I am curious if any of you have heard of Delgado Leasing? They approached us on leasing our property the lease we have not is with Geosouthern and comes to an end next March. Any suggestions?
Im sorry I meant to add that we are located on the eastern side of Lavaca county.
Gabby:
I've never heard of Delgado; but, Geo Southern sold most of their leases North Of I-10 back in 2013 to a company by the name of Devon. Do you know if yours was sold or not? I have property in Fayette County and Geo Southern still has mine and it dies in December; however, Geo Southern has been attempting to purchase more acres in Fayette County and I believe they are trying to add to their lease holdings in Colorado County as well. Back in the early part of this year I talked to a couple of different leasing agents trying to lease for Geo Southern; but, can't remember the Leasing Company names; but, it wasn't Delgado.
The bad part of it is that they weren't willing to even negotiate. They made a low ball bonus offer along with their bad lease and said that was their only offer. Basically take it or leave it.
Good luck; but, IMO, right now sure isn't the time to be leasing.
gabby said:
Im sorry I meant to add that we are located on the eastern side of Lavaca county.
Yes our lease was sold to Devon, they did inform us they will not be renewing. This group from what I believe is basically trying to buy up some leases now I guess in hopes of being able to sell them when the releasing starts up again. Maybe I am misinformed but how I look at it is someone not involved in any of the production but trying to get a piece of the pie. I think this is what makes smaller properties harder to deal with and less attractive to the production companies to have to deal with all of this. Maybe I am wrong because I am not very educated when it comes to all the red tape that goes on. However, gonna follow my gut and say NO thank you. They try to make it sound like LEASE now or possibly not get picked up. I'll take my chances, it has been a blessing in my eyes we have such a a small property, and there hasn't been any drilling so far near us. I hope this turns around for all of the workers that have lost their jobs more than anything. Thank you for the response Bigfoot :) I have heard that as well, that they aren't leasing right now...
it is Delago, not Delgado. we too have been contacted abt leasing a small parcel we own on the E side of Shiner, as have some of our neighbors. Delago is VERY new; incorporated late last yr, apparently a 2-man operation. therefore unlikely they have any production capability. my guess is along the same line as gabby's: trying to take advantage of depressed oil prices/activity, buy leases below market, and flip them when (if?) oil prices recover. we have turned their offer over to our lawyer for further review and recommendation.
fyi: Devon bought GeoSouthern in late 2013.
Here is their website
Mr. Yertis I am curious have you come to a decision on leasing with Delago?
no, we are still in discussion w. our attorney. we do know that Delago land man is pressing our neighbors to sign a lease. our neighbors are mostly owners of individual lots on which their home is sited, lots are much smaller than 1 acre
gabby said:
Mr. Yertis I am curious have you come to a decision on leasing with Delago?
Mr Yertis was wondering how it was going with your discussion with Delago?
our attny is negotiating w. Delago. we are of the opinion that Delago will flip whatever leases they have in place when (if?) oil prices rebound.
gabby said:
Mr Yertis was wondering how it was going with your discussion with Delago?
I think that if they get enough acreage together they would drill. My opinion of them has changed from first sight. They do seem reputable and it would be nice to deal with a Texas based company, sometimes bigger is not always better. I think I'm gonna give it a go and see where it lands. Good luck to you Mr. Yertis I am not familiar with your name but it would seem our property is not very far apart, if your 4 miles east of Shiner.
we have decided to decline the Delago offer for a number of reasons: it was a low-ball offer, which they will flip when oil prices go up. the lease Delago sent us was a standard producer's 88 lease, heavily favored toward the producer. it contained no indemnification, horizontal Pugh, or cost-free royalty clauses, all of which are critical components of a lease more favorable to the land-owner. the landowner is not protected against litigation in case of accident w/o an indemnification clause. w/o cost-free royalty, the land owner rather than the producer pays tax, transportation and treatment costs, which all come out of the royalty. lack of a Pugh clause means an entire lease can be held in force even if only a small portion of it is pooled for production. (i am conveying what i have been told by our attny as well as others we have consulted.) but the real red flag for us was when the land man refused to negotiate w. our attny. we know very little abt mineral leases and that's why we retained a highly experienced attny to represent us in the first place!
