I received a letter, a check and a Term Royalty Agreement from Xyz, LLC. The letter stated that they wanted to increase their revenue interest across all the mineral interest I owned over a large area of Pecos County defined in Exhibit A attached for a two (2) year term. They offered to pay X dollars for 20% of my royalty interest. A check for X dollars was included. The royalty agreement was titled “Term Royalty Agreement” and (Two Year) was printed under the title. In the body of the agreement in bold was “TWO (2) years for March 1, 2013”. I executed the agreement and cashed the check. Recently, I learned from a concerned royalty payer that received a copy of this agreement that the small print extended the agreement for as long thereafter as any valid and subsisting oil, gas and/or mineral lease covering any portion of the Lands, or lands pooled or unitized therewith, etc. In effect this seems to be a purchase of 20% of my royalty interests disguised as a two year term agreement. Is this legal? I am 76 years old.
P. Simmons:
It sounds like it would be wise to consult an experienced oil and gas attorney, present a copy of this lease agreement and let it be evaluated in order to interpret the wording of this lease. By doing so, you will be more certain about what terms you are agreeing to and not be surprised in the future to learn that your minerals are tied up for additional time.
Or a litigation attorney. Wow.
Lesson of the day: Always read the small print. Likely a new well has either been drilled or is soon to be drilled here. Buyers don't send these offers out for no reason. Something attracted them to your property (like bees to flowers!) I agree, it sounds as if you sold your royalty rights for as long as the current lease is in effect, or if you're not currently leased, then for as long as any lease that becomes effective within the term is in effect, which could be years. I hope you at least got a decent check. It doesn't sound like this was a lease by the way, but rather an option to purchase a royalty interest. Good news is you've apparently still got 80% of your royalty interest. Hopefully they paid you a fair price for your 20%. If so, then maybe it's not such a bad deal, but I'm always wary when I receive offers like this...and I do. It is probably legal unfortunately.
Frederick M. "Mick" Scott CMM, RPL
The Mineral Hub
I throw this kind of letters in the thrash were they belong
Actually, it is correct that it is a term royalty conveyance. Titles mean nothing. You were taken advantage of. Have someone try to recover at least a portion of your royalty, if you are so inclined.
The big letters giveth, the small letters taketh away. Next time, hire a lawyer. Sad, but good advice. If this came through the mail, then there are certain legislative protections built in, but you still need to read them.
Best
Buddy Cotten