Hello, my family signed a lease with this company in July. Grady County Section 22 T3N and R6W I have a confirmation from them. They answered their phone mid-August, said our checks would be in the mail the next week. And they have not answered emails or phone calls.
The last time we leased, we had our money in 6 weeks and are now wondering if this company has dropped off the face of the planet.
Since they have the signed contracts, could they proceed without paying us? What is the legality of not paying a contract?
Welcome to the forum. Do you mean Flycatcher Oil & Gas out of Lubbock or a different company? I did not find any leases filed from them in that township.
This is a good example (unfortunately) of why you should never hand over an original oil and gas lease without getting paid that moment. Many of us would scan the original and send a copy to the leasing company with big black marker and a big X on every page that says “COPY DO NOT FILE”. We get a third party such as attorney or accountant or bank to hold the original and turn it over to the leasing company once the check has cleared. Many reputable companies have no problem with this arrangement as it builds trust.
Go back to your leasing documents. Did you have a cover letter that had draft instructions that told how long it would take to get your payment? Some of them can be months and months. Time to do a title search, find another buyer, etc. Some leasing agents will file a lease without paying and move on ahead. This creates trouble and legal issues for the mineral owner who has to demand the lease be removed from the records at the courthouse for non-payment. So far, no lease has been filed in 22-3N-6W in many years. You should send a certified letter return receipt demanding payment to the address on the lease (hope you kept a copy-always do that.) Give them a time limit such as two weeks and if they do not respond, then your letter should say that the lease is null and void for non-payment as of a certain date. (I am not an attorney, so they may have better wording).
Never trust any leasing company until you have built up trust in working with them. They must earn your trust based upon meeting their commitments either verbal or in writing. That means no signed leases changing hands until you have received your money UP FRONT!
I have had good luck using a legal intermediary to act similarly to a real estate escrow company. Work with an established oil & gas attorney that understands the business and has a good reputation within the industry. The lawyer will hold the signed lease until cash is received from the leasing company pursuant to a written agreement. Only after the cash has been received and the check has cleared will he/she then relinquish the signed documents to the respective parties.
Treat any oil & gas mineral rights sale/purchase/leasing like you would a real estate deal. All real estate deals use an escrow agent to act as a stakeholder and mineral rights should be handled the same way as well. A good oil & gas attorney will cost you money, but it will be an INVESTMENT not an EXPENSE since they can generate additional cash in the deal with their negotiating skills as well as insuring you are not taken advantage of during the process causing you additional expenses and/or a loss of cash.
In my first deal where I leased mineral rights to Chevron Oil the attorney was able to negotiate an additional $1,500 per acre in bonus payments versus what I would have leased to them if I had negotiated without an attorney. Based upon leasing 22 acres, the attorney was able to produce an additional $33,000 in bonus cash and it cost me $ 5,000 to hire him. So it was a net positive cash flow of $ 28,000 to me. Not a bad return on investment a 6.6 times return multiple in cash versus the $ 5,000 that I paid out to him.
As they say in business- “it takes money to make money”, Do not be afraid to make an investment into your property as long as it is not an expense. The difference being an investment is cash expended that you expect will generate a return on investment and an expense being nothing more than overhead to your efforts. Expenses do nothing but reduce your return on investment . That’s not to say that all expenses are bad and unnecessary but they do reduce the operating margins you receive on the deal.