IMO, Delago will never drill a well on their own - but they will flip the acreage to a third party for a profit and perhaps an override. There may be an outside chance that they would be a non-op WI partner in a well but the odds of them operating is ultra slim.
gabby said:
I think that if they get enough acreage together they would drill. My opinion of them has changed from first sight. They do seem reputable and it would be nice to deal with a Texas based company, sometimes bigger is not always better. I think I'm gonna give it a go and see where it lands. Good luck to you Mr. Yertis I am not familiar with your name but it would seem our property is not very far apart, if your 4 miles east of Shiner.
John:
Good show and IMHO, a very smart move to send them packing. Again, IMO, this isn't the time to be negotiating a lease except in very rare cases.
john yertis said:
we have decided to decline the Delago offer for a number of reasons: it was a low-ball offer, which they will flip when oil prices go up. the lease Delago sent us was a standard producer's 88 lease, heavily favored toward the producer. it contained no indemnification, horizontal Pugh, or cost-free royalty clauses, all of which are critical components of a lease more favorable to the land-owner. the landowner is not protected against litigation in case of accident w/o an indemnification clause. w/o cost-free royalty, the land owner rather than the producer pays tax, transportation and treatment costs, which all come out of the royalty. lack of a Pugh clause means an entire lease can be held in force even if only a small portion of it is pooled for production. (i am conveying what i have been told by our attny as well as others we have consulted.) but the real red flag for us was when the land man refused to negotiate w. our attny. we know very little abt mineral leases and that's why we retained a highly experienced attny to represent us in the first place!
Well, I haven't had a problem negotiating the provisions you mentioned above. I am not an expert by no means and I do appreciate the input. I have sent them my provisions actually on all the topics above and have so far been able to work thru these. I haven't been fortunate enough to have ever received a lease off in my favor lol... Low ball offer- well yes it is a time when the market is not in the favor of the land owner, with that being said, I am not sure what low-ball means, and how much he has offered you but I think that his offer is fair and along the lines of what has been offered in the area even when things were very active. I always shoot for one day maybe I will actually be part of a well, than only being part of a lease but hey, this is someone who is showing an interest, and a lil competition in the mix of things is a good thing.
Rock Man have you heard of Creed Drilling? I believe this would actually be the driller, but that is just a guess.
Creed operating / probably equals Creed drilling
Attached a list of the wells permitted under their name from past 10-15 years.
All vertical tests chasing conventional targets.
gabby said:
1168-CreedOperatingpermits.pdf (5.12 KB)Well, I haven't had a problem negotiating the provisions you mentioned above. I am not an expert by no means and I do appreciate the input. I have sent them my provisions actually on all the topics above and have so far been able to work thru these. I haven't been fortunate enough to have ever received a lease off in my favor lol... Low ball offer- well yes it is a time when the market is not in the favor of the land owner, with that being said, I am not sure what low-ball means, and how much he has offered you but I think that his offer is fair and along the lines of what has been offered in the area even when things were very active. I always shoot for one day maybe I will actually be part of a well, than only being part of a lease but hey, this is someone who is showing an interest, and a lil competition in the mix of things is a good thing.
Rock Man have you heard of Creed Drilling? I believe this would actually be the driller, but that is just a guess.
Well with everything being said and done... I am going to wait this one out..
Thank yall for all the help....
Rock Man, I think you're exactly right. It sounds like Delgado is looking for "easy leases" that they can hold for 3-5 years (whatever the lease term length they can get). Eventually, drilling will start up again, and then they will be guaranteed either a spot as a partner with a large company in the well (if they can swing a farmout where they are carried through the tanks), or at the least, a hefty override reservation when assigning it. And yes, the lowball offer will be increased to cover so-called "expenses" of acquiring and holding the lease. No doubt, they will get an override in addition to being paid back everything they actually spent plus some, by a serious operator who eventually might want to buy the lease. Before the dive in oil prices last December, this practice was called "lease busting" but it was only done when active leasing was going on in a particularly "hot" area. What I don't understand, though, is how taking a lease just to hold it until someone else might want it can be legal when one of the implied covenants in every oil & gas lease is the good-faith intent to drill a well. Taking a lease to hold it for up to its entire primary term hoping it can be "turned" on speculation seems to conflict with that good-faith requirement. Anyone have any comments or insight?
Mr. Yertis, what was the offer as far as bonus and term go?
offer was well below the 25%, $2K/acre we were offered by a different company, plus the issues i mentioned above . one of our neighbors signed for $5K/acre w. a different company a couple yrs ago