New here with what seems like an old story. My cousin and I were contacted by Patch Energy about buying mineral rights in Winkler County, Texas. (It appears there is current production with three wells- Section 30, Block 27, Public School Land Survey, A-1744) After doing some research, we discovered that these rights were purchased by our Great Uncle, and he died intestate with no wife or children. However, he had 5 brothers who would inherit according to Texas law, one of whom was our Great Grandfather who had 8 children. The mineral rights are currently in Receivership in Winkler County. After talking to the Clerk of the Court, it sounds like we need to file an Affidavit of Heirship and petition the Court to remove the Receivership. This would require hiring an attorney. However, while we know how much money is being held by the Court (over $40,000 with royalties being deposited each month), we don’t know how many other potential heirs there are and what percentage of this money we would be awarded. So long story short, do we take Patch Energy’s offer of $1,660 each to sell to them or is it worth it to hire an attorney?
Husky I checked production on those 3 wells and they are fairly decent wells with room on that section for several more wells to be drilled…if it were my minerals I would be looking for a landman or oil/gas attorney for guidance…just my opinion…I’m assuming ya’ll own the minerals on the whole section
Highly probable that there are multiple benches in this area. Could be a lot of O&G to be produced here over time - may take decades but good mailbox money potential for sure.
Thank you. Not sure we can afford to hire an attorney or landman if it takes decades to recoup that cost.
Thanks for your input. The information we found says we own .000020345 decimal interest in the lands. Doesn’t sound like much, eh? Except it has managed to accrue $40,000+ in royalties. It’s been in receivership since January of 2017.
We talked to one law firm and they recommended hiring a landman for $1,500 a day to research our ownership claim. We just don’t have that kind of money to pursue this without knowing there would be enough payoff to recoup that and then some.
I understand the concern about spending $$$ for legal analysis when you aren’t sure if you can get a payout of these expenses. But is it possible to get other members of the family together to share in these costs? The upside here is pretty significant. Here are some facts - the three wells in question have produced almost 1.4 million BO and 3.3 BCF of gas since July 2018. And will probably produce at least this same amount (or more) over the remaining lives of these three wells. Add in the infill drilling locations that were noted in another post - 2 to 3 similar wells at this horizon with similar results as the first three horizontal wells. Then add in the possible 4 to 6 additional target zones that may probably exist in this area - each with the potential for 4 to 6 wells per target zone. A review of various industry presentations supports the multiple bench prospectivity in this area. I agree that it may take decades to get all these benches drilled up and producing cash flow, but it is assets like this that keep spinning off royalties to families for a LONG time. Just something to consider.
Thank you for the additional information on the wells. It would just be my cousin and I paying to sort out our rights. We are not in contact with other possible heirs which is part of the problem. We don’t know how many others there are and who got offers from Patch. When I talked to the Winkler County Court Clerk last month, she said there were no new filings in the receivership. Sounds like we might have to bite the bullet and find an attorney who would take this on. We are both out of state, so that’s another complication. Lots to think about!
Ridge Runner Resources - Northern Delaware Non-Op Package (1).pdf (3.1 MB)
This PDF is from the northern part of the Delaware Basin. But the one figure that shows the multiple benches / target zones is a common theme in this Basin - including Winkler County.
Husky, You are correct that this is a common issue. Groups like Patch look for interests in suspense/receivership and do the back end title work to track down current owners. Running title can be a tedious and expensive process, however, $1,500 a day is triple the normal landman day rate (granted, business is booming right now and might be tough to find someone available). With that being said, you have some options. Patch (or any buyer that sends you an offer) has the title info and likely the means to pursue getting the money out of receivership. I would ask them how much money your individual interest is worth. You can negotiate selling a portion of your interest, say 50%, in exchange for splitting the money owed to you or some variation of that. Lastly, based on back of the envelope math and limited details - $40k was split between 5 siblings is $8k, so then your great grandfather’s $8k portion divided equally amongst his 8 children, and so on - keeping in mind a lot of assumptions but that is the general high level way to look at it.
Thank you for the ideas. Patch says our interest is worth less than a $1,000 each (of the money in receivership I’m assuming), but doubled their original offer of $830 to $1,660 each when we didn’t bite. That makes me think it’s worth a lot more, probably as other folks here have guessed for the rights to current and future production royalties. As to the “envelope math”, we know that all 5 of the Great-Grandfather generation siblings are deceased, as well as our Grandmother and all of her 7 siblings. We don’t know how many children and grandchildren all the other siblings of each generation there are. And we don’t know how many Patch has found and contacted, other than no one has sold their rights to Patch as of last month and the receivership is still intact. It’s sounding more and more like we need to “pay to play” here. Just weighing how much we can afford.
Thank you. That is really interesting!
Patch has no reason to be overly positive with you about the value of your minerals. The cheaper that they can get them, the better for their investment group. I would put heavy money on the fact that they have had a technical evaluation done on your area as to overall potential, O&G reserves and theoretical cash flow over time. They are not working in the dark here - they are hoping their low-ball offers will catch some rewards from those who are ready to take cash payments now.
The comments that I posted yesterday about number of benches and future wells is a mini technical evaluation of this prospectivity (side note - I am a retired O&G geo professional who knows the Permian Basin very well).
And as for any cash payments, make sure you understand the tax implications of these payments.
@mmhusky Good morning! It seems like Patch has probably already done the research and has a good idea of how much you have in suspense and offered much lower than that number. Thus, setting themselves up for a nice profit. I think it’s best to hire an attorney to work on getting it out of receivership. If you explain the situation, an attorney should be able to work with you as far as deferring payment until the royalties are released from suspense. That way you are not paying out of pocket during the process. There are several quality attorneys in Midland that I can recommend.
That would be ideal! I would really appreciate if you could share your referrals to any attorneys who you think may be open to taking our case on that basis. Thank you so much.
Thank you again. I have some idea of the tax implications, but good to research further!
@mmhusky What state do you live in? I’d be happy to reach out and give you their information.
Thank you! I am in Oregon, and my cousin is nearby in Washington. We really appreciate the referrals.
First, have you searched public records for your great uncle’s name to learn when he acquired the acreage, and how much acreage? https://Reeves.TX.PublicSearch.US or www.TexasFile.com
Secondly, it was probably the judge of the local district court who signed an order putting the mineral rights in receivership. Ask the court for a copy of that order, it might contain useful ownership info. It will probably name a Receiver, normally a local attorney charged with responsibility of stewardship over the asset in receivership. The receiver may or may not return your phone calls. The receivership will be given a convenient name, e.g., “Defendant John Doe et al”, possibly the name of your great grandfather or the first owner name of the listing. Receivership orders do not necessarily appear on those public websites like TexasFile.
Third, search for a lease where an operator leased the receivership’s acreage, such lease should be easy to find in the two public websites.
I do know of an Oklahoma landman experienced in this very sort of receivership & suspensed royalties in TX plus other states, not sure if our forum rules allow me to name him … I don’t have any relationship but know he does good work.
Thank you for all those suggestions. We are going through everything, and I’ll let you know if I would like to contact your landman.
Again, ask the court for receivership documents that may provide information. I forgot to mention, an operator’s lawyer would have filed a Motion with the local court requesting formation of the receivership and explaining why. The same operator/lawyer would have also composed the judge’s Order establishing the receivership. Then, the operator would have negotiated a lease with the receivership. The three docs may tell you a lot about mineral owners, legal description, history, etc.