My family is in the process of leasing, and we have encountered our first request for the O&G company to file a memo instead of the actual lease. We will keep the original signed lease. Is there any downside for the mineral owner in having only the memo filed, other than the necessity of keeping track of the original lease?
Prepare 2 originals and both you and lessee should sign and all parties have a fully executed original. You should initial all pages.
Memorandums are very common in Texas, but not so common in Oklahoma. It usually means that the operator is a Texas based and prefers it that way or your terms are better than others and they do not want to broadcast them.
The advantage to the mineral owner of a full lease posted in the county is that your heirs (and others) can always find it. If you have the only other original, you had better keep really good storage eyes on it. Scan and file digitally, let your kids know where it is and how important it is, etc. The memo needs to post the most important items. I prefer a full lease to be filed.
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We had a real problem with a memorandum in a case in which I was involved. The decedent did not have a copy of the lease. We only obtained a copy after litigation ensued. I am not a fan of the memorandum.
This post is not legal, investment or tax advice, it is for discussion purposes only. Reading or responding to this post does not create an attorney-client relationship.
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We have some property in NM and TX. We don’t lease often but when we do, we will get three signed copies, initial all pages, keep two originals and file one of those full lease originals with the NM or TX county ourselves. If the O/G company wants to file a Memo, that’s fine. We will file a fully executed original ourselves with the county.
Thanks for the info.
Memorandum’s are quite common. Generally the Lessee has given you terms that they don’t want the general public to know about. No problem as long as the terms of the Memorandum spell out the terms of the oil and gas lease itself.
MD, your suggestion about recording the lease yourself sounds logical but companies whose policy is to only file memo’s often include wording in their leases stating that the Lessor agrees the full lease will not be recorded. If you are able to negotiate that wording out of the lease then the operator wasn’t married to the idea of only a memo being recorded.
Many ogls have depth clauses, or Pugh clauses. If only a memorandum is filed, then a new/competitive landman who is searching the records may be unable to determine that the deep depths, or lands outside the unit are unleased. If it is not readily apparent that it is unleased, then they won’t call the mineral owner for an ogl.
Now, in theory, the landman has the right to inquire of the company holding the lease to see a copy, but the company is frequently secretive and will not produce it.
When company A transfers operations to company B, who transfers it to company C and then, ultimately on to … Company M, it may be impossible to ever find a copy of the original ogl. I
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The landman can contact either party to inquire about the specifics of the lease.
Is it possible to file the memorandum at the courthouse so that their is a record for heirs in the distant future?
The operator will file the memorandum at the courthouse, but it is not as useful to heirs as it does not have each and every clause included in it. That is what the heirs will need.
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Tim, it looks like your reply got cut off, and I would like to see rest of it if you can post the rest. Thank you.
In our experience the Lessee opts to file the Memorandum of OGL in lieu of a fully executed copy for confidentiality purposes. As others noted, the Lessee may be in the process of negotiating leases covering similar, adjacent interests or contractual arrangements burdening the same. The Memorandum of OGL provides record notice of the pertinent terms of the lease without revealing each and every provision. In terms of any potential downsides, we find that the percentage of royalty interest and any applicable Pugh clause language is not contained in the Memorandum. As such, we are tasked with tracking down a fully executed copy of the lease. I suppose the Lessee or its successors and assigns could fail to produce said copy in a timely fashion, thereby (1) leading to a delay in payment of proceeds; or if applicable (2) future bonus payments owed to you due to a release/partial release of lands covered by the lease. We have had no issues requesting a copy of the lease from the Lessee or its successors in interest, thus no delay in payments etc. Perhaps we were just lucky. Nonetheless, I also recommend keeping several copies of the fully executed copy of the lease as you would any estate documents. I too would be careful of taking it upon yourself to file at the courthouse. If you are concerned about missing out on additional bonus payments due to lands Pughing, you have viable options you can pursue to let the world know you are ready to be leased for those depths.
My point is that documents get lost. If documents could always be found, how come there are so many posts about heirs not being able to locate a lease or a deed that Dad or Grandpa executed.
Companies can be a little bit better in the computer age. But, it very likely that once company A transfers the interests, and then it gets down to Company M, who is a guy operating out of a pickup truck, whose wife answers the phone at home, the docs are scattered to the wind.
Also, while both parties are able to provide a potential lessee with copies of the lease, many do not, because they don’t get around to it, or the lessee is suspicious about the intent of the person asking.
Now, if the company wants to record a memorandum, and then allows the lessor to file the ogl after a period of six months, that would probably work.
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I second Tim’s point
Thanks all for your input, it is much appreciated!
They do this so that the actual agreed upon amount of for the lease is not made public. I would think that a Notarized signed signature from one of the company principals kept in a fire proof safe might work but I would consult an attorney.
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