Can a lease offer be rescinded?

Oil and Gas Leasing Help
1

Prior to its acceptance, in Texas, can an oil company rescind their lease offer at any time …… for any reason?

Is there some type of official notice (in writing?) that must be given to the mineral owner in such an instance? I have been dealing with a lease offer from an oil company (through a landman that I confirmed is actually representing the oil company) and I had questions concerning the way the landman was showing my mineral interest, which I believe to be incorrect. The landman said they would look into this and get back to me. Time passed, I did not hear back, so I contacted the landman to see what had been found about the way my interest was listed, and the landman told me that the oil company has rescinded their offer.

What is the best approach for a mineral owner to take in such a situation? And ….. could a mineral owner be “force pooled” (if that’s the correct term) at some time in the future if he doesn’t have written documentation from the landman/oil company that a lease offer was rescinded, which I assume would essentially mean that a lease offer was basically never given?

2

In Texas you do not have a contract until an offer has been accepted and the terms finalized, ie terms of lease negotiated. Even then, you will likely see that the offer is dependent on verification of your title and net mineral interest in the tract. It is not unusual for one party or the other to back out before the deal is done. Not dissimilar to a house sale, where contract must be signed by seller and buyer and there is a contingency period for inspections, loan approval, sometimes sale of buyer's current home. Forced pooling is an Oklahoma concept. You could become an unleased mineral owner, but most likely if the area has activity, another company will lease your minerals.

3

People need to deal with landmen or companies in writing. You need to save every scrap of paper, not just the letters, offers, and leases but the envelopes they came in as the date on which the letter was mailed can make a difference. Don't do business by phone because you can't prove anything! It's your word against theirs. When everything is committed to paper, it's their word against theirs. If they call you on the phone and you want a really short phone call? Ask them if they mind if you record the call? It will be a very short phone call.

4

Thank you for your comments TennisDaze and r w kennedy. A few more questions, to make sure I understand. First, I stand corrected TennisDaze. From your comment I see the distinction between an unleased mineral owner and being force pooled. I'm hearing that others may have agreed to leases in my same area but before my lease terms were negotiated I was told that the offer to me had been rescinded by the company who initiated the discussion. I think that the company who made the lease offer to me (Company A) may have decided to sell their leases to another company (Company B) and Company A stopped their leasing efforts in my area. In that situation, do I need written documentation from Company A that they rescinded their lease offer to me so that Company B can't claim, at a future time, that I'm an unleased mineral owner because I was once in the early stages of a leasing discussion with Company A, but that discussion ended when Company A rescinded their offer? Any other things that I should be aware of in a situation such as this?

5

Jdub, generally not as long as you didn't execute a lease in their favor and send it to them or scan it and e-mail it to them or possibly sign a letter of intent, a real letter of intent, not just the sort of thing they throw in preliminary offer letters you may receive before they send you an actual lease. As long as they can't say you made a promise on which they relied, you are in the clear.

People should never return any letter that wants you to check a box agreeing to lease or sell minerals before you have seen the contract, no matter how big the dollar value. Not that I think they will stand up in court after the buyer pulls the switcheroo, but to save yourself possible headaches.

6

Another question concerning an oil company rescinding a lease …….. I gather it’s fairly typical for a lease to have a “Counterparts” clause which I understand to mean that the Lessor’s and the Lessee’s signature do not have to appear on the same copy of the lease. The Lessor can sign one copy and the Lessee can sign a different copy and together both copies constitute one lease.

If the lease copy that the Lessor receives from the oil company only contains the line for the Lessor’s signature and the Lessor signs it and returns it to the oil company (the Lessee), could the oil company, before they would sign their copy of the lease, rescind their offer even though the Lessor has signed the lease? What if, above the signature line, the lease contains the wording “This lease is executed to be effective as of the date first written above” which refers to the date listed in the first paragraph of the lease …… does that make a difference?

If the Lessee (oil company) can rescind the lease before they sign it but after the Lessor has signed it, does that mean that the Lessor should never accept the “Counterparts” clause in a lease?

7

The lessee need not execute the lease at all. They can use as proof of their acceptance the canceled check they used to pay you, that's all they need.

8

Thanks for your reply, r w. ….. but would that still potentially leave the lessor vulnerable? Seems it’s not uncommon for the lessor to take 2 or 3 months, or more, to pay the leasing bonus. During that 2 or 3 months, perhaps the lessor is trying to flip this lease to someone else. If he finds no takers, could he then decide to rescind his offer to the lessee, which means the lessee would have been “out of the market” for other potential offers for those 2 to 3 months.

If a lessee won’t commit to promptly signing the lease would that likely mean that he’s not committed to executing it, and was simply trying to tie up the lessee’s minerals until he could find someone to flip the lease to …….. or buy the lessee time to get an engineering report to see if the area of the lessee’s minerals have good potential?

9

I may have skipped over something here. You NEVER give anyone an executed lease without cash in hand or other certain way of receiving payment. I myself have been burned doing it, it's not safe to do business that way. Look up Draft Returned/Unpaid or something of the sort on this site and settle in for a days worth of reading. The old ways are sometimes best. Direct exchange. Submitting your executed lease and a draft to a bank to act as escrow. When your payment comes in, the bank mails your lease to the lessee.

You could possibly execute a lease, make a copy and boldly mark the copy as COPY and scan and e-mail the lease to the landman as a show of good faith, then he can go out and try to flip it. Documents for recording are supposed to be originals.

Personally I don't know why you want to deal with a possible flipper anyway? If he is a flipper he's trying to deceive you from the start that he is a legitimate lessee with cash to spend.

