Contacted by two Landmen, two oil companies

Texas Mineral Rights Karnes County, TX
#1

Hello,

I am part owner of mineral rights for a 100-acre tract.

I've been processing paper work with Landman "A" who represents Oil Co. "X" for about a year. We are now completing a stipulation of interest. Today, unsolicited, Landman "B" representing Oil Co. "Z" contacted me requesting similar forms, probate information and offered a stipulation of interest "to get payments" due to me.

Questions:

1. Is it good business for me to provide the information requested to two landmen representing two different oil companies?

2. If I must pick one scenario, what are the most important issues to address and understand?

Thank you.

#2

I think it is a good idea to see if they will start bidding against one another. It does not hurt to provide information to both and see what the best deal is that you can get in terms of royalty, bonus and primary term, among other important lease terms.

#3

OK. Your reply is very helpful.

Regards.

#4

I may or may not have a similar situation. I Have been leased thru company A now for over three years, primary term about to expire. I got a call from a landman representing company B, they want to lease a pipeline easement across a portion of my property as well as drill a well, leased to company A, he mentioned that well construction is a ways out and that they have until December to complete the well.

Should I let this go for now and see where it goes?

Contact original leasing company A to make them aware?

After my primary term is up, can company B outbid company A for rights to drill?

Thanks.

#5

I'll answer your last question first, yes Company B can outbid Company A for a new lease on your acreage assuming Company A's lease terminated in its entirety. As to the rest of your question, I am a little confused what Company B is asking from you. If Company A owns the current lease, they have the sole right to enter and drill on your acreage. It sounds like Company B wants to enter a top lease with you? Wanting to lease a pipeline easement as well as drill a well does not make sense to me.

#6

Ben Elmore wrote:

"Wanting to lease a pipeline easement as well as drill a well does not make sense to me."

Ben, in the past we've been in a similar situation ... i.e., while we were in lease negotiations, a different landman representing the same company called about doing a pipeline easement. It didn't smell right at the time. I sensed the pipeline guy might have been calling to pick our brain about where we stood in the lease negotiations. We agreed to negotiate a pipeline easement ... but the pipeline guy never called back. Could this be because most/all leases agree to allow pipelines ... although the terms may not be stipulated?

Could you explain a little more about why this doesn't make sense to you? Thanks!

#7

Mr. Kruciak, as Mr. Elmore says, it doesn't make sense with the information you have stated. I think there must be something more. Worst case I would let the lease expire to clarify the situation, make sure the lease has expired and you are not held by continuing operations and file an affidavit of non production and request a release of the lease by company A.

#8

That would be why it didn't make sense, because most leases provide the right to do whatsoever is reasonably necessary to develop the minerals, including laying pipelines. A pipeline easement is usually worked out with the surface owner (assuming the mineral and surface estate is severed), or an unleased mineral owner, or if one lessee wants to lay a line across an adjacent tract for the benefit of another tract (as a few examples).

Ray H. Joyson said:

Ben Elmore wrote:

"Wanting to lease a pipeline easement as well as drill a well does not make sense to me."

Ben, in the past we've been in a similar situation ... i.e., while we were in lease negotiations, a different landman representing the same company called about doing a pipeline easement. It didn't smell right at the time. I sensed the pipeline guy might have been calling to pick our brain about where we stood in the lease negotiations. We agreed to negotiate a pipeline easement ... but the pipeline guy never called back. Could this be because most/all leases agree to allow pipelines ... although the terms may not be stipulated?

Could you explain a little more about why this doesn't make sense to you? Thanks!

#9

Make sure you get 25% royalty - you're in a HOT area w/liquids, which will easily command 25% - don't even think of taking a percent less. Other than that, cover the basics, and get as much bonus as you can. You haven't agreed (signed) anything yet, so let the two landmen 'bid it up!"

#10