He did say he does not work on commission. And back in 2009, the landman at that time with Exterra also said that they are paid a daily rate and expenses, but not commission. So what is their motivation. Again, perhaps a snipe hunt to see, if I am still alive and dangle a sum 10 x more than the relatives settled for in 2009. I know they can drill without my lease because they have the majority of leases wrapped up. So why the push now. You would think they would just do what I asked, which is an escrow and a sound business practice, just to finish this 320 acres. To push back like this, doesn't make sense to me. One of the rules of the game, is to be the last link in the chain. The offers are usually better and quicker. Well, for some reason, that technique is not working with this. Higher up. Back in 2009, Exterra appeared, then Red Rock came, something of a subsiderary of Exterra. In other words, put the pea under the cup and guess which cup. That did not sit well with me, but the relatives had no problem with the switch. Exterra has a nice web site, looks very established and from my experience they came through with the bonus payments to all the relatives. The problem? They would not do an escrow with me. I would pay, they would not play. Now here we are again, MUCH better offer, all around, but still not willing to do the deal with an escrow and failing to send me a lease with the changes I wanted. Stay tuned
I have no way of knowing if this landman is telling untruths about comission, an override would not be a commission anyway, so it would be perfectly true that they were not on comission. Doesn't matter anyway. My point still stands that the landman may not be authorized to give you what you want, even if their superiors would agree to it, hence you get told what you want to hear and the lease arrives totally different. It isn't fraud to lie in this case from what I have studied, the written agreement (lease) would override any verbal or prior written agreement should you sign the lease. I'm not a lawyer but it's amazing the side alleys I run into when researching, some of them being the splitting of legal hairs and how many angels can dance on the head of a pin.
Well, he e-mailed me and said he would have to take my "demands" to his coordinator. He also made it very clear they would force pool me. I told him no problem, maybe it is good that I get a chance to challenge "the way things have always been done". I never got to drop the escrow demand on him. So we will see what he comes up with. I gave him until May 8 to solve their issues with me.
He is probably telling the truth about commission. We are not salesman, we are paid a daily rate. Actually majority of Landmen are attorneys. Now I am not sure if Colorado pooling is the same as Oklahoma pooling, but I imagine it is being we are the state everyone models it after. But, thatâs a good thing, let them pool you, you will get the highest bonus paid per nma, and the average royalty paid⌠The only risk is that you may not get pooled.
I believe, in Co, if you get force pooled you get no bonus 12.5% royalty until payout of well cost and 100% risk penalty, then you become a working interest in the well. In ND it would be no bonus 16% until payout of well and 50% risk penalty, then you become a working interest [I am doing this}. Quite a large difference from Ok. I have dealt with many landmen, none were lawyers to the best of my knowledge. I have noticed that most OK landmen have no idea of how things are done in other states. This is not a slap at Mr. Bay, just an observation. Recently there was a landman on these forums from Ok and he said, commenting on a thread about a lease offer in Tx, where the OP was offered a lease at 25% royalty, that the royalty was almost always 12.5% or 1/8, that no companies will lease someone for 25% and he was refuted several times and on being informed of one persons lease of 24.75%, he said that still isn't 25%. The fact is he had no idea outside his very narrow area, and was unable to admit it when shown. It's fairly easy to look up forced pooling/ non-consent in Co. I do not mean to say that all landmen from Ok have no knowledge of other areas/states, just that many landmen everywhere do not. Some would admit it and some wouldn't, just as any other group of people.
Tom Bay said:
He is probably telling the truth about commission. We are not salesman, we are paid a daily rate. Actually majority of Landmen are attorneys. Now I am not sure if Colorado pooling is the same as Oklahoma pooling, but I imagine it is being we are the state everyone models it after. But, that's a good thing, let them pool you, you will get the highest bonus paid per nma, and the average royalty paid.. The only risk is that you may not get pooled.
We actually of 25% quite regularly actually it is a choice on every lease in two counties that I am working in OK. & I donât remember the last time I leased at 1/8th , unless completely unproven area and we are the first ones to test the water.
