Josh Pierce of WCLand Service contacted us to sign a lease with their company. He says the lease is on behalf of a client who “specializes in producing in marginal areas that other companies deem too high a risk to pursue.” The president of WCLS however, has signed the lease as lessee. They say the “client” wants to remain anonymous. Is this normal? Says we are the last 20 % of our 100 acres. We don’t know if this is true. Has anyone out there been contacted by WCLS within section 27, Township 28 South, Range 28 East, M.D.B. & M ? ( have no clue what those last letters signify ). Is this land company a good one? Terms of lease are $35 per acre, 1/6 royalty and an automatic renewal at their discretion after initial 3 years of another three years. I am uncomfortable with an unknown company and an automatic renewal. I would ask $50 per acre and 3/16 with those conditions I think. Help! Please contact me.
Mary:
WC Land Service is most likely a company that leases for very minimal investments and flips the leases for much larger profits over the lease term. First, I would learn what is actually going on in my mineral area. There is something of interest or WC would not be contacting you. Second, learn the going lease rates for the area. You might want to click on "Groups" above and scroll to California then find your county in the list. At this point, you can post with people who have interest in the area. I would demand to know the other company for whom they are leasing but as I said earlier, most likely this is a short term lease for profit.
Land men/companies are always leasing for someone else. Exploration and Land and Title, although related, are different aspects of the business. Also land men are not supposed to reveal their clients at least until the lease hold is recorded. Oil and Gas is a competitive business. As Mr. Mallory suggested, information is everything- research the register of deeds in your county and see what you can find for oil and gas leases under this land company and others. If you see another one leasing near you, call them and send your descriptions to them. At shorter term means more money per acre. A 3 year with an option for 3, they pay you another bonus for the additional 3 years. Ask for the greater bonus and enhanced royalty, they can only say yes or no.
Mary,
I would not lease. A minimal production well will more than likely be reopened and the lease held indefinitely. If you do lease, stipulate a single production zone lease, Every formation above and below will be open for further leasing.
I have dealt with West Coast Land Service, several times over the years and Mr. Pierce on one occasion. They have been honest and fair in all their dealings with me and always paid the rentals on time. Mr. Pierce had disclosed the client they represent on one of my parcels when I asked, but he did tell me to keep it under my hat and not divulge the info to other outside parties. Hope this helps Jim
Ms. Powell,
Our client who we have disclosed to you and your brother is the same as the original Lessee on the previous lease. West Coast Land Service does not take leases on speculation. West Coast Land Service only takes leases on behalf of our clients. The only reason we are taking new Leases (instead of amending and extending the existing lease) were to incorporate the changes to the lease your brother had requested. Our client does in fact have the remaining interest held under lease. Additionally Vintage which is now California Resources Corp., subcontracts out their drilling just as nearly all oil companies do. Our client is still desirous of acquiring leases with you and your family. Please feel free to contact me anytime and I will answer any questions you have and address your concerns.
Thank you,
Josh Pierce
In addition to that, most of the previous replies assumed facts and went beyond helpful advice. It appears that the landman was honest, and it was just a matter of a fiduciary and confidential relationship coming into play. The reply that a landman never may disclose, or that a lessee never will know who they are leasing to, is also incorrect. The correct answer is that it depends. Many times, the name of the client company is already on the actual lease form. Other times, the name of the lease broker is on the lease, and the lease will be assigned to the client company at a later date. The initial replies that something fishy is always going on are not helpful, and not accurate. It never always means that a lease flipper is necessarily involved. Some advisors here, and I know who they are, have good intentions and are trying to be helpful. However, they might think about qualifying some of their advice, and stop jumping to conclusions. This question is a good example. The landman, fortunately, was able to come on and clarify or offset some of the weaker replies and advice.
The reply that the lessor will not always know who they are leasing to prior to recordation is also incorrect.
The comment that they wouldn't be contacting you unless they knew something was there, or words to that effect, is also not necessarily true. A company is aware of the risks involved in a "wildcat" area. The fact that it is considered wildcat, makes it a much more riskier venture.
Definition of Wildcat:
adj. - Risky or unsound, especially financially
v. - To prospect for oil, or other minerals in an area not known to be productive.