Citizen Energy Lease Terms

Just got a letter in the mail from Citizen Energy requesting I make a selection on lease terms. Should I make a selection on the letter and mail back or just wait for them to contact me with the actual lease.

  1. Participate in the drilling
  2. Lease at $500 per acre 1/8 th royalty.
  3. Lease at $300 per acre 3/16 th royalty

FYI: I own a very small interest in Sec 8, T18N, R4W

Personally, I do not return the letters as I wait to see if other third parties will be interested. I do put them in my files. Some companies use the letter as notice of attempt to lease and do follow up, others do not and go straight to pooling using the letter as an excuse. So stay aware of any additional mailings.

If you have not leased in a while, it would be wise to get a draft lease from anyone who is trying to lease and then get a qualified OK oil & gas attorney to make the needed edits. Most draft leases are not in the mineral owner’s favor, especially regarding post production charges.

If I cannot get an acceptable lease using our “family lease” instead of their poor draft, then I do not have a problem going to pooling. Logan is not going to see huge lease bonuses. I usually ask what they are offering for for 1/5th and 1/4th, just to see what they say. Unlikely to get a 1/5th in Logan, but never hurts to ask.

If I wait to be pooled do I still have the opportunity to negoiate a good lease (no deductions etc)?

If a pooling order is issued, you have 20 days to make an election within the order or negotiate a lease with whoever you wish.

We also have a small mineral ownership in 8-18N-4W SW/4. Last year, June, a landman with Rock Creek Land contacted me offering 3 year with 2 year option $400/nma & 1/8th or $250 & 3/16ths. There was no negotiating on the lease terms. We had received royalties from that property on the Gragg#2 well with the last payment in 2013. Researching the property I found that the Gragg #1 was plugged 11/25/2015. There was a transfer of operator in 4/2020 and an Application to Drill/Recomplete 11/22/2021 which was approved by OCC and expires 5/24/2023. I spoke with the new operator questioning the drilling plans and shared with him the lease offers I had received. There are several spacings orders in place covering the S/2 & SW/4. I also received the letter with options from Citizen Energy in January 2023. I spoke with their landman working this deal and he said they were planning to drill 2 horizontal wells. One well into the section north and another into the section south. Both originating from the SW/4 of section 8. I have also been trying to work out favorable lease terms but it seems the best regarding PPD’s is no deductions unless product is enhanced for a higher market value. I have just recently received several OCC applications filed by Citizen. I’m sure Pooling will be sent once these are approved. Moving forward Pooling may be the better option. Any comments/insight as to the pros vs cons of being pooled is appreciated. I have heard that in Oklahoma products must be made “marketable” without PPD’s when Pooled, is this true?

I am not a lawyer, so cannot comment in hard terms. Most of my pooling orders have been for gross proceeds and do not have post production costs taken out. A rare one has the PPC language in them.

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