I mean by definition, the flipper will be making money that you yourself could have made? If you want to consider the flipper your agent? Then enter into an agent agreement up front. Why try to be cute with the I maybe know that you know that I know that you know that I'm not a legitimate lessee and I'm just trying to scratch something up with OPM, other peoples money. It's bad business when a deal starts with deception.

Who wants to do business with someone who lies about money?

If I hear any crying over that preceding sentence, it's because someone bypassed thought and went straight to "feelings". Someone who purports that they will pay you for your lease when they don't have the money is lying. Ask yourself why they wouldn't be up front about what they are trying to do? If I had some acres I wanted /needed to get leased and I figured I needed help beating the bushes? I would enter an agreement for someone to act as my agent who would receive whatever they negotiated above my requirements. Some might say it's the same result so what does it matter? To which I say it isn't always the same result, remember the search I suggested above? Also, it matters to me.

10

If you were familiar with Law 101 you would know that there is no contract until there is “offer” and “acceptance”. Whomever signs first is making the offer to the other party. The Landman is not making you an offer, you, by signing a lease, are making an offer to the Landman. Acceptance is then achieved when you receive a signed copy of the lease back from the energy company or when you receive some sort of payment. Until then there is no contract and the energy company can decline to accept. Your lawyer knows this. If he/she doesn’t you need to change lawyers. I am not a lawyer and nothing I post should ever be considered legal advice. My only advice is that you need a lawyer well versed in the laws of minerals and land in your state.

11

This link and this link may add to the discussion.

12

As 4th named Trust successor in the 1998 Utah Trust document for North Dakota minerals that she had never seen, sister Joy pretended to have made a 'lease' of our inherited 384.01 mineral acres, that did not have her notarized signature, ignorantly done in the name of that 1998 Trust.

Joy, while overseas, assumed that her imaginary status in a pretended 2003 Utah trust she signed with Power Of Attorney, and that was illegally recorded by Saint George Utah lawyer Russell Gallian, somehow gave her authority to act in other legal matters.This man is in big trouble, because of the following facts-

(1) A '2009 lease' in North Dakota pretends to have been executed from our unauthorized sister Joy,living in Laos, although she was totally lacking any authority.

(2) A '2009 lease' was fraudulently assumed to be valid because Joy had the lease check for $76,803 sent to unauthorized brother Jim!

(3) Jim deposited the check in his secret untraceable New Mexico account , and from there, remitted funds to heirs who were expected to cooperate.

*The matter to be settled is, what constitutes a valid mineral lease lacking an authorized notarized signature,by a 1998 Trust that no person had ever seen , entirely based upon Joy's unauthorized instruction, as 4th named Trust successor, to have lease funds sent for distribution by 5th named successor Jim?

As the legally named 1998 Utah Trust Successor, my status was shrugged off in January 2013 ,by a Williston ND judge,who 'decided' that a later imaginary 2003 Utah trust formed unlawfully by Power Of Attorney to 'own' the house that our deceased in 2009 Mother had already deeded to our brother Jim, became 'valid' in ND in 2013, after it had never existed in Utah!

Our sister Joy was then given permission to receive and disburse royalty funds, and vindictively left me out, with the full knowledge of her ND lawyer and the ND judge!

Proof of a 'valid lease' must be offered into evidence, because the fraud of what transpired is easily proved.

13

Generally, lease 'counterparts' are used when there are a number of people owning an interest in the leased tract (lessors) and who live in another location. For instance, multiple Lessors may live in multiple states, and 'counterpart leases' can be sent to them for signature instead of circulating the original instrument. Those signed and notarized 'counterpart leases' are compiled to constitute 'the lease'.

It should be noted that signature lines for each lessor involved are identical on each copy and that the completed lease may have, for instance, 10 lessors and 10 separate copies of the identical lease form - each with one lessor's signature. Each and every lessor will be listed in the preamble of the lease, but separate copies sent to lessors for signature. The Lessee will sign all copies of 'counterpart leases'.

As to rescinding an 'offer' after a lessor signs a lease: for a lease to be enforceable - something of value needs to change hands. In areas where there is competition to acquire leases, it is fairly common practice for the Lessee to issue a 30 day or even 90 day bank draft to pay the lease bonus. This practice allows the Lessee the time required to verify the mineral title. Verifying mineral title, and proportional interests involved, is a really involved process which requires inspection of each and every instrument ever put of record which affects the chain-of-title. The mineral estate is traced from the original Patent through current day. This information is compiled into a 'Sovereignty Title Report' which is then passed to a title examining attorney to verify it's accuracy and who will note any deficiencies requiring curative actions.

Should the final title report not match the lessor's interest as set forth in the lease, the draft need not be paid and the lease ceases to be in effect. This 'draft' process protects the lessee from buying a pig in a poke. Many lessors know nothing more about their mineral interests than what they have been told by their family...and which may be inaccurate.

Incidentally, the Lessee named on the lease can often be a company name used by an drilling operator to keep their actual company name from drawing attention. For instance, Chevron may acquire leases in an area using 'XYZ Mineral Holdings' as the Lessee company to keep their interest in an area from drawing the attention it would if they acquired the leases under the Chevron name. Often times a subsidiary type entity is formed (with a different company name) to facilitate keeping all the leases in one project area separate from other projects the 'parent company' has. It is not necessarily indicative that someone is trying to 'flip' a lease.

In reality, I've seen leases taken with the intent of 'flipping' them which have terms more beneficial to the lessor than what the original company is offering. As long as a lessor gets favorable terms in negotiating their lease, it shouldn't matter. You still get what you negotiated for. If I lease you, and after XYZ acquires a 'drilling block' your's is the only lease needed to complete that block, I will negotiate with XYZ to assign them your lease to complete their block...and you still end up with more favorable terms than had you leased to XYZ in the first place.