I recently received a letter from a company I’m not familiar with stating they were “elected by the current Operator to purchase Oil and other related Hydrocarbons and distribute revenue to the Owners for production.” They are requesting I sign and return their enclosed Division Order and W-9. The name of the well and my Royalty Interest decimal is correctly stated.
Next they state “this agreement does not amend any lease or operating agreement between the interest owners and the lessee or operator or any other contracts for the purchase of oil or gas.” Next, they listed the usual provisions … terms of sale, payments, indemnity, disputes-withholding of funds, termination and notices.
And last, they have ADDED a provision I’m not familiar with AND not part of my 25 year old lease and Division Order. It reads
DEFAULT: If a working interest owner is in default in the payment of its share of the lease expenses, operator of the above lease, may withhold payment of any monies due the undersigned until operator has recovered all monies it is due for lease expenses.
I am hesitant to accept this DEFAULT provision that obviously affects payment of my Royalty. Any advice would be greatly appreciated.
I would delete the default provision by striking through it and initialing the deletion. Your royalties should not be applied to the lease operating expenses. If your minerals are in Texas, that is not part of the statutory division order. See discussion about division order - Can a Division Order Modify Lease Provisions? — Oil and Gas Lawyer Blog — December 27, 2016
I was so happy and relieved that you answered my question. I told my husband I hoped that Tennis Daze would comment. I always appreciate and rely on your helpful advice to all on the forum … I’m sure I speak for many!
TennisDaze, one more question regarding the INDEMNITY clause.
They wrote it as the following:
The owner agrees to indemnify and hold payor, IT’S SUCCESSORS AND ASSIGNS, AND ITS AGENTS, SERVANTS AND EMPLOYEES harmless for all liability resulting from payments made to the owner in accordance with said division of interest, including but not limited to, attorney fees or judgments in connection with any suit that affects the owner’s interest in which payor is made a party.
Texas statute does not include the added language and only states PAYOR.
Should I line through the added language and initial … OR does it matter at all that they included the extra language??