I'm curious what you decided. My relative received the same offer and was concerned about the value of the bank draft and the terminology "this draft when paid is payment in full for the lease." The value on the draft appears completely arbitrary. Will accepting the draft negate receipt of the $250 per acre bonus consideration?
We are all new to this. Any advice is helpful.
Jamie Velsor said:
Today I received an Oil and Gas Lease Proposal from SWEPI on mineral interests I hold In Moffat County, CO. I have read the prior postings and would like any feedback on their proposal. My interests are in Twp. 7 North, Range 93 West of the 6th PM, Section 22: Lots 5,6 and Section 23: Lots 3,6 totalling 160 net acres. Their terms are as follows: for an "up-front" lease, bonus payment equal to $250 per net mineral acre for a 3 yr. paid-up lease term with an option to extend the lease for an additional 2 years for an additional bonus payment of $250 per net mineral acre and a royalty rate of 17.5%. The letter goes on to say that it shall be considered for all purposes as though said lease originally provided for a primary term of 5 years. They included a bank draft and a W-9 form and they state they will have 60 banking days to examine title because they have not been verified by their title examiners, in which case, the amount of the draft would change. They go on to say that upon completion of their research, the will amend the lease and adjust the amount of the draft accordingly.
It feels like going on a blind date and want to know if this is the "norm" for this area, their credibility as a Lessee and the reason for the exploratory drilling in this region? The last company who leased from me filed for bankruptcy, which for me, may or may not have been a good thing. If anyone would be kind enough to provide me with any information that would assist me in making a somewhat informed decision, I would be ever so grateful. They would like their documents signed and returned by Dec. 15th, with all documents signed and notarized prior to Dec. 10th. Thanks and please contact me if you require any further information.
Hi and thanks for your inquiry. To date, my bank would not accept the deposit note without holding onto the original documents until such time as “any” money is forthcoming. I am almost at the 2-month benchmark wait period for their title searching process and after trying a number of times to get some response from the landsman, I have had no success. My concern is they will get ahold of the original lease agreement and record and file it without any payment to me. I am hoping that this will not be the case but you are right to be skeptical of the supposed bank draft. It is not a guarantee of payment and if anything, you should insist on a “partial payment” down, good faith deposit that any bank would be happy to accept as “cash”. I hope this has been helpful. Jamie Velsor
Is your lease through SWEPI or NextEnergy? In my eyes, this is a very serious matter. I have found that I too have been getting the run around by both companies but am fortunate not to have signed anything. Dianne Jamie Velsor said:
Hi and thanks for your inquiry. To date, my bank would not accept the deposit note without holding onto the original documents until such time as "any" money is forthcoming. I am almost at the 2-month benchmark wait period for their title searching process and after trying a number of times to get some response from the landsman, I have had no success. My concern is they will get ahold of the original lease agreement and record and file it without any payment to me. I am hoping that this will not be the case but you are right to be skeptical of the supposed bank draft. It is not a guarantee of payment and if anything, you should insist on a "partial payment" down, good faith deposit that any bank would be happy to accept as "cash". I hope this has been helpful. Jamie Velsor
Hi Dianne - My deal is with Swepi and I actually called the land company that is acting on their behalf today and was getting vague answers to my initial questions. I then started to ask for a copy of the recorded lease they say they submitted for filing and recording which I now realize would be erroneous on its face because it is titled as a “paid-up” lease when in actuality, they have not paid anything and payment hinges on title search of the net mineral acreage ownership (supposedly…) I mean I know what I own. My bank demanded to hold onto the lease with the original signature on it and we sent the land company a duplicate original but my signature is a photocopy, not an original. So I would think they would need to obtain the originally signed lease from my bank at the time they honor the bank draft. I also asked for the landman or anyone from the land company to confirm to me that the funds are being paid. My sixty day wait period is due soon and we also had some discussion about that. At first I was told that I would receive the lease payment around the end of February, beginning of March and I questioned that based on the wording in the lease. She then said that the time period would be within the sixty days referred to in the lease. I then asked to have the landsman who wrote to me initially to contact me at which point she explained how busy he is and I said that customer service would go a long way at this point since he has not responded to my letter and e-mails so she said she would flag my folder and leave a message for him to contact me. I have always been skeptical but decided to go with it anyway. Oh, the woman made reference to the matter of the lease guaranteeing that they would have sole availability to the mineral acreage as if to say that the lease is sort of a binder of sorts? If they went ahead and recorded the duplicate original, I would be shocked that the County Clerk would have accepted that as an original document and I should know more soon. Stay tuned… Jamie Velsor
IJamie, it sounds as though your bank is wise. I hope Moffat county uses good judgement too before they record anything. Jeff Clanton was the landman I was dealing with and he kept in close contact with me. He always returned my phone calls and answered my emails ... even til late in the evening. The next thing I knew he was no longer working there ... much to my surprise, and his too! I haven't been able to get a straight answer or return phone call since. The whole ordeal has raised several red flags for me and I am leery of any future dealings with them. Thank goodness for this forum where we can compare notes.
