Lease agreement on cover letter

Oil and Gas Leasing Help
1

Hi,

I'm helping someone with getting their minerals leased. Today he got what is a "cover letter", with the terms of (bonus, royalty%, and length of years) agreed upon, with a line for his signature that basically says he agree's to the terms set, before he can get the lease packet and draft. It doesn't need to be notarized, just signed and returned, and they posted it is contingent upon clear title to minerals.


I've never seen such a thing, where you can't see the lease before you agree to accepting terms. The company says its because people get an offer, and then change their minds to the terms etc.

Has anyone ever heard of this, or do you think it'd be binding, if signed, and then once the lease is received and NOT acceptable to the other verbiage within the lease, would my that signed "cover letter" be binding to having to accept the lease offer.

Thanks

2

Unless the letter specified the EXACT lease form to be used, what you have is an agreement to agree. I use them all the time, making it subject to a mutually agreeable lease form (which at its best, is an agreement to agree, which is no agreement).

3

Hi Buddy,


Thanks for responding. It seems almost pointless, IF the lessor has already agreed to the terms set. Just so long as he's not bound to the lease itself, if he doesn't like the legalize. But sounds more like the landsman has been burned a time or two. lol

He's new to computers and trying to set up paypal to utilize your services if he hits a snag. Even to naviagate email is a challenge right now.

Thanks much,

Susan

4

Dear Susan,

Glad I could help.

How's the weather? Getting to be fall yet. We had a cold snap here and the high was only 94.

5

Hi Buddy,

A week ago, I was tempted to turn the furnace on, now this week is fabulous fall weather. The tree leaves are about 25% colored already.

I dread the thought of a repeat, of last winters weather. Some day (maybe someday sooner if a well(s) would happen) we can be snowbirds, and skip out on the cold white stuff.

Wishful thinking,

Susan

6

What are you going to do if some other company comes along and offers you more money and better lease terms and you have signed a letter of agreement?

I here all the time about a landman contacting a mineral owner and making an offer to lease for X dollars and a 1/5 royalty, 3 year primary term and a 3 year option term. This means nothing without the documents! Verbal agreements don't mean much. If a landman is too "lazy" to reduce his offer in writing to you then I would not consider it!. Get him to e-mail you a lease and addendum's that are editable, and also a hard copy. Then if you hire and attorney or mineral manager you can forward the offer to them. Mail service is too slow.

You might get a Chesapeake Draft that never get's paid! or takes 3 months to clear your bank.

I have been at this leasing for 40 plus year's and they keep getting more crazy every year.

If you went to buy a new car, do you think they are going to let you leave with it without signing and paying!

Paying comes first! Landmen are getting paid by the day or by the hour. The longer it takes, the more they make. They are not concerned about you, just getting the best deal they can from you and then move on to the next target or sucker!

7

I can tell you what I would do.

I would negotiate in good faith if I had signed a letter agreement. Otherwise, what have I, if I do not have my honor?

I really do not care if the agreement to agree is no agreement. My word is worth more than the paper.

8

I love most everything about this website and the help it provides.

When something different happens (such as signing a cover letter to receive a lease packet) that I've never seen happen in previous leasing events, and I don't understand it, or the legal consequences of it; I feel very comfortable to come to MRF and post the situation, for input.

In most every post, I get the answers needed and feel confident those posted answers are correct. What seems difficult to me, has been answered by very knowledgeable people.

For this, I am very appreciative and so happy this website exists.

Most everyone could agree that leasing situations have changed a lot, in comparison to 10+ years ago, maybe less than 10 years. As for negotiating in good faith, is the way we were raised, typically a handshake was all that was needed for most of lifes need, (not leases of course). As to a mineral owner wanting to change terms after getting a lease in the mail, I'm guessing many times there are Lessors new to the process and have no idea what terms are "fair" and this offer comes out of the blue, so he/she says yes; then calls a few neighbors or relatives etc. only to find out they're being taken for a fool, and want better terms.

On the flip side, there are those that have posted messages here; of leases being sent out, the lessor signs, and 30+ days later or more, the Lessee decides they're not going to honor it, for whatever reason. Hopefully they return the lease, but it has taken the MO's ability to lease to other offers, they might have even turned down; for however length of time that rejection took, and there is no recourse for the lessor.

