I, along with a few other family members, have recently been contacted by a firm looking to arrange a lease of this land, roughly 5 acres, to another energy company. We are all heirs to an estate that holds this land. Up until this contact, none of us were even aware that this land even existed.
I contacted the Ward county clerk and confirmed that the land is still listed under my great grandmothers name. (She has been deceased for over 25 years). Beyond that, none of us know anything more about the land, let alone the parties looking to lease it.
I have no doubt that I would want to consult an attorney before going ahead with this, but before I get that "meter" running, I was hoping to get some input from folks here.
Also, the company that sent us all lease papers to sign and return, set a deadline for their offer of 5/15/17. That was a big red flag in my book, but now I have family members concerned that we might be missing out on an opportunity if we don't act quickly.
Any comments/suggestions/questions would be greatly appreciated.
Joe, I don’t have time to write much right now, but just wanted to say you came to the right place. Others will chime in. I own a few minerals in Ward County, too. Welcome to the site.
I have some minerals in Ward Co., but they have been held by production for a long time. Although I probably know about most of the minerals I own, from my experience it is not terribly uncommon for me to find out I own minerals somewhere only when I am contacted by someone wanting to lease them or buy them.
Do you know whether the outfit wanting to lease your acreage is an oil company or if it is a lease broker? If it is the latter, ask who they are leasing for. If they refuse to tell you, that is a big red flag.
Unless the party who will ultimately own your acreage is a well known company with a good reputation (not necessarily a very large major or independent), I would suggest that, if you do decide to lease you either ask for the bonus check from the landman upon signing, if in person. If it is done through the mail, you might ask that an instrument called a "sight draft" be sent with your lease after you reach a verbal agreement.
A sight draft is something you can cash a certain number of days after returning the executed lease, assuming everything was done right. This gives the oil company time to get the returned lease and see that it is properly executed. Not many companies that I know use sight drafts anymore, but you hear more than a few nightmarish stories these days about people who either have to wait months before they receive the lease bonus money they were promised or never receive it.
If you add the bonus amount per net mineral acre you have been offered to this thread, others who may have leased in your vicinity can possibly let you know if your offer is way too low or really good and everything in between.
It certainly varies as to the time offers to lease are good for. From my experience, 30 days is most common. I would not personally really consider 15 days a big red flag. However, I would strongly recommend that you do not rush into anything until you have done all your homework and are comfortable with the lessee and the terms of the lease. If they really want to lease you, they will normally extend the deadline. However, I cannot guarantee that they will.
In my opinion, the most likely reason that they made it 15 days was to cause exactly what has happened with some of your family members--create stress in hopes that you will rush in because you are afraid you might "be missing out on an opportunity".
Suggest not rushing into things by signing a lease with an unknown entity. A 15 day deadline to sign lease is much too quick.
If this offer falls through, there will be many more to come from other oil companies or lease brokers. I would not worry about trying to meet that deadline they gave you. Time is on your side since leases are constantly being bought in that area. In mean time find a good oil/gas attorney who knows the area.
Jetta has taken most of the leases in this section, includng quite a few 5 acee tracts. Jetta is now working with Concho (COG) on horizontal drilling in this area. There are numerous wells and permits in surrounding sections. No permits yet on Section 29. Royalty rate of 25% is standard. It is OK to lease to another company which may participate with COG and Jetta is the wells. The important thing is written lease terms. And you need to make sure your bonus is good as this is a good area.
I just checked a subscription site (DrillingInfo.com) to see what sort of historical activity are around your lease area.
Section 29 has had no horizontal drilling today and only one old vertical producing well. However, Section 28 (adjacent section) has two horizontal wells drilled by Concho what have produced over 500,000 BO and almost 900 MMCF of gas. These two wells are still making over 500 BO and 700 MCF per day.
Even though your 5 acres will only be a small piece of any production unit, you will be looking at 25+ years of O&G royalty revenue once wells are drilled in this section.