Yes, keep us posted Jamie and good luck! Dianne
Jamie Velsor said:
Hi Dianne - My deal is with Swepi and I actually called the land company that is acting on their behalf today and was getting vague answers to my initial questions. I then started to ask for a copy of the recorded lease they say they submitted for filing and recording which I now realize would be erroneous on its face because it is titled as a "paid-up" lease when in actuality, they have not paid anything and payment hinges on title search of the net mineral acreage ownership (supposedly...) I mean I know what I own. My bank demanded to hold onto the lease with the original signature on it and we sent the land company a duplicate original but my signature is a photocopy, not an original. So I would think they would need to obtain the originally signed lease from my bank at the time they honor the bank draft. I also asked for the landman or anyone from the land company to confirm to me that the funds are being paid. My sixty day wait period is due soon and we also had some discussion about that. At first I was told that I would receive the lease payment around the end of February, beginning of March and I questioned that based on the wording in the lease. She then said that the time period would be within the sixty days referred to in the lease. I then asked to have the landsman who wrote to me initially to contact me at which point she explained how busy he is and I said that customer service would go a long way at this point since he has not responded to my letter and e-mails so she said she would flag my folder and leave a message for him to contact me. I have always been skeptical but decided to go with it anyway. Oh, the woman made reference to the matter of the lease guaranteeing that they would have sole availability to the mineral acreage as if to say that the lease is sort of a binder of sorts? If they went ahead and recorded the duplicate original, I would be shocked that the County Clerk would have accepted that as an original document and I should know more soon. Stay tuned... Jamie Velsor
Kyle, I realize your post here is a bit dated - 11/14, and today is 2/1/11, however, when you said you owned land in Northeast - if you would tell me which Township and Range this is. Thanks Pam
Kyle McNeil said:
Just my two cents but the figures you are talking about seem to be way low especially when Chevron, Exxon/Mobile and Chesapeake are paying $10,000/acre for the mineral rights in the Northeast where I live and own 150+ acres. I would definitely consult a good gas lease attorney on this issue. Also do some research on the web and check out land coalition web sites in your area. For example check out a couple in our area for valuable info:
We finally signed our lease this week. It was a 4 month process but we did receive much more favorable terms than initially offered so I would encourage everyone to work with an attorney on their leases.
$250/net acre, 17.5% royalties 3/2 year lease term
Just to provide some contact info in case people are interested:
We signed with Energy West
PO Box 1441
Denver, CO 80201-1441
We worked with a landman initially, Mr Ken White, who was very professional. (970)331-6161
I did not speak with the owner of the company, Mr. James Sullivan, (out attorney dealt with him) but she said he was also very professional.
Before we signed, we also received an offer letter from Next Energy in January so they seem to still be signing people. We did not negotiate with them so I can't speak about their staff.
This is a apprehensive situation for sure. It is my opinion that us landowners should stop accepting drafts from oil and gas companies. We should tell the companies we will sign the lease whenever they get their title work done and can present us with a company or cashier’s check. Otherwise, there is nothing to keep them from filing the lease(s) of record and never honor the draft(s). I read a blog from an attorney on the web recommending that landowners not accept a draft and demand a cashier’s check. Good luck!
