are consistently negotiating leases, pipeline easements, and the like, and need someone to review production records to make sure leases are being complied with. If it a one off deal, I would try to negotiate a flat fee with the mineral manager rather than a percentage of production forever.

Tori Wells said:

SO, that would be an example of hiring a mineral manager on an as need basis as suggested by r w ??

Wade Caldwell said:

On the flip side, some mineral managers are very poor writers and cannot properly draft or interpret a lease or title issues. Also, mineral managers do not have the same ethics requirements on conflicts of interest and not going into business with a client that attorneys have.

I am not picking a fight with mineral managers. If you have enough acreage to justify it, a balanced approach may be best. Mineral managers are supposed to supposed to stick to the business side of the transaction, not practice law. In short, you may want to use a mineral manager to market available acreage and negotiate deal points, and then use an attorney to paper it and make sure title is correct.

P.S. Some attorneys are pretty in tune with the market and are good negotiators.

11

Tori,

I guess my questions back at you are:

Why do you think you need one and what tasks are you expecting them to preform?
How did the proposal come about?
Was it unsolicited or did you seek out the Mineral Manager?

There are conflicting opinions but I think that is because mineral owners have different needs, goals, and abilities. And you will find mineral owners who have engaged professionals who have different levels of education and experience. There are also different levels of professionalism, support staffing, and sadly ethics.

I feel the mineral owner has the primary responsibility to manage their own property to some degree. Or at the very least have the ability to manage it. I think the smart mineral owners are the ones that educate themselves and engage others where they lack the knowledge and experience to do so. In most cases, this involved hiring a professional to perform the tasks they are not comfortable with handling.

The risks of making mistakes depend greatly on your interests owned in the transaction at hand. If you have 1 net mineral acre, your risks are not near as great as owning 200 NMA. As with many things in business you need to look at your Return On Investment on what you spend and a Risk Assessment on what you don’t engage a professional for.

Spend some time in selection of the professionals. In the last 4 years I have retained the services of 5 attorneys, 7 landmen, 1 mineral manager, 1 Petroleum Engineer, and a couple of accountants. I have also had the opportunity to engage personally with many more of the above. My experiences have varied greatly. One attorney was one that was “inherited”. His incompetence has cost me hundreds of hours of my time and several thousand dollars. I have encountered an ethics issue in a professional which cost me considerable time and money. And some are just flat better than others. It is no different than your hair stylist. Go to a different shop every month and see how your results vary. They may all carry the same title, but see how you feel about visiting some of them a second time.

I think a mix is needed. I can’t imagine paying an attorney $200-300 per hour to look up the same data a good landman or mineral manager can. Although in some cases the attorneys are engaging such help and billing you for the services accordingly.

Using the correct professional could (and should) increase your total return. I feel I am on my way to having a pretty good team of professionals to work with on an as-needed basis. The key is as-needed, I’m not going to marry one of them or make them a partner in the company that holds the assets.

I think the info you have received from the two professionals here in this thread is VERY valuable.

I’d be interested in seeing that proposal. I might tend to agree with the attorney. Regardless, I think my best advice to you is to work on educating yourself with the industry.

12

Very succinctly put, along with the last sentence being the "highlight" of Rick's advice.

Again ... good luck.

Rick Howell said:

Tori,

I guess my questions back at you are:

Why do you think you need one and what tasks are you expecting them to preform?
How did the proposal come about?
Was it unsolicited or did you seek out the Mineral Manager?

There are conflicting opinions but I think that is because mineral owners have different needs, goals, and abilities. And you will find mineral owners who have engaged professionals who have different levels of education and experience. There are also different levels of professionalism, support staffing, and sadly ethics.

I feel the mineral owner has the primary responsibility to manage their own property to some degree. Or at the very least have the ability to manage it. I think the smart mineral owners are the ones that educate themselves and engage others where they lack the knowledge and experience to do so. In most cases, this involved hiring a professional to perform the tasks they are not comfortable with handling.

The risks of making mistakes depend greatly on your interests owned in the transaction at hand. If you have 1 net mineral acre, your risks are not near as great as owning 200 NMA. As with many things in business you need to look at your Return On Investment on what you spend and a Risk Assessment on what you don’t engage a professional for.

Spend some time in selection of the professionals. In the last 4 years I have retained the services of 5 attorneys, 7 landmen, 1 mineral manager, 1 Petroleum Engineer, and a couple of accountants. I have also had the opportunity to engage personally with many more of the above. My experiences have varied greatly. One attorney was one that was “inherited”. His incompetence has cost me hundreds of hours of my time and several thousand dollars. I have encountered an ethics issue in a professional which cost me considerable time and money. And some are just flat better than others. It is no different than your hair stylist. Go to a different shop every month and see how your results vary. They may all carry the same title, but see how you feel about visiting some of them a second time.

I think a mix is needed. I can’t imagine paying an attorney $200-300 per hour to look up the same data a good landman or mineral manager can. Although in some cases the attorneys are engaging such help and billing you for the services accordingly.

Using the correct professional could (and should) increase your total return. I feel I am on my way to having a pretty good team of professionals to work with on an as-needed basis. The key is as-needed, I’m not going to marry one of them or make them a partner in the company that holds the assets.

I think the info you have received from the two professionals here in this thread is VERY valuable.

I’d be interested in seeing that proposal. I might tend to agree with the attorney. Regardless, I think my best advice to you is to work on educating yourself with the industry.