Thanks, right now Exterra's landman basically is out of it until his coordinators can evaluate my terms. What I would like to do is have these terms included in the lease:
1. Whenever the lease is assigned, the lessor is notified so the lessor can keep track of who is in charge.
2. Lease renewal includes a renewal payment more than $1.00 per acre, if no royalities were paid during the original lease term.
3. If profits are paid, then some sort of accounting of the expenses and income would be given at time of payment.
Thanks to everyone who have responded to my posts. Knowledge is power in this case.
Ragina, Have you heard of Summit Exploration? John Ely is part owner of this company and he has a tremendous amount of knowledge in the G&O industry. He has drilled over 100,000 wells in his lifetime. His company has 70 petrolium engineers and they are currently working with other people in Daniels & Sheridan Co. If you Google John Ely & Associates, you can read about him and what he is doing with fracking (its amazing) and some of his other areas of expertise. I was very impressed. I'm confidant you wouldn't be disapointed if you look into what they have to offer.
The first point is hard, I think lessees aren't very good at keeping track or simply can't be bothered, that is why the lessee wants a paid up oil and gas lease instead of a lease that requires yearly delay rental payments. You should be able to handle #2 yourself by not having an option in the lease, or if you do, set your own reasonable payment for the exercise of the option. #3 may or may not solve itself, when I receive my checks monthly, the check stubs do indicate the cost of transportation, and conditioning of oil/gas.
regina redmond said:
Thanks, right now Exterra's landman basically is out of it until his coordinators can evaluate my terms. What I would like to do is have these terms included in the lease:
1. Whenever the lease is assigned, the lessor is notified so the lessor can keep track of who is in charge.
2. Lease renewal includes a renewal payment more than $1.00 per acre, if no royalities were paid during the original lease term.
3. If profits are paid, then some sort of accounting of the expenses and income would be given at time of payment.
Thanks to everyone who have responded to my posts. Knowledge is power in this case.
Regina:
I saw this post and it got my curiosity up, so I decided to wade through all the posts. Way back when, I went through some of this same stuff. There has been some good advice given; but, in my opinion, if you ever want to sleep again, "Don't lease to these guys".
The first problem is dealing with family. The obvious and best approach is for one family member or 2 or 3 of the family members (acting as one) to call the shots. Everyone acting as individuals never works out; but, if you think your headache is bad now, just wait until there is production, seismic, pipelines, etc.
1. As stated above, record, document, be reasonable, but, smart as you've already done.
2. Never sign a lease that hasn't been refined by the mineral owner's (your) O & G attorney or someone that deals with lease work often. All Oil Companies (good ones and bad ones) will first offer their "standard" lease. Believe me, it is "their" lease in every way, equalize the playing field and add an addendum that has protection for you.
3. Forced Pooling could be an issue, so just be ready with lots of written provable information.
4. No money, no signed lease. A bonded, trustworthy escrow agent is a must if you decide to go forward. If they want the minerals, let them do their title work on their dime while their money is sitting in the escrow account. This title may not be the easiest one since there are so many interested parties; but, a good title person or company can do the necessary research in a reasonable time frame. As mentioned above, there are always exceptions; but, those are very rare. Besides that, haven't they had since 2009 to do a title search. Sounds like these guys are flippers and not an oil company anyway!
Gopod luck!
regina redmond said:
Thanks, right now Exterra's landman basically is out of it until his coordinators can evaluate my terms. What I would like to do is have these terms included in the lease:
1. Whenever the lease is assigned, the lessor is notified so the lessor can keep track of who is in charge.
2. Lease renewal includes a renewal payment more than $1.00 per acre, if no royalities were paid during the original lease term.
3. If profits are paid, then some sort of accounting of the expenses and income would be given at time of payment.
Thanks to everyone who have responded to my posts. Knowledge is power in this case.