Jamie Velsor said:
Hi and thanks for your inquiry. To date, my bank would not accept the deposit note without holding onto the original documents until such time as "any" money is forthcoming. I am almost at the 2-month benchmark wait period for their title searching process and after trying a number of times to get some response from the landsman, I have had no success. My concern is they will get ahold of the original lease agreement and record and file it without any payment to me. I am hoping that this will not be the case but you are right to be skeptical of the supposed bank draft. It is not a guarantee of payment and if anything, you should insist on a "partial payment" down, good faith deposit that any bank would be happy to accept as "cash". I hope this has been helpful. Jamie Velsor
have been getting ofers at $300, 3/2 yrs and agree to 3/16th…my lease form or at least NARO rider. I won’t agree to carrying costs or pooling - insist on “pugh clause”. They keep coming - anything from anyone else?
have been getting ofers at $300, 3/2 yrs and agree to 3/16th....my lease form or at least NARO rider. I won't agree to carrying costs or pooling - insist on "pugh clause". They keep coming - anything from anyone else?
quite a few…but don’t fathom why these folks don’t even insist on pug clauses and no carrying costs, etc, …I’ve received same offers from Shell…etc. ???
6th Generation Texan said:
How many net mineral acres are you leasing?
donn mahoney said:
have been getting ofers at $300, 3/2 yrs and agree to 3/16th....my lease form or at least NARO rider. I won't agree to carrying costs or pooling - insist on "pugh clause". They keep coming - anything from anyone else?
Donn, are your minerals in Moffatt or Routt County?
donn mahoney said:
quite a few...but don't fathom why these folks don't even insist on pug clauses and no carrying costs, etc, ..I've received same offers from Shell..etc. ???
6th Generation Texan said:
How many net mineral acres are you leasing?
donn mahoney said:
have been getting ofers at $300, 3/2 yrs and agree to 3/16th....my lease form or at least NARO rider. I won't agree to carrying costs or pooling - insist on "pugh clause". They keep coming - anything from anyone else?
quite a few...but don't fathom why these folks don't even insist on pug clauses and no carrying costs, etc, ..I've received same offers from Shell..etc. ???
6th Generation Texan said:
How many net mineral acres are you leasing?
donn mahoney said:
have been getting ofers at $300, 3/2 yrs and agree to 3/16th....my lease form or at least NARO rider. I won't agree to carrying costs or pooling - insist on "pugh clause". They keep coming - anything from anyone else?
Mineral rights are in both Routt and Moffat Counties.
Pugh clause = a lease clause that is to the owners benefit. It ensures that the company that drills will release all acres that are not included in the well unit and savey pugh clauses include statement that releases formations above and below the producing formation as well. Without such a clause in the lease a company could, say, drill on your 10% of 1200 acres, put in a well and declare an 80 acre unit, but still hold the rest of your 1200 acres "by production".
Thank you for your explanation! Dianne donn mahoney said:
Mineral rights are in both Routt and Moffat Counties.
Pugh clause = a lease clause that is to the owners benefit. It ensures that the company that drills will release all acres that are not included in the well unit and savey pugh clauses include statement that releases formations above and below the producing formation as well. Without such a clause in the lease a company could, say, drill on your 10% of 1200 acres, put in a well and declare an 80 acre unit, but still hold the rest of your 1200 acres "by production".
I see you have been in this since August and thought that you may be able pass on something that you may have run across. I also, am trying to learn about leasing my mineral rights. I am in Moffat County T6N, R96W and T8N, R92W and am having a hard time identifying a oil rep leasing in my area. Too far north or west for some. If you happened to have heard of anyone leasing up in my area I would appreciate a lead to that.
