Where to go from here? Received letter from / Heir Non-Executive Mineral / asked to sign Ratification

General Mineral Rights Discussion
1

Hello,

My only sibling and I received a certified letter from what appears, after some internet searching, to be a Company that employs Landmen but is also co-owned by an independent oil and natural gas exploration and production company. The letter is in reference to a very small portion of mineral rights that my father, now deceased, kept when he sold some land he owned many years ago. The land is located in Mitchell County, Texas. Said letter states that executive mineral rights have been leased and any heirs, which is my mother, who is still living, are asked to sign a Ratification document. There is also an offer of money “per net mineral acre”.

I hope I haven’t been too vague, or vice versa… my sibling and I are trying to help our mother decipher what is in her best interest at this point. I still receive the Mitchell County newspaper; therefore, when news of the Cline Shale began to appear…I located a copy of the Warranty Deed with Vendor’s Lien signed by my parents and the Grantee, who bought their land.

Before I ask any questions or concerns about the letter…am I posting this in the right area of the discussion board? Or should I post my question somewhere else?

Thanks so much!

Lale

2

The Deed your parents signed should spell out that they retained the minerals but passed the executive rights to the purchaser. Is that type of language in that Deed?

Charles Cunningham

3

Charles,

Thank you for responding. After you read what I’ve included below, I do see the answer to your question about my parents retaining minerals…passing rights to purchaser. In the letter we received, there is no offer of royalty interest or delay rentals percentage. Only a bonus per net mineral acre is offered. Plus signing of ratification. We aren’t sure if royalty interest and delay rentals will be offered after we contact the company that sent the letter. This is just very confusing.

Deed says: Provided it not be necessary for Grantors, heirs and assigns to join in executive of leases covering mineral interest to be reserved…Grantee heirs, assigns have exclusive right to lease land for oil, etc. For clarification: Grantors, heirs, etc. reserve 1/4 royalty interest and 3/8 of bonus and delay rentals with Grantee, heirs, etc. obtaining exclusive leasing rights over land above described.

Thanks Charles,
Lale

4

Lale

You have good news and bad news in your situation. First the bad news. You have no bargining position, your parents conveyed that power to the purchaser when they sold the property.

The good news is that the company has to pay you the same as they paid the holder of the executive rights. You will be paid 3/8th of the toal bonus and delayed rentals. If you can I would try to verify what bonus and royalty was given to the holder of the executive rights. The chances of the company trying to short change you are very slim as most would not even consider doing that.

The good news is that you have a chance to get a well and royalty payments.

It is to your advantage to sign the ratification, as by not signing you could possibly delay any drilling that may be planned.

Hope this helps

ChRLES

Lale Gasper said:

Charles,

Thank you for responding. After you read what I've included below, I do see the answer to your question about my parents retaining minerals...passing rights to purchaser. In the letter we received, there is no offer of royalty interest or delay rentals percentage. Only a bonus per net mineral acre is offered. Plus signing of ratification. We aren't sure if royalty interest and delay rentals will be offered after we contact the company that sent the letter. This is just very confusing.

Deed says: Provided it not be necessary for Grantors, heirs and assigns to join in executive of leases covering mineral interest to be reserved...Grantee heirs, assigns have exclusive right to lease land for oil, etc. For clarification: Grantors, heirs, etc. reserve 1/4 royalty interest and 3/8 of bonus and delay rentals with Grantee, heirs, etc. obtaining exclusive leasing rights over land above described.

Thanks Charles,
Lale
5

Charles,

You have explained everything very well, and have helped ease our concern about royalties, bonuses, etc. Thank you so much for your time and valuable information!

Many regards,

Lale

6

Dear Lale,

Without examining the entire history of title, including the entire document creating the reservation, I will only speculate.

In Texas, a non-executive has no need to ratify a lease to be paid their bonus. None. Tell them that you want your bonus and you will execute an Acknowledgment of Receipt of Bonus Consideration.

Why to they want you to ratify the lease? That question is an easy one. They want to have the authority to pool your minerals. Even though the non-executive has in your case no power to negotiate and are bound by the terms of the lease, the executive has no authority to pool your minerals.

You see, a pooled unit, in 99.999% of the time, is effected by a cross conveyance of minerals. The executive may lease your minerals, but not convey them in any way (including a cross conveyance through pooling).

The oil company wants to have the ability to pool your minerals, which may or may not be to your benefit.

A good litmus test of the field landman is to ask him this question. "I already know the answer to this question, but I want to know if you know the correct answer. Must I execute the Ratification of Lease in order to be paid my bonus amount which you absolutely owe? I will give you a hint. It is either yes or no"

If he says anything other than no, then ask to speak to someone above his pay grade. If the landman asks why you will not sign a Ratification, tell him that you want to keep your options open at the present time.

For more on pooling, see here:

http://www.mineralrightsforum.com/profiles/blogs/rule-of-capture-re...

http://www.mineralrightsforum.com/profiles/blogs/the-basics-of-pool...

http://www.mineralrightsforum.com/profiles/blogs/pooling-in-texas-p...