I know Buddy has multiple leasing forms, in which one would secure that the lessee does indeed have to honor the offer being made. It's a shame that good faith term doesn't exist within ALL landsmen. I know there are good landsmen out there, but within the craziness of North Dakota oil boom, there are hundreds of horror stories of stunts being pulled. The bottom line is, it IS the lessors choice to sign on or not, with or without guidance of someone knowledgeable.

Thanks,

Susan

9

Nearly all of the landmen don't have any authority to get you paid, plan and simple!

Most work for Cheasapeake!


Snues said:

I love most everything about this website and the help it provides.

When something different happens (such as signing a cover letter to receive a lease packet) that I've never seen happen in previous leasing events, and I don't understand it, or the legal consequences of it; I feel very comfortable to come to MRF and post the situation, for input.

In most every post, I get the answers needed and feel confident those posted answers are correct. What seems difficult to me, has been answered by very knowledgeable people.

For this, I am very appreciative and so happy this website exists.

Most everyone could agree that leasing situations have changed a lot, in comparison to 10+ years ago, maybe less than 10 years. As for negotiating in good faith, is the way we were raised, typically a handshake was all that was needed for most of lifes need, (not leases of course). As to a mineral owner wanting to change terms after getting a lease in the mail, I'm guessing many times there are Lessors new to the process and have no idea what terms are "fair" and this offer comes out of the blue, so he/she says yes; then calls a few neighbors or relatives etc. only to find out they're being taken for a fool, and want better terms.

On the flip side, there are those that have posted messages here; of leases being sent out, the lessor signs, and 30+ days later or more, the Lessee decides they're not going to honor it, for whatever reason. Hopefully they return the lease, but it has taken the MO's ability to lease to other offers, they might have even turned down; for however length of time that rejection took, and there is no recourse for the lessor.

I know Buddy has multiple leasing forms, in which one would secure that the lessee does indeed have to honor the offer being made. It's a shame that good faith term doesn't exist within ALL landsmen. I know there are good landsmen out there, but within the craziness of North Dakota oil boom, there are hundreds of horror stories of stunts being pulled. The bottom line is, it IS the lessors choice to sign on or not, with or without guidance of someone knowledgeable.

Thanks,

Susan

10

Hi Walter,

We had negotiated a lease from one of Chesapeake's many company names, and that particular clause within the Order Of Payment page, verbatim it said:

" XXX company, retains the right to surrender the Lease associated with the Order of Payment at any time and for any reason. If the Lease is surrendered before payment is due under this Order of Payment, the Lessor may retain any consideration paid at the time of signing the Lease, but Lessor is not entitled to any additional amount. If the Lease has not been surrendered or payment made by the specified due date, then Lessor shall notify Lessee in writing and Lessee shall have 30 days from receipt of such written notice to make payment or surrender the Lease without any liability."

Talk about RED FLAGS, along with many other absurd clauses within the lease. Not to mention that last line about them having 30 days more (AFTER) already assigning 120 day payout, and Lessor having to write in to request payment. Something is SO WRONG with that entire clause.

As per the payment they say can be retained, if lease is surrendered, that must only be in the case of a toplease, as NO such money was offered up front to the lease we were sent.

The whole thought of them being able to surrender the lease after a 120 day "business days" was sickening, in the meanwhile, the other offers to be leased would have been turned away, and we would have nothing at the end of it.

Fortunately we got a much better offer and lease format from another company, and was such a relief.

It's easy to find many disgruntled mineral owners that have dealt with Chesapeake, within this MRF.

11

That's Great,

You better hope that Chesapeake does not acquire your lease!

12

As Mineral or Royalty or any kind of interest owners we are in pretty bad shape if we have to deal with some of these type of people!

I can tell all of you one thing. "if you pay me bonus money and I get my hands on the money they will NEVER get it back!

13

That sounds eminently fair Mr. Stewart, because if they get their hands on your lease you will have hell getting it back if they haven’t paid.

Walter Stewart said:

As Mineral or Royalty or any kind of interest owners we are in pretty bad shape if we have to deal with some of these type of people!

I can tell all of you one thing. "if you pay me bonus money and I get my hands on the money they will NEVER get it back!

14

I know they are actively trying to lease the entire area surrounding our minerals; so there is a good chance their amount of "leased acres" when they put in for permits, will land them the rights to drill our areas.


Walter Stewart said:

That's Great,

You better hope that Chesapeake does not acquire your lease!