Thank you for all your information. It seems to me that for years, Oil and Gas companies have been presenting to mineral and land rights owners their lease. Why not have the mineral rights and land orders present to the oil companies their lease. It cannot always be one way. Once you have been aproached to lease your mineral rights, then you should present them with your lease. Somehow this makes sense to me. So....I am going to use EXterra's lease and modifiy it: add protections in for the mineral rights owners. I am a real estate broker with about 30 years experience and in Arizona only lawyers and real estate brokers can write a contract. I realize that what I create will have to be made state specific and should be reviewed by a lawyer since I do not practice law or give legal advice , but I cannot believe that no mineral rights owner has ever presented the oil companies with their lease. The oil companies can reject it out of hand or they can use it to start a dialog. But, you have something that the oil companies want and if mineral rights owners become uniform in dealing with them, I believe a more equal playing field can be created. I know as a landlord, someone coming to lease my property, they will get my lease, not the other way around. With this in mind, look for the lease on this site in the next couple of days. We can modify it, add to it, take suggestions and come up with something that may work when dealing with these companies who mass lease areas on speculation. I don't know if this has been tried before, so if I am tilting at windmills, let me know.
In real estate transactions there is a warning about who you are dealing with an if they are qualified to purchase/lease your property. Going the other way, buyers are cautioned about what they are entering into.
These cautions are in writing and must be part of the real estate contact. Do Oil companies do the same? As mineral rights owners, are you cautioned about the transaction you are about to enter into. Is there full disclosure about "forced pooling"; is there disclosure about the ability of the lessee to fulfil the lease, i.e. drill. Many of the contracts are with "flippers" who have no drilling permits, equipment to drill or expertise. They are the middle men. Does this get disclosed in the contract? And don't give me the part of the contact that allows assignment. For these guys like Exterra, they either have a target (that should be disclosed) or they are holding to flip, and that should be disclosed.
What about the surface rights owners. How are they protected and informed as to what is going to occur.
People, I think there is enough of you to put the breaks to this type of exploitation.
I will begin my conversion of Exterras lease tomorrow around 10 AM. If you can, I will read all of the imput before then.
Regina:
I wrote a dissertation and lost it when I decided to check out your forum friends page. So this is going to be short. After going through "shell shock" back in the early 80's, I got with an attorney and between he and I, we came up with a lease that was acceptable for the next leasing experience. It was a good lease; but, everytime I either got hammered in a situation or heard of someone else getting hammered, I would pick up the pencil and word processor for a lease update. Then in 1998, I started gathering old leases from firends and putting together a database. I've tweeked, crossed out, rewrote many if not most key element of a lease many times since thenand I've come to realize, there "ain't no" perfect lease. Situations change quite often with the territory; but, much of the important clauses are still relivant. If you have a or some good leases to start from, you are way ahead of most; but, if you don't I wouldn't mind sending you a copy to get you started.
I'm no lease hound and I don't do this for money. I'm just a mineral owner that likes to see the playing field as close to equal as possible. Remember it is a give and take situation and since your profession has already taught you that; but, you can't get it, if you don't ask.
If you would like to have a copy to begin your work from, I would be more than happy to send you something to get you started. Just go to the Forum friends page, accept me as a friend, send me a quick note so I will know. We can communicate off line there.
regina redmond said:
Thank you for all your information. It seems to me that for years, Oil and Gas companies have been presenting to mineral and land rights owners their lease. Why not have the mineral rights and land orders present to the oil companies their lease. It cannot always be one way. Once you have been aproached to lease your mineral rights, then you should present them with your lease. Somehow this makes sense to me. So....I am going to use EXterra's lease and modifiy it: add protections in for the mineral rights owners. I am a real estate broker with about 30 years experience and in Arizona only lawyers and real estate brokers can write a contract. I realize that what I create will have to be made state specific and should be reviewed by a lawyer since I do not practice law or give legal advice , but I cannot believe that no mineral rights owner has ever presented the oil companies with their lease. The oil companies can reject it out of hand or they can use it to start a dialog. But, you have something that the oil companies want and if mineral rights owners become uniform in dealing with them, I believe a more equal playing field can be created. I know as a landlord, someone coming to lease my property, they will get my lease, not the other way around. With this in mind, look for the lease on this site in the next couple of days. We can modify it, add to it, take suggestions and come up with something that may work when dealing with these companies who mass lease areas on speculation. I don't know if this has been tried before, so if I am tilting at windmills, let me know.
In real estate transactions there is a warning about who you are dealing with an if they are qualified to purchase/lease your property. Going the other way, buyers are cautioned about what they are entering into.