Here's the latest turn of events regarding my interests in Moffat County. Having received an offer in the form of a Paid-Up Lease from a company called Swepi including a bank draft of up to $40,000.00; after waiting their requested two month time period with which to conduct a title search, I started calling the land services working on their behalf. I was at first assured that the money would be forthcoming, etc. I then asked to speak directly to the contact who reached out to me and I was told that he is a very busy person to which I said that I was also a very busy person but for the sake of good customer service, I would like for him to call me or contact me via email directly. After a few days, I was contacted by him via telephone with excuses as to why he couldn't reach me and said that he would check into the concerns that I had and get back to me. After a few days, I received a call from someone claiming to be a title searcher who then told me that my mineral interests were located in a unit and that I should contact the BLM for further information on my interests. Oh and yes, he was oh so sorry that the Swepi offer could not go forward as offered. So for those of you to obtain a bank draft as opposed to a cashier's check or other form of cash in hand, I would be cautious. My bank would not act on the draft until they received verification that the funds would be available for deposit in "cash" format. What was interesting was that my bank insisted on holding onto the original documents until such time as it was confirmed to be a legitimate deal and so we provided Swepi with a duplicate original with a photo-copied signature and notarization. I was surprised to hear that the Moffat County Clerk's Office actually accepted that document as recordable and did so on behalf of Swepi. This issue alone has me very concerned as far as ethical practices in a county recorder's office. Upon calling the BLM, they provided me with information of a company who is currently working that area along with other helpful information.
I made a call to a company known as Foundation Energy and after reviewing the situation and a few emails, I have learned that this company had contacted me back in December of 2010 with an offer. Due to the fact that I was involved with the Swepi proposed deal, I did not continue with Foundation. So, as of today, I am requesting a duplicate offer for my consideration and review and they are offering $135. per acre with a 15% royalty and a five-year lease. I am interested to see what clauses will be contained and wonder if I have any room to move with their offer. Any information, etc., would be greatly appreciated. So, what I can recommend is that you have signed with Swepi based on the bank draft they submitted, I hope it works out for you. If you haven't signed and yet are still considering, I would request something definitely more substantial than a bank draft. I have been told that Shell did a "mass" mailing to scope the region to explore this area.
As an update... I mentioned on an earlier post that I had signed a lease extension with Shell for our mineral interests in Moffat County. We have an existing lease that was originally with East Resources, whom Shell purchased in mid-year 2010. The lease extension was a straight five year extension, $250/acre bonus with a royalty of 17.5%. I returned the bank draft with the lease and requested in writing a check for the 10% of the bonus upon completion of the title work. All of my correspondence was directly with Shell, to the best of my knowledge. Everything came to me on Shell letterhead. Anyhow, six weeks after mailing the signed lease I received a check for the full 10% owed to me, the balance is due on or before the existing lease expires the end of July of this year. I had no issues when working directly with Shell, no excuses, exceptions, nothing. They returned calls and E-Mails promptly, and answered my questions.
I won't say that I got the best deal available, but...dealing directly with Shell (at least in our case) was straight forward.
Jamie - I'm not certain that I understand...is your mineral interest in a Federal Unit (BLM)? Evidently not, if BLM is sending you to Foundation Energy. Foundation bought from Pioneer in Moffat County relatively recently. Foundation is currently permitted to reenter...and I own 25% - they have no lease with me (Pioneer did not either). Foundation offered a "producer 88" lease and the same terms they offered you. I sent them my lease form...and I guess we are at a stand-off right for now.
As for SWEPI (Shell)...about every week someone from MJ Land Services (agent) contacts me, and more recently, independent land men. They want to lease interests in Routt and Moffat. Thus far, Shell is inflexable about altering their lease form - but their bonus keeps going up - now at $350. I would not accept a draft. In your lease you "warrent" ownership - if it turns out otherwise, it is up to them to get their bonus $ back.
What happens with your recorded lease in the County now??
Do you look at the Colorado Oil and Gas Commission web site? Loads of information about permits, applications, production, maps, hearings, etc. Their material is not updated each day, but good.
Jamie, I take it Shell has agreed to file a release, you do know one will have to be filed since you say they recorded the copy of your lease.
Shell or Swepi did do a mass mailing there and Routt with a return deadline back in December after they bought East Resources leases. Shell like most others are now filling in select tracts and will probably be all thru leasing very soon. Foundation bought out Pioneer's leases and there are a lot of mineral owners in a very large unit upset that they are locked up by one stripper well.
Swepi or Shell is only leasing in select tracts and the $350 offer is only on those tracts, section by section.