So was just wondering what a landman actually dos. So once you get my lease signed then what happens and do you sale that lease to a producer do you hold the lease are you working for a producer. When I signed my lease my landman really wasn't willing to really answer any of these questions. My lease is in terry county texas was just wondering more about the process of what happens once I sign the lease .
David,
When a mineral owner signs a lease, he relinquishes all rights to his minerals in exchange for a promise to maybe receive a little rent (lease bonus) and another promise to pay a share of revenue (royalty less product enhancement costs), received from the sale of product from the lease, if any. The landman's only responsibility is to get the owner's signature on a lease anyway he can. It is up to the former mineral owner, now lessor, to make certain he gets what he is entitled to under the lease. The lessee's responsibility is to make as much money as possible for himself from the lease agreement. The lessee controls 100% of the mineral rights through the lease agreement and can do whatever he wants within the law and the rules set down in the lease.
Once an owner signs a lease and receives a little bonus money, his responsibilities are over. All that is left is worry about is whether he did the right thing and with whom he did it. Did you ever wonder why the lessee never signs a lease agreement???? Only the mineral owner is committing to anything, that's why.
Landmen are often the naysayers, and often they do not have the authority to grant whatever you ask even though their employer would be willing to grant what you wish if it would close the deal.
When a landman says he will have to run it by his boss, he isn't lying, he was instructed what to offer and that is it. I have seen day laborers with more authority on their first day on the job. If you want to know what it takes to become a landman, hold up your right hand and repeat these words : I am a landman. You are now a landman albeit an untrained one and lacking skills. Do not assume any landman you talk to has much more skills or training than you have. I have heard stories of landmen who were hired who had been dog groomers the week before, not exactly a related field.
I am sure there are landmen out there who only mail offers and talk to prospective lessors over the phone who could not search title. I am sure there are landmen who do nothing but "run" title and I'm sure there are many who can do every facet of landman work with extreme competence. How you are going to find out which variety you are talking to on the phone or from whom you have received a letter/offer is a mystery to me.
The answer to what precisely is a landman is, it depends on the landman.
I guess my question was more since i have signed my lease how do I know if it was ever turned over to actually drill on. Was the landman actually working with a actual producer .Was there actual interest in ever drilling there or just to tie up the lease in hopes that someone may drill at sometime or is that landman just holding the lease looking for investors .
Gary L. Hutchinson said:
David,
When a mineral owner signs a lease, he relinquishes all rights to his minerals in exchange for a promise to maybe receive a little rent (lease bonus) and another promise to pay a share of revenue (royalty less product enhancement costs), received from the sale of product from the lease, if any. The landman's only responsibility is to get the owner's signature on a lease anyway he can. It is up to the former mineral owner, now lessor, to make certain he gets what he is entitled to under the lease. The lessee's responsibility is to make as much money as possible for himself from the lease agreement. The lessee controls 100% of the mineral rights through the lease agreement and can do whatever he wants within the law and the rules set down in the lease.
Once an owner signs a lease and receives a little bonus money, his responsibilities are over. All that is left is worry about is whether he did the right thing and with whom he did it. Did you ever wonder why the lessee never signs a lease agreement???? Only the mineral owner is committing to anything, that's why.
Gary L Hutchinson
Minerals Management
While possible, the landman probably was not the money man. If you were paid, your lease is probably in the hands of someone who would like to participate, in the hands of someone who was speculating on the value of what they leased you for verses what they believe to be the market value so they could profit immediately, or in a few years, from "flipping" assigning your lease to someone who wants it more, an operator or another investor. Your lease could be spread out over several assignments to several different entities. I think it would be slightly better if your lease were assigned directly to the operator, but operators often assign leased acres to another operator.
I would say that the upshot is that you have zero control now, so I would just put it out of my mind. You may watch for activity near you but I would not bother to contact the lessee, they have what they want and you are yesterdays newspaper that the fish came in, except in the rare occasion that they did forget to get something in the first place then they really want to talk to you again, because now they have money tied up in it and anything they need they need badly. Short of the foregoing, they really don't want to talk to you, they have already made the money off you, you are drained for the moment.
If they happen to drill and get a good well, the lessee/operator may want to contact you before you find out that you have a good well or any kind of profitable well, to buy your minerals before you have an inkling of what they may be worth. A last hail mary pass to try to squeeze as much profit as possible out of your acres as corporately possible. After all, you sold 100% of the hydrocarbons under your acres for the lease bonus (possibly 1% of value or less) and now all you own is a royalty interest of possibly 20% to 25% or less, maybe you would sell that too? Presumably you have no better idea immediately after a well is drilled than you did when you were leasing the minerals,( which is a conveyance of 100% of the minerals), in the first place.
