My family has been strung along by two different lessees (one with offices in Plentywood and one with offices in Scobey) for approximately $150/acre; 1/8 net profit on 5 and 3 year lease offers. Both issued bank drafts which have never been funded.
Does anybody have a credible, honest lessee that they have had experience with? I believe we should all try to help each other out by sharing information.
Let me know what you think.
Thanks!
I agree that we should all try to help each other as much as possible as this can be quite a confusing event.
Does anybody know whether or not any of the oil companies who set up shop in Daniels County within the past year have actually funded their own bank drafts? Iâm happy Tripp Hammer opened up the topic and agree with Sharlie Mooreâs comments.
I signed a lease with Shale Exploration. The 90 business days time frame for them to make good on the bank draft was yesterday. No money. A friend of mine has the same issue with them. I hear through the grapevine that they have paid on one lease. Iâm glad that only a portion of my minerals were on the lease I signed.
Thanks so much for the information! Doesnât sound like they are the company to deal with!! I hope they are reading this too!!
From what I have heard from others, I would steer clear of Shale Exploration. They originally stated that they would start drilling in April of this year and now it looks like they will not start drilling until next year at the earliest. I think they purposely mislead people so they could sign as many leases as possible. There are many energy companies moving into Eastern Montana, so if you havenât signed yet, keep your options open, as you will likely be approached by a more reputable company.
Thanks so much, Greg. Do you also have mineral rights in Daniels County?
Hi Sharlie,
We have mineral rights on about 1000 acres in Daniels County. We havenât signed with anyone yet, but we have had a couple companies interested in our property. We hope to work something out in the next month or so.
Hi Gregg,
Well keep us posted on how it goes with your transactions. It helps me educate myself in case, and I repeat in case we are lucky enough to have oil.
Greg Bentley said:
Hi Sharlie,
We have mineral rights on about 1000 acres in Daniels County. We havenât signed with anyone yet, but we have had a couple companies interested in our property. We hope to work something out in the next month or so.
Yes, Sharlie- will do! I am new to this whole mineral rights thing and my brother (who lives in MT) is handling this for all of us. Iâm learning as much as I can as well.
Elaine: Thank you for sharing your personal experience. I hope you donât have trouble getting Shaleâs cloud on your title removed.
Sharlie: An interesting read is an article in Reuters entitled âEnergy Giant Hid Behind Shells in âLand Grab.ââ Publish date was December 28, 2011. A member of Mineral Rights Forum posted the link to this article, but I canât find the original post. I just thought it was an educational article, and I am NOT suggesting Chesapeake has any involvement with whatâs happening in Daniels County.
Iâm wondering if anybody knows anything about the results of the test well drilled in the vicinity of PeerlessâŚ???
The article that Chuckie mentions is here:
http://www.reuters.com/article/2011/12/28/us-energy-giant-idUSTRE7BR0G420111228
It is the most comprehensive investigative article about what happened in Michigan in 2010. Thousands of signed leases cancelled and the use of shell companies. Chesapeake was the big company behind it all. I was one of the landowners that was involved; some of us are fighting in court.
As with Chuckie, I have no idea who is behind the companies you mention who are operating in MT and not honoring bank draft lease agreements. It will be difficult to find out. However, I would do the following:
a. check BBB
b. check with MT state business registry - to verify they are licensed to do business in MT.
c. Google the name of the company to see what you can find out, also Google the contact names that you have and their phone numbers - you may learn something this way as well. NOTE: when investigating a company in this way - you MUST be sure to have the company name exactly right and pay special attention to whether LLC, Co., Inc. etc. One particular strategy of the scam is to use names that are very close to an existing gas/oil company so if you google and arenât careful you may be reading about some other company.
However, I will tell everyone thisâŚDO NOT ACCEPT BANK DRAFTS, SIGHT DRAFTS, ORDER FOR PAYMENT OR LETTER OF INTENT. ONLY ACCEPT Company check or cashier check. also do NOT provide the signed lease until you have CASH in the bank (that is the cashier or company checks have cleared).
Good luck.
Wilson
Will they really give you a cashierâs check or company check?
Will they really give you the money before you sign the lease and let the check clear? Has anyone ever done this before?
Wilson: Thank you for all of your input. I find it alarming that a landowner would be required to put their social security number on a bank draft, or the like, and submit a completed IRS W-9 form (with SS #) to a company that may not have a legitimate reason for having that personal information, i.e., that they have nothing to report to the IRS if they havenât paid a landowner any dollars.
Tim,
Absolutely, the companies that want your minerals and want to do things properly. The old days the bank draft approach was justifiable and for the most part worked (so I understand). However, now it is used by many as a method to lock up acreage and then determine over time what they will really decide to do with it. They may drill around the area to determine if they want to lease, they may look for a buyer to flip the holdings, they may just have something âcome upâ and decide that the timing isnât good and want to move on. The fact that it is a possibility is precisely why you cannot trust anyone on this matter. So you immediately begin to communicate with your contacts that you will be requiring either the cashierâs check or company check. Then during the time the check is clearing someone (bank, attorney, etc.) will hold the signed lease in Escrow. When the funds clear then the lease is provided by the escrow âmanager.â
This can absolutely be done and it must. It is the only sure way to weed out the disingenuous lessees and ensure that youâll have the bonus payment along with the minerals actually leased (and not rejected). This approach also protects a MO (mineral owner) from having the lease filed prior to payment (which is a real hassle to get released).