These cautions are in writing and must be part of the real estate contact. Do Oil companies do the same? As mineral rights owners, are you cautioned about the transaction you are about to enter into. Is there full disclosure about "forced pooling"; is there disclosure about the ability of the lessee to fulfil the lease, i.e. drill. Many of the contracts are with "flippers" who have no drilling permits, equipment to drill or expertise. They are the middle men. Does this get disclosed in the contract? And don't give me the part of the contact that allows assignment. For these guys like Exterra, they either have a target (that should be disclosed) or they are holding to flip, and that should be disclosed.
What about the surface rights owners. How are they protected and informed as to what is going to occur.
People, I think there is enough of you to put the breaks to this type of exploitation.
I will begin my conversion of Exterras lease tomorrow around 10 AM. If you can, I will read all of the imput before then.
Ms. Redmond, there are other leases written from the mineral owners view. Parts of leases can be gleaned from government lease forms and incorporated into your own lease form, one such clause would be to determine paying quantities of production and if production fell below that mark, how long the operator would have to increase the production or the lease would be forfeit, if the primary term of the lease had already expired. I would put alot of effort and possibly a bit of money into a search before I tried to reinvent the wheel, which in my opinion would be even more expensive and time consuming. If your lease was as favorable to you as the lessees lease is to them, I think it likely you will be force pooled. I would recommentd that you get what you need from your lease but to exercise some restraint or you may have wasted your time creating the perfect landowner lease that no lessee would accept, in which case you can save the effort and make them force pool you. Being force pooled has benefits that probably haven't occoured to some people, such as, if there is no lease, there is no lease language for the lessee to fall back on, I think it holds them to a higher standard. Lessors I think are also at a disadvantage because they no longer own the oil and gas, but only a royalty interest in the production. If you are not paid your royalty, it's a business dispute and it isn't illegal to owe someone money, but what if you are not leased and still own the oil/gas that is being removed and sold without your consent ?
One part of your message hit home. I told Exterra in 2009 to leave my oil in the ground. Don't touch it since we could not come to an agreement. I thought I was being flippant. Maybe not. Thank you for all the thoughts. Like I said, if this has been tried before I want to know. But I will still press on using the "standard boiler plate lease" Exterra used.
r w kennedy said:
Ms. Redmond, there are other leases written from the mineral owners view. Parts of leases can be gleaned from government lease forms and incorporated into your own lease form, one such clause would be to determine paying quantities of production and if production fell below that mark, how long the operator would have to increase the production or the lease would be forfeit, if the primary term of the lease had already expired. I would put alot of effort and possibly a bit of money into a search before I tried to reinvent the wheel, which in my opinion would be even more expensive and time consuming. If your lease was as favorable to you as the lessees lease is to them, I think it likely you will be force pooled. I would recommentd that you get what you need from your lease but to exercise some restraint or you may have wasted your time creating the perfect landowner lease that no lessee would accept, in which case you can save the effort and make them force pool you. Being force pooled has benefits that probably haven't occoured to some people, such as, if there is no lease, there is no lease language for the lessee to fall back on, I think it holds them to a higher standard. Lessors I think are also at a disadvantage because they no longer own the oil and gas, but only a royalty interest in the production. If you are not paid your royalty, it's a business dispute and it isn't illegal to owe someone money, but what if you are not leased and still own the oil/gas that is being removed and sold without your consent ?
Ms. Redmond, you can't force them to leave it in the ground as they can't produce others and leave yours but you can do everything possible to make the lessee act responsibly toward you and your interests. As I said above there are leases you can find if you search for them, and you can extract clauses from them. Remember that it won't be plug and play, it will be your responsibility to make sure that all clauses work together as a whole to provide the effect you want. Good luck!
I agree. To me these are the sections of a lease that need to be addressed:
Who is the lessor? Are there any others in the group who owns an interest. What disclosures have been made?
Who searches for all owners?
Who is the Lessee? Are they an oil drilling, or capacity to drill company? Are they a broker? Notice given on assignment to another party.
What is the term of the lease: Term identified and what happens after that term expired.. Option...Cancellation
What is the bonus offered? Amount and who pays it. How is the transfer of paperwork and money exchanged
What is the percentage offered? Stated clearly.