What becomes very intriguing to me is the language that you quoted "reserve 1/4 royalty interest." If that is the unadulterated language, you could easily argue that you receive 1/4 of what comes out of the ground, reduced to your pre-conveyance interest, instead of 1/4 of the royalty provided for in the lease, reduced to your interest.

A professional might try to get a stipulation of interest from the oil company as to your royalty decimal (being the higher one) in exchange for execution of a Ratification. Just a thought. Questions such as yours will often give rise to answers of first impression, instead of consideration of all the variables involved.

Best

Buddy Cotten
7

Hello Mr. Cotten,

Thank you so much for the additional information! This was very insightful and I hope it's okay to ask additional questions. I am going to invite my sibling to view this discussion and offer her the opportunity to ask questions as well.

Thank you for guidance about what to ask the Landman. We really want to help our mother do what is truly in her best interest!

Thanks again!

Lale

8

Your negotiation position will be determined on the location of the property, the gross size of the parcel and the net acres.

For example, in your case, it is much better to have a 1/1000 interest in 5000 acres (5 net acres) than a 1/2 interest in 10 acres, also 5 net acres.

Buddy

9

Lale,

Also ask for a copy of the lease you are being asked to ratify.

10

Buddy,

The net mineral acres belonging to our mom is a small percentage of the gross size of the parcel (by parcel, I’m assuming you are referring to the land?). So since the total acreage belonging to the person (executive owner) is less than 500 total acres, and our mom owns less than half of the net mineral acres …she would be better off having the 1/4 interest she has? Once again…very confusing, but my sibling and I are learning!

Also, the question you posed in your previous post "Intriguing …that language you (I) quoted “reserve 1/4 royalty interest.” I’ll double check and get back with you on that.

Grateful, Lale

11

Wade,

Thanks for adding this and reiterating what others have suggested as well! I appreciate your input and any other thoughts you might have.

Thanks again, Lale

12

Lale, you are asking questions in the right place, take your time researching the right questions, then ask some more. I would not be in a hurry to sign anything the oil companies will still have to pay you what they owe. This stuff takes a long time and answers are often hard to come by. Good Luck!!!

PS never sell your mineral rights IMO

13

Craig,
This forum is a God Send to my family and I …as I’m sure there are others that share the same attitude! I started reseraching the Cline Shale, as well as obtained a copy of the Deed of Trust, online via countycourtrecords.com, once I heard that Mitchell County was included in the area. Our family had no documentation, therefore my mother remembered that she “thought” my father retained a portion of the mineral rights…but wasn’t for sure. Once I found the Deed of Trust, printed it out and gave a copy to my sibling,…we at least had what is needed should we be contacted about said mineral acres. That was about a year ago. We chose not to seek someone to explore or discover on it, but rather decided if the time came that an oil company wanted to drill…we would be contacted. Now that we have, my mother, sibling and I all agree that it’'s better to search, learn, ask questions, and be informed before signing anything. Your post reinforces that thought process and I appreicate it!

I’m sure in the days ahead, we will ask more quesitons.

Appreciation to everyone who has responded thus far!
Lale

14

Your mineral interest puts you in a very enviable position. Truly do not ratify the lease and keep your options open. In my opinion.

Buddy Cotten

15

Thanks for the reference to countycourtrecords.com I am sure that it will come in handy for others, this is the kind of stuff that really helps.

Lale Gasper said:

Craig,
This forum is a God Send to my family and I ....as I'm sure there are others that share the same attitude! I started reseraching the Cline Shale, as well as obtained a copy of the Deed of Trust, online via countycourtrecords.com, once I heard that Mitchell County was included in the area. Our family had no documentation, therefore my mother remembered that she "thought" my father retained a portion of the mineral rights...but wasn't for sure. Once I found the Deed of Trust, printed it out and gave a copy to my sibling,...we at least had what is needed should we be contacted about said mineral acres. That was about a year ago. We chose not to seek someone to explore or discover on it, but rather decided if the time came that an oil company wanted to drill...we would be contacted. Now that we have, my mother, sibling and I all agree that it''s better to search, learn, ask questions, and be informed before signing anything. Your post reinforces that thought process and I appreicate it!

I'm sure in the days ahead, we will ask more quesitons.

Appreciation to everyone who has responded thus far!
Lale
16

Hi Buddy,

I read the 3 articles you referenced in an earlier post. I must say, they were very informative and probably written in the most “user friendly” language, for an oil and gas dummy like myself, than I have read so far!

If you don’t mind, I would like to ask another question in reference to part of the article you wrote in part 3 about pooling…and my mom’s mineral interests:

" FOR IT TO BE FAIR, the landowner’s royalty should be computed on net mineral acres in the unit, NOT gross acreage assigned to the unit, like this modification of Situation 1"…

Would it be in my mom’s best interest for her to:

  1. Tell the Landman she will sign the ratification agreement, but only if there is an added “stipulation of interest” from the oil company that agrees to her royalty decimal being the higher one?
  2. By her asking for the “stipulation of interest”, is that the same as what the above referenced clause from your article is talking about?

