Old original Texas oil lease questions

Oil and Gas Leasing Help
1

Hello,

I am new to this forum, my goal is to piece together what has become fragmented information across the family in terms of oil wells, leases and royalty interest. I read in other forum posts that when a new well is drilled many times the original lease and terms of that lease is used and a new lease is not required. In my case my great grandfather and great grandmother signed an oil and gas lease in 1976 (Clayton Williams). I believe it was about that year when 3 Vertical wells went up on the property. In 1979 my great grandparents deeded my grandfather, father, and an uncle mineral interest in the amount of 1/6 each and my great grandparents kept 3/6. In 1990, another uncle of mine was deeded 1/6 mineral interest and my great grandparents now kept 2/6. Then, in the later 90's my great grandfather and grandmother deeded their remaining mineral interest (2/6) to be split evenly to their 6 great grandchildren. In 2003, original lease rights became owned (sold I guess) to another company I'll call 123 and company 123 had a horizontal well pooling amendment drafted to amend the original lease and my grandfather, father, two uncles, and all 6 great grandchildren were each asked to sign this lease amendment.

If anyone could answer, I am not sure if we all signed a company 123 lease amendment in 2003 because a re-entry horizontal well was beginning or if it was because their were many new family members that now held interest since the original lease was signed?

If anyone knows, fast forward to 2017, a new company stood up a new pooled horizontal well on a neighboring property, this pool uses all of our land, and no amended lease or new lease to my knowledge was requested to be signed, is this because the original 1976 lease and/or the 2003 lease amendment (with horizontal wording mentioned) covered everything that would be needed?

Thanks to all,

Larry

2

The answer depends on the exact language in the lease and amendment. Also the terms of the declaration of pooled unit or similaf instrument that may have been ratified.

3

Thanks for the reply, (it's a little lengthy) but below is pretty much what the 2003 lease amendment to the 1976 lease stated:

WHEREAS Lessor did execute 1976 lease

NOW, THEREFORE, the undersigned owns an interest in and to all or a portion of the land in said lease, said land further described

WHEREAS, said lease and all rights and privileges thereunder are now owned by "Company 123" and

NOW, THEREFORE, it is expressly agreed that if at any time, either before or after the formation of a pooled unit thereunder, should the RRC of Texas permit, prescribe, allow or require larger units for production from a horizontal well or wells, than is allowed by said lease, then Lessee is authorized to form new units, and/or revise existing units to contain sufficient acreage to either obtain the maximum allowable for a horizontal well or to increase such acreage to form units of the size permitted or allowed by law for such horizontal well. Furthermore for the purpose of forming a new unit as described in Exhibit A attached, Lessee shall have unencumbered right to pool within the boundaries of said new or revised unit, all or any portion thereof the acreage covered hereby regardless if said acreage is currently within the boundaries or outside the boundaries of an existing unit.

NOW, THEREFORE, in consideration of the premises cited herein and other valuable considerations all cash to us in hand paid by Company 123, the receipt of which is hereby acknowleged, we the said "Larry Graff", Lessor (whether one or more) do hereby adopt, ratify, and confirm said lease in all of its terms and provisions (as amended herein) as well as any land and premises unto the said Company 123, subject to and in accordance with all the terms and provisions of said lease (as amended) as fully and completely as if we had originally been named Lessor in said lease, and had executed, acknowledged and deliver same in our own proper person. And we do hereby agree and declare that said lease and all of its terms and provisions is binding on us and each of us and is a valid subsisting oil, gas, and mineral lease. Except as expressly amended herein, all other terms and provisions of the lease shall remain as originally written.

The undersigned parties hereto are each the owner of a mineral, royalty, or payment out of production interest subject to the terms of said lease. For the consideration hereinabove recited, the parties hereto owning a mineral interest in said land do hereby grant, lease and let unto Company 123 that land described in said lease and any amendments thereto for the purposes set out in said lease in all things in accordance with the terms and provisions of said lease as same is hereby amended. The parties hereto owning a royalty or payment out of production interest in said land, for said consideration do hereby ratify and agree that said lease as amended hereby is binding upon each of them and that their interest may be pooled under the provisions hereof

4

The language is very comprehensive. It allows the Lessee to form new unit or revise existing units and to increase the acreage. There are no depth restrictions or size restrictions. It has been crafted to allow the Lessee to do pretty much anything that it wants with respect to units as long as the lease is viable.

5

If I am getting this correctly, Company 123 now owns the 1976 (Clayton Williams) lease and all the Amendments listed in this 2003 lease Amendment they initiated, is that right? Back in 2003, Company 123 wound up using 131 of our acres in an "Austin Chalk" horizontal pool. So my last question is in 2017, a different Company, call them Company XYZ stood up an "EagleFord" horizontal well pool originating on land adjacent to our property, but runs across our entire property using all of our land acreage, does Company XYZ use the terms of the original 1976 lease or both the 1976 lease terms and the terms of the 2003 amended lease owned by Company 123? Can the 2003 Amended lease terms apply to 2 different companies? How do I find which lease Company XYZ is using for the new 2017 well?

R/,

Larry

6

There is only one lease, the 1976 lease as amended in 2003. The terms of the 1976 lease prevail except as specifically amended in 2003. You have to read both documents in rheir entirety together to understand the lease in full. As to which or how many companies own the leasehold, you have to look at the county deed records for assignments. Unless your lease requires that you be notified or requires your consent, most companies will not inform you of assignments. 123 may have assigned some or all leasehold to XYZ. Or 123 may still own the lease and be participating as a nonoperating working interest in the well. You should get copies of any assignments for your records. Make a well file for each well with permits, plats, completion reports, etc off RRC website. Keep all correspondence and check stubs. Also look for any unit agreements for these wells which are filed in county deeds for your files. You will have to pay for copies of recorded documents. Do not sign any legal document without understanding its terms - this applies to everything in your life. Research and ask questions to make sure you understand because you will be bound for the life of the agreement. There are 100 year old oil leases still in effect all around Texas.

7

That helps a lot, thanks for explaining, I am creating folders. Now that I know what assignments docs mean, I can see the 2017 well (which looks like 2 different pipes called 1H and 2H) as grantee of the 1976 lease. I see a Texas records document online labeled Designation which has both (1H and 2H) pooled acreage at 507, however the RRC online docs for 1H and 2H labeled Plat, Acreage Designation, and Pooling Authority each have 481 acres listed so I assume that is the actual acreage. Last step is tracking down 1 missing mineral/royalty interest deed from our great grandmother to the 6 great grand children that does not show up online so I will look to contact the County records. Thanks again!

8

There are 5 members in my family, who each individually signed leases for the same property. Do we all split the income for the property or the income is generated per lease?

9

Depends upon how well you get along. Technically, each of you gets the proceeds based upon your own lease since that is how the division order is calculated. If one of you picked a different royalty, than that person’s cut might be different. You might want to talk to an attorney and see if a family trust or LLC is a viable option. Sure helps out at probate time and keeps the minerals from fractionating more at the next generation level. Something to think about.