Terms and conditions of surface owner and his protection
What is a producing well, when can the lease be cancelled
What is "forced Pooling". detailed description of process.
Payment of royality and how is that accounted for in disclosure of expenses vs profit
How disputes are to be handled.
And then a general discussion of oil and gas leases with regards to mineral rights holders.
What I am reading in the Exterra lease is legaleese and not directly in plain english. So I will attempt to change some of that by referencing sources for clarity. We'll see. I take this is a great learing experience and an exercise in brain challenges.
J
I have been working on this, and frankly having fun. But this is serious business and once I get the lease finalized, I would have no problem sending this to Exterra. I understand documents are everything when threatened with forced pooling.
Jseph Smith
P. O. Box 1
Anywhere there is Oil, USA
Date:
Oil Explorer Company/Landman
Slick Ave.
Anywhere there is Oil, USA
RE: Oil, Gas and Mineral Lease Covering ____Acres in:
Township_____Range_____PM of Section _____part ____
Dear Oil Exploration Company/landman:
I have received your presentation of an offer to lease my Oil and Gas minerals and hydrocarbons. To restate the offer, an Oil and Gas Paid up lease, an Order for Payment in the amount of _________(____per net mineral acre), an Agreement to Correct and a W-9 form for Taxpayer Information was presented. You did not state in your presentation letter the percentage of royalties. That was stated in the fine print on page one of the proposed lease, item 2, paragraph two.
I require full disclosure of who you are, who you represent, and how you arrived at the
offered amount including the percentage of royalties figure.
The minerals/gas/hydrocarbons can be leased by the appropriate use of my lease for that purpose. Your lease comes from the point of purchase. My lease comes from the point of sale. I think we both can agree on that. You want to purchase what I may want to sell willingly, or you may try to force the transaction by exercising âforced poolingâ.
I have enclosed a check list that I require to be completed, before I would accept your signature on my lease.
Sincerely,
Joseph Smith, Mineral Rights Owner
Pre-lease questionnaire
Lease
Escrow information
Pre-Lease Discovery Questionnaire for Lessee
- What experience do you have in drilling for minerals? ________________________
- What was the date of the last drill permit granted to you/company?______________
- Do you have at least 3 years experience in the state of Colorado in obtaining leases?___
- If you are a landman, your clientâs name must be on the Lessorâs lease agreement. Would that be a problem?__________________________________
- Have you contacted any other owner of this tract of land that I may have not known existed?__________________________(heirs, etc.) If yes, please provide me a list of interested parties that you have discovered that will become part of the lease.
- If you are an experienced exploration company, how many forced pools have you initiated in the last 4 years._____________________.
- What type of research do you complete to arrive at the bonus amount and the percentage of royalties amount that is offered in your documents.__________________________________________
- I have an escrow company that will handle this transaction with the delivery of documents and payment of monies offered. That company is _____________________, and all costs associated with the handling of the escrow will be paid by me. Do you have another preference for an escrow company?___________________________.
- Have you ever had a criminal/civil action filed against you or the company you represent in any jurisdiction for failing to fulfill your obligation under any oil and gas lease, including misrepresentation, or failure to pay bonus money or royalties?__________________
Please provide your response to the above questions within 10 days of the date of this letter.
Based on the answers provided, I will determine if it is in my best interest to grant you an oil and gas lease.
Ms. Redmond,
You are clearly having fun with this lease but since you are a businesswoman, surely you know the value of a good attorney. Wouldn't it be worth your while (and a few dollars) to consult an oil and gas attorney, one who has had experience in dealing with this type contract?
I am in Texas and when all the hoopla of the EagleFord Shale play began in our county a couple of years ago, an attorney was my best investment. He looked out for my interests as this was his area just as real estate is yours. I'm not discounting your abilities at writing a contract. I'm just offering that perhaps someone who does it daily may have some insight that you don't.
I do wish you good luck in this.