    I was somewhat caught off-guard today, when my husband called and informed me that the Landman that sent the certified letters to my family, appeared “in-person” at my husband place of work! And…my husband works 1 1/2 hours away from our home. The Landman told my husband he was staying in the town where we live for a few days, in an attempt to establish contact with us to get my mother to sign the ratification document. My husband explained that my sibling and I were seeking some additional advise, before advising our mother. The Landman told my husband that the landowner has already signed everything and the percentages have been agreed upon…but he didn’t offer to tell my husband what they were, other than the amount of bonus per net mineral acre that has been offerd to my mother per the letter.

    My family is at a loss as to how we should advise our mother. Help!

    Thanks so much,
    Lale
17

Dear Lale,

My initial advice stays the same. Receive and receipt for the bonus dollars and do not ratify the lease. Fact is, demand your mother's bonus payment. Or get someone to do it on her behalf.

The stipulation is pre-mature. As I pointed out and Wade confirmed, you need to see everything. For example, there have been examples where (in a situation similar to yours) that we executed a ratification and lease amendment at the same time. Quid Pro Quo is what I think the attorneys say -- something for something, not something for nothing.

Now, at step one, you get your monies. Step 2 would be to talk to the company man and not the field hand. The field landman showed his hand - and desperation - when he showed up at your husband's work 90 minutes away.

Dollars to doughnuts that if you e-mailed me your property description showing acres, survey, county, etc., I would find out in 5 minutes that there was activity close to or on your property.

Step 1. Demand your bonus dollars with no ratification requirement.

Best

Buddy Cotten

18

Buddy,

First…would it be okay if I emailed you?

Second…Thank you for the clarity and steps provided in reference to our situation. It is very helpful, because I must admit…it is quite hard to separate the thought “If our mother doesn’t sign, she doesn’t get the bonus”. However, yourself and several others have made it very clear on this forum…WE DO NOT HAVE TO RATIFY IN ORDER TO GET THE BONUS! And we just made contact via text message with the Landman this morning, and his exact words were:

" IF WE CAN GET “MOM’S NAME” TO SIGN A RATIFICATION, SHE IS DUE TO RECEIVE $ (I WON’T DISCLOSE AMOUNT HERE, BUT HE QUOTED THE AMOUNT) BONUS, PLUS ROYALTY (I WON’T DISCLOSE AMOUNT HERE, BUT HE DID QUOTE A ROYALTY AMOUNT)".

Buddy, I surely hope this Landman isn’t purposefully insinuating that my mom has to ratify in order to get the bonus. Another thing I noticed, when he texted me the royalty amount she is due to get, it wasn’t stated as a percentage or decimal amount…but rather, just stated???

And why are we being asked if there is a Will or Probate ? How is this any of the Landman’s business?

This is surely getting more difficult.

Much obliged, Buddy

Lale

Our family had a phone conference last night,

19

Either the landman is "purposefully insinuating" the falsehood that your Mother must sign to get her bonus OR he is incompetent and does not know that she does not have to do so. Either way, not a real good way to treat somebody whose signature you need on a document. A "just stated" royalty amount is fine. The Will or Probate for WHOM does the landman want to inspect?

20

Lale, you need to deal with this landman in writing, on paper. Phone calls and texts they could say anything whatsoever. People don't mess around nearly as much on paper because it can have nasty consequences when you get to court. It's always good to get something in writing, even if it's just in a letter and not a contract.

I think you are probably talking to the low man on the totem pole also, I never have much success talking to people in that position in oil and gas.


Lale Gasper said:

Buddy,

First....would it be okay if I emailed you?

Second...Thank you for the clarity and steps provided in reference to our situation. It is very helpful, because I must admit...it is quite hard to separate the thought "If our mother doesn't sign, she doesn't get the bonus". However, yourself and several others have made it very clear on this forum...WE DO NOT HAVE TO RATIFY IN ORDER TO GET THE BONUS! And we just made contact via text message with the Landman this morning, and his exact words were:

" IF WE CAN GET "MOM'S NAME" TO SIGN A RATIFICATION, SHE IS DUE TO RECEIVE $ (I WON'T DISCLOSE AMOUNT HERE, BUT HE QUOTED THE AMOUNT) BONUS, PLUS ROYALTY (I WON'T DISCLOSE AMOUNT HERE, BUT HE DID QUOTE A ROYALTY AMOUNT)".

Buddy, I surely hope this Landman isn't purposefully insinuating that my mom has to ratify in order to get the bonus. Another thing I noticed, when he texted me the royalty amount she is due to get, it wasn't stated as a percentage or decimal amount...but rather, just stated?????

And why are we being asked if there is a Will or Probate ? How is this any of the Landman's business?

This is surely getting more difficult.

Much obliged, Buddy

Lale



Our family had a phone conference last night,