So cash on the barrel head for any leasing deals! Protect yourself by using this method. Some lessees may not want to do it, but that is fine, there will be some that will do it (the legit ones that truly want your minerals).
Now that you have the payment method down - spend time on learning about the best lease. Any lease you are provided is heavily favoring the gas company and that too is not acceptable.
Good luck.
Wilson
Chuckie,
Yes, I suppose that is just the more reason to not provide the lease and accompanying W-9 until you have the âcash in hand.â But the W-9 and social security number isnât their gig and I have not heard of any fraud etc. along those lines. The tactic is to lock up as much land as possible. The gas/oil company realizes that the minerals are either going to be productive (hydrocarbons) or valuable (sell to JV) or not productive âenoughâ (so bail). I should say that this isnât always the case, but it has happened, appears to be happening with greater frequency and if nothing else is a possibility. So rather than take the chance provide the lease, addendum, W-9 and all associated lease package documentation once you have âcash in hand.â I will also add that you wonder about why they get the W-9 info if no legit need - well it is simply part of the protocol and yes, they donât need it unless they pay (the story is they will pay, thus here is the W-9, now donât you feel good?). So either they will have to W-9 doc if needed AND it gives the Lessor the warm fuzzies - it did me when I provided mine and STILL did not get paid and had my lease cancelled.
So DONâT take the chance. Youâll lease and youâll take cash please - thank you very much.
Wilson
Chuckie said:
Wilson: Thank you for all of your input. I find it alarming that a landowner would be required to put their social security number on a bank draft, or the like, and submit a completed IRS W-9 form (with SS #) to a company that may not have a legitimate reason for having that personal information, i.e., that they have nothing to report to the IRS if they havenât paid a landowner any dollars.
Each of my family received a $50 check with the initial lease documents. As they were processing the lease papers they came along some anomalies that have had to be perfected. My brother, who is an attorney is keeping a close watch this time to see if they come through. They claim that they will be FedExing company checks to us this week. Iâm not holding my breath. I do know the Executive Director of the Montana Petroleum Association, Dave Galt and I intend to give him a call later this week if the money doesnât show. I do know that there will be legislation to clear a bunch of the âhocus pocusâ crap up when the state legislature meets next year.
Tim A. Schneider said:
Will they really give you a cashierâs check or company check?
Will they really give you the money before you sign the lease and let the check clear? Has anyone ever done this before?
Wilson and Chuckie,
I wouldnât be too alarmed with the procedural things that they seem to be doing. We do have a successful oil lease in Central Montana that took the same course over ten years ago. It does have a successful oil well on it, which does not produce much, but still followed this process.
Wilsontownship said:
Chuckie,
Yes, I suppose that is just the more reason to not provide the lease and accompanying W-9 until you have the âcash in hand.â But the W-9 and social security number isnât their gig and I have not heard of any fraud etc. along those lines. The tactic is to lock up as much land as possible. The gas/oil company realizes that the minerals are either going to be productive (hydrocarbons) or valuable (sell to JV) or not productive âenoughâ (so bail). I should say that this isnât always the case, but it has happened, appears to be happening with greater frequency and if nothing else is a possibility. So rather than take the chance provide the lease, addendum, W-9 and all associated lease package documentation once you have âcash in hand.â I will also add that you wonder about why they get the W-9 info if no legit need - well it is simply part of the protocol and yes, they donât need it unless they pay (the story is they will pay, thus here is the W-9, now donât you feel good?). So either they will have to W-9 doc if needed AND it gives the Lessor the warm fuzzies - it did me when I provided mine and STILL did not get paid and had my lease cancelled.
So DONâT take the chance. Youâll lease and youâll take cash please - thank you very much.
Wilson
Chuckie said:
Wilson: Thank you for all of your input. I find it alarming that a landowner would be required to put their social security number on a bank draft, or the like, and submit a completed IRS W-9 form (with SS #) to a company that may not have a legitimate reason for having that personal information, i.e., that they have nothing to report to the IRS if they havenât paid a landowner any dollars.
Tripp,
Not sure what you mean about not worrying about the procedural things. The âprocedural thingsâ such as getting $50 up front are gimmicks; maybe legit, maybe not; for your sake, I hope all is well.
Regarding your 10 year ago lease process, without being rude, it doesnât apply. Todayâs leasing world is different - it is now Lessor Beware.
The âprocedural thingsâ are washed away when the lease transaction is simply bundled into a âcashâ payment and escrow arrangement. Deals not done in this manner might work and they might not. Deals done as I have outlined can only succeed.
Once the âtransactionalâ details are understood then the time can be spent hammering out the best lease. So I strongly recommend to all MOs that when they are approached, you tell the landman that you are interested in leasing, look forward to working with them and that you require a cash payment scenarios (as described).
That is all, nothing to worry about if they are still talking to you - if they agree to pay in that manner, you know youâll get paid (and if not they wonât have your lease).
Tripp, I sincerely hope your deal goes through smoothly - it just may.
An article in the Billings Gazette (2/29/12 I think) talks about the bank draft a bit. In all the years that my family has leased mineral rights, a bank draft was always the way the lease company paid for the lease. However, in light of Shale Exploration not funding the bank draft, I would seriously try to get a cashierâs check - maybe have it held by an attorney or your bank until you provide the signed lease.