The point is that it probably wouldn't do you any good to know who or how many hold your lease. It would be totally besides the point unless you sold the mineral rights or someone drilled and got some production.
lack of anything to worry about is frequently mentioned as a plus of leasing. The fact is closer to making a virtue of a necessity. It's only good to have nothing to worry about, because there is nothing you could do anyway. Sit back and enjoy the ride.
LOL. I'm sorry that you are having such a hard time getting a straight answer to your question. The reason is that the advisors ARE NOT landmen.
You might offer a little more information. Is the lessee an individual or a company?
Here is how the system works in general. An oil company usually hires an oil & gas lease broker to acquire the leases for them on a contract basis. The leases are either in the name of the company/lessee, or in the name of the lease broker. If in the name of the lease broker, he will assign the leases to the company at some point, most likely after most of the leases have been acquired.
Will they actually drill on your lease? There is really no way to tell in advance, or when you execute the lease.
Individuals or pro lease buyers also acquire leases in an effort to acquire a position in a hot area. They really don't have the means or desire to drill a well, but look to flip the lease to a company active in a given area while retaining an overriding royalty. Some call them "block busters", but that may be a little harsh. There is no inherent right to acquire leases in a given area without any interference. They aren't doing anything illegal.
The idea that the operator may want to contact you before you find out you have a good well and make an offer to buy your minerals seems silly, or something that is really atypical. There are plenty of pro mineral buyers out there who chase various prospects, but it usually isn't the original lessee.
David:
Here's my take on the entire pyramid. The main objective for all parties involved is to make as much money as possible. First, the mineral owner has two choices, to lease or not to lease. If he or she chooses not to lease and a well is drilled, he or she will participate in the well. The other choice of the mineral owner is lease which means two ways to make money. The first is to get the most bonus money upfront and then to get highest % royalty. This is normally negotiated with the landman who in turn is working either for an oil company or a lease broker (refer to Mr. Quincy's 5th paragraph). At this point, it is extremely important for the mineral owner to acquire as much knowledge about his/her mineral area and be totally aware about what he or she is about to sign. Various areas have numerous productive zones and it is wise to study the possibility of adding a "pugh" clause in the lease in order to protect other zones. This could be another avenue for future negotiations which in turn leads back to the main objective, making the most money from your holdings. In conclusion, once the lease is signed, the mineral owner forfeits his/her rights to have any control of the mineral area until the lease is expired and of course if a well is drilled, all terms of the lease will remain in effect.
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Thank you Mr mallory and Mr Quincey that is what I was looking for.
David: From a mineral/royalty owner perspective I can share my experiences with you. I do manage the minerals for numerous extended Family members that own mineral properties in various areas of Texas. I also have the assistance of a very knowledgeable O&G Attorney to advise and help with the very complicated mineral lease provisions to be negotiated in an up to date mineral lease document. As to the landman issue our ATTY insists on the landman identifying the Company/Operator he/she represents. For our Family's interests this is a requirement before we negotiate any further. I understand that some Company's attempt to lease "hot" areas anonymously, and that is fine, but not with us. I have told land agents in the past when they can divulge their clients come back and we will talk. Why is that important? I strongly believe that the landowner and/or mineral owners have a right of transparency. I want to know who the initial Lessee/Operator is. I want to study their reputation and what kind of track record they have in maximizing production. Do they have the Geological/Engineering expertise? How long has the Operator been in existence? There are numerous Operators that I will refuse to lease too. How can I do that if I don't know who we are leasing too? Below is an excellent link that offers some details on mineral leasing or the do's and don'ts of mineral leasing. It is a very helpful educational article.
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Mike,
Your clients are fortunate to have you as their manager. In my mind, you do every thing right and for the benefit of the assets. Thanks.
Gary Hutchinson
Mike Igau said:
David: From a mineral/royalty owner perspective I can share my experiences with you. I do manage the minerals for numerous extended Family members that own mineral properties in various areas of Texas. I also have the assistance of a very knowledgeable O&G Attorney to advise and help with the very complicated mineral lease provisions to be negotiated in an up to date mineral lease document. As to the landman issue our ATTY insists on the landman identifying the Company/Operator he/she represents. For our Family's interests this is a requirement before we negotiate any further. I understand that some Company's attempt to lease "hot" areas anonymously, and that is fine, but not with us. I have told land agents in the past when they can divulge their clients come back and we will talk. Why is that important? I strongly believe that the landowner and/or mineral owners have a right of transparency. I want to know who the initial Lessee/Operator is. I want to study their reputation and what kind of track record they have in maximizing production. Do they have the Geological/Engineering expertise? How long has the Operator been in existence? There are numerous Operators that I will refuse to lease too. How can I do that if I don't know who we are leasing too? Below is an excellent link that offers some details on mineral leasing or the do's and don'ts of mineral leasing. It is a very helpful educational article.
