Buy Back Lease

Has anyone ever bought back a mineral rights lease before the end of term in order to resell it for more money?

If so, how does it work and what did you do? Did you feel it was worthwhile.

One time I leased to Anadarko Pet. for a 2 year lease at $200 per acre and signed it and got a cashiers check at the same time. A day later I got a call from a Chesapeake land man and they offered $500 per acre and better terms. But sometimes you get big promises and no money! This has happened to me also.

In your case I would let the lease run out and then lease if you can.

Brookeye,

There are many good reasons to negotiate an assignment of an existing lease rather than terminating it through a buyout. Exploration companies do it all the time.

Thanks for your reply. Would you mind giving me examples of some of the reasons?

Gary L. Hutchinson said:

Brookeye,

There are many good reasons to negotiate an assignment of an existing lease rather than terminating it through a buyout. Exploration companies do it all the time.

Gary L. Hutchinson

Minerals Management



Walter Stewart said:

One time I leased to Anadarko Pet. for a 2 year lease at $200 per acre and signed it and got a cashiers check at the same time. A day later I got a call from a Chesapeake land man and they offered $500 per acre and better terms. But sometimes you get big promises and no money! This has happened to me also.

In your case I would let the lease run out and then lease if you can.

Thanks for your input. You are so right about promises vs. reality. I never celebrate until the check clears the bank!

Walter Stewart said:

One time I leased to Anadarko Pet. for a 2 year lease at $200 per acre and signed it and got a cashiers check at the same time. A day later I got a call from a Chesapeake land man and they offered $500 per acre and better terms. But sometimes you get big promises and no money! This has happened to me also.

In your case I would let the lease run out and then lease if you can.

First you need to find the lessee, as the lease has probably been assigned unless you dealt directly with a company that intends to drill themselves (unlikely) Complicated multi-lease transfer agreements between companies may not always be recorded and the memos of assignment that are recorded may not show quantitative derivatives of interest that have been laid off. In an assignment to you or better, your designee, you can get a warrant and/or representation that no derivatives to production or drilling have been laid off to others. Since the first lessee probably didn't sign the lease, may not exist, or be in bankruptcy,you won't have to demand a release of the terminated lease or go to court for it to be recorded. As the assignee, you or your designee (if you know who I mean) will be in control of chain of lease title. Another reason is that your chain of title will be preserved for follow on prospective lessees. Save the recorded documents so you can be paid sooner and by check. Also, you will be in a better position to deal with an operator's land department to enhance what is now your lease for your lessor's (your) bottom line benefit without going through another daisy chain of independent landmen and assignees. Once you know if the lease is encumbered and the current lessee can't terminate it without incurring a lawsuit from its assignors, you may be better off waiting for the lease to expire. Beware that terminating a lease you believe to be default can give the lessee a reason to extend the lease while the default is cured so that is not usually a good way to go.

Minerals management is not a cook book procedure. Everyones wants and needs and ethics are different. Continue to act in a thoughtful manner and protect your interests, wants, and needs first. The industry won't do it for you.



Brooksye S. Gertsch said:
Thanks for your reply. Would you mind giving me examples of some of the reasons?

Gary L. Hutchinson said:

Brookeye,

There are many good reasons to negotiate an assignment of an existing lease rather than terminating it through a buyout. Exploration companies do it all the time.