Yes, an attorney would be helpful, but keep in mind their stock in trade involves over the top language, statements that the average person would find hard to follow. In recent years the trend has been to have clarity in contracts, meaning "in plain english". Our consumer credit laws have changed drastically because of the desire to present terms in language everyone can understand. So should contacts like the lease proposed to me by Exterra. It should be clear, definitions should be given to words that the "trade" uses, like a shut in well. I think the biggest misunderstanding would be the "forced pooling" or pooliing concept. In most cases, especially my families, the average person would not understand some clauses in the contract without giving it to a lawyer. It has been my experience, hiring someone close to the community is not always getting the best advice. I don't want to say the "good ole boy" network, but it does exist. Today, in this forum, it was posted that she was offered $750. per mineral acre and three sixteenths in Weld County. And that was just for 1.4 acres. I was told just a week ago, that $500 was the best Exterra could do and they went back on their word on the three sixteenths and reverted to 1/6. I think there should be a comp data base for this stuff, just like there is for real estate. I would like to know the value of the leases that did become effective in the last year. I read all the drilling permits and the drilling applications just to find a lease that was recorded. When I did, of course they had as consideration $10.00 +, thereby hiding or making confidential what the bonus was for that transaction. I did find what the royalty payment was because it was part of the lease. Mineral rights owners are at such a disadvantage when it comes to knowing the market. Then, how do you know if who you signed with is able to complete the lease, or did they just flip it. That is huge with me. I don't mind the assignment part, I just want to know who is at the end of the tail. So, yes I will be having fun trying to convert the legal jargon into "plain english".
I totally agree about the language; but, there are three parties to this debate. You can guess who looses out on the langauge issue. Neither the oil companies nor the attorney want everyone to see not only the $$$ elements of a lease; but, the lease language itself. Not only do they not want you to see the lease literal, they don't want you to understand it once you see it. This keeps the mineral owner in the dark and the oil company and the attorney in control.
I don't know about your state; but, here in Texas and I suspect all over our state, we are even getting better, now we are recording a Memorandum of the Lease. Which basically says nothing except the parties involved and the property legal description and a few more points that really don't tell another interested mineral owner anything. That's even if the mineral owner has the snap or is willing to learn the basics of records research.
Just remember, we're in their ball park, not ours. Not all but most of the judges and especially the supreme court judges are bought and paid for, so we just have to remember that until enough people stop bowing down and saying yes to their terms we only have a few options. Remember there is one very powerful word "NO"! The problem is that the majority of the people will run over their neighbor or their relatives with their handout, saying where do I sign and when can I get my money.
Good luck and give in and get yourself and attorney once you've gotten yourself up-to-speed. These two elements put together make a pretty good team. The attorney is the best money and the smartest move you'll ever make.
regina redmond said:
Yes, an attorney would be helpful, but keep in mind their stock in trade involves over the top language, statements that the average person would find hard to follow. In recent years the trend has been to have clarity in contracts, meaning "in plain english". Our consumer credit laws have changed drastically because of the desire to present terms in language everyone can understand. So should contacts like the lease proposed to me by Exterra. It should be clear, definitions should be given to words that the "trade" uses, like a shut in well. I think the biggest misunderstanding would be the "forced pooling" or pooliing concept. In most cases, especially my families, the average person would not understand some clauses in the contract without giving it to a lawyer. It has been my experience, hiring someone close to the community is not always getting the best advice. I don't want to say the "good ole boy" network, but it does exist. Today, in this forum, it was posted that she was offered $750. per mineral acre and three sixteenths in Weld County. And that was just for 1.4 acres. I was told just a week ago, that $500 was the best Exterra could do and they went back on their word on the three sixteenths and reverted to 1/6. I think there should be a comp data base for this stuff, just like there is for real estate. I would like to know the value of the leases that did become effective in the last year. I read all the drilling permits and the drilling applications just to find a lease that was recorded. When I did, of course they had as consideration $10.00 +, thereby hiding or making confidential what the bonus was for that transaction. I did find what the royalty payment was because it was part of the lease. Mineral rights owners are at such a disadvantage when it comes to knowing the market. Then, how do you know if who you signed with is able to complete the lease, or did they just flip it. That is huge with me. I don't mind the assignment part, I just want to know who is at the end of the tail. So, yes I will be having fun trying to convert the legal jargon into "plain english".