Mike:
All good advice, but this effort is only goes so far. With one legal document, any leased property can be assigned to any other party. This can and does happen frequently. The other issue, especially in highly competitive areas, is that there are often multiple parties leasing in the same area and even in the same section. You can do all kinds of due dilegence with regard to the lessee, but that party may not end up being the operator at all unless they have a majority stakehold. I have to admit, on my last lease that I signed, I took the approach you are suggesting. They agreed to divulge the true company they were representing only if I signed a "confidentiality agreement". I did so, and after all that, the minerals eventually changed ownership to a completely different party that was not on the radar. At the end of the day, you have limited control for a limited time.
JW: I agree with your assessment and have experienced an assignment from the original lessee. My point is to have transparency and respect for the mineral owners by the Operators wishing to lease your minerals by having the Operator/Company identify themselves. We never stop learning from these kinds of issues. I have never had this request denied, and without signing a non disclosure agreement, so I am batting a 100% so far. On the point of an Operator assigning/selling the mineral lease to another entity, it is also wise to have a a provision in the mineral lease that stipulates that the mineral owners be notified in writing of any assignment or sale in part or whole to another Operator. I see this issue come up time and again on these forums.
I strongly agree that it is important for the Lessor to research the potential of the Lessee knocking on his door, even though after the Lease is signed the Lessor has absolutely no control on who ends up owning it, like a mortgage, which often will get sold multiple times from one financial institution to another during its duration.
At least by researching the original Lessee and leasing only to a reputable company with experience drilling in that play/formation, a mineral owner can INCREASE the chances that the well will get drilled and that he will get a royalty check. I was able to talk quite a few mineral owners into leasing from my clients, all majors, by showing them from public records how my client's competitors had little to no experience drilling ANY wells in the respective play/formation. When you can do that, and explain the concept of "lease flipping," the mineral owner usually "gets it."
As Mr. Kennedy says in one of his replies in this thread, I just held up my hand and said, I am a landman, so now I guess I am a landman. Never mind the 15 years experience I have working for Oil and Gas Companies, Brokers and individual mineral owners negotiating leases, farmin/farmout agreements, rights of way agreements, surface use agreements, etc. Never mind the numerous abstracts of title, or the numerous title opinions I have cured. Never mind the hundreds of leases I have negotiated with and for mineral owners. Never mind the classes I have taken thru the American Association of Petroleum Landmen (AAPL). Never mind any of that. If I would have known all I would have to do is hold up my hand and say, "I am a landman", I would have made myself official 15 years ago. Well, I just did it so now I am official. Phew! Finally
Congratulations! Finally the recognition you deserve.
jeremy gautreaux said:
As Mr. Kennedy says in one of his replies in this thread, I just held up my hand and said, I am a landman, so now I guess I am a landman. Never mind the 15 years experience I have working for Oil and Gas Companies, Brokers and individual mineral owners negotiating leases, farmin/farmout agreements, rights of way agreements, surface use agreements, etc. Never mind the numerous abstracts of title, or the numerous title opinions I have cured. Never mind the hundreds of leases I have negotiated with and for mineral owners. Never mind the classes I have taken thru the American Association of Petroleum Landmen (AAPL). Never mind any of that. If I would have known all I would have to do is hold up my hand and say, "I am a landman", I would have made myself official 15 years ago. Well, I just did it so now I am official. Phew! Finally
Gary,
Do you know any good Land men in Woodward Co, Oklahoma that could do a title research for me?
I need to find someone to check the records real soon before we buy some minerals. I would do it, but I'm tied up with other things. I know most of the records are clear till it got up to the last sale of the surface and reserve the minerals. These minerals have had ever little movement, but we are doing a family a favor so they can pay the nursing home.
Regarding land men. I found a really great guy who does title search in Dallas. He was wonderful and because he knew we needed the title search real fast, he made a trip to far NW Oklahoma and back in one day. Copied all the records that we needed and wrote a great report within a couple days. Plus his price was very fair.
If anyone needs someone to do title search, I will be glad to share his name with you. But, he does stay busy.
I have worked with lots of land men in the past that didn't know how to fill out a lease or agreement, but would tell you anything they thought you wanted to hear to get you to sign a lease or agreement. Then their are those who don't like woman, they will tell you I would rather deal with your husband, good luck, he doesn't own the minerals you are wanting to lease. Since I do most of my title searches except when we are buying minerals from relation or friends, I do hire a title researcher in that case, so I know when they are good or bad.