I would recommend that you get a lawyer to look at any lease and strive to get a "cost free" lease to try to minimize deductions from produced O&G. Also look to get familiar with the Tx RRC site - this is a great resource to see what is going on in your area as to drilling activity and production.
Thank you all for the info provided so far. Some additional information.
We are being contacted by a landman/agent on behalf of Anadarko. The offer is to pay us our bonus within 60 days pending the outcome of review of proper ownership rights by us. It is a 3 year lease option with an option for 2 additional years at lease end. 25% royalty.
My primary concern is my liability if I enter into any agreement. There is an outstanding property tax balance with the county. Not much in comparison to the bonus offer, but still a financial obligations that I will be opening myself up to. Another concern would be legal liability in the event there was an accident of some type on the property.
I realize these are things that I will need to discuss with an attorney prior to going ahead, but any comments on these concerns would be great.
On a side note, while I would be open to suggestions and/or offers to help with legal advice on this matter, please feel free to share contact info here, but please do NOT contact me directly unsolicited. (Got a voice mail this morning from a landman)
You need to pay the property taxes associated with your surface of the county can foreclose and sell both the surface and minerals in a Sheriff's sale. This is no different that your home. Historically, Texas has not held mineral owners liable for actions of the operator and working interests. This is not to say that the courts could reverse this position. Minerals are dominant estate and the surface owner does not have the ability to prevent activity related to oil and gas development. You can add a provision in your lease that the lessee indemnify you for any liabilities related to its activities. You should also add a provision that the lessee will pay for any use of your surface based on University Lands Rate and Damage Schedule. There is no reason for this to be given free to the lessee. If you only own minerals, then you would get the same bonus and the surface owner would be paid damages. Finally, given that title is still in your grandmother, Anadarko need the 60 days for clearing of title and determining which family members own what percentage of the minerals. Paperwork depends on whether her will was probated and what needs to be filed.
Anadarko is a well known company and has one of the largest lease positions in the delaware basin. You should be fine trusting them. I imagine the property taxes in Ward County are not very high. If I were in your position, I might use the bonus payment to pay off those taxes.
If you would like, I can send you an addendum to the lease you could request be included on the lease.
Taxes probably aren't going to be a bunch, as mine run me around .95 cents per acre per year. I'd be checking into that real quick and getting it caught up. If the rate is similar to mine, that'd run you about $120 (.95 x 5 acres x 25 years). Get your family members to share in that.
As to liability problems, I've addressed that at contract time, both liability issues with workman or civilian injury and EPA issues due to Oil and Gas company problems after the fact and have been able to get the Oil and Gas Company to add this in without any heartburn. Just a matter of asking. Don't want to get sued over someone breaking an ankle stepping in a hole or having the EPA contact us later because of some environmental issue because of a spill.
And 15 days to sign a lease is too short. The process doesn't take long, but don't get rushed into anything.
Latest update. Finally spoke with an attorney in Houston, friend of a friend, who seemed very familiar with what we have going on. He thought all of the $ numbers were in line and the lease itself seemed pretty standard. He told me I should be good as long as I had them remove the warranty of title line. He didn't think that would be a big deal for theme to agree to. Sure enough though, when I hit the landman with that request, he said his client wouldn't do it. I told him we couldn't leave ourselves open to possibly having to pay back any bonus or royalties years down the road in case things weren't right with the title. I told him that if he was confident that we are the true title holders to the land, I didn't see the problem with them removing the line. He went back and talked to people "up the chain" at his office and just left a message saying they would get rid of the line.
On the tax issue, he offered (I didn't ask) to increase our bonuses by $500 each (mine, by brother & father) to help offset the tax obligation.
What am I missing? He seems very eager to get this done. I'm as big a fan of money as the next guy, but he seems almost too anxious to close this deal. Maybe he's just looking to get this off his desk and i'm over thinking it.