I own mineral rights in 21-6-4. Casillas has informed me that they are issuing a new lease agreement for this section due to the depth clause in their original agreement. This will also be for 28-6-4. They have said that the new lease they will be offering will be exactly the same as their initial lease with a new depth clause. Ovintiv is disputing their rights to drill due to this depth clause issue (I assume). They are making applications for multiple wells.
My questions are: 1) Is Casillas’s new lease offering negotiable or must we accept it due to our prior lease agreement. 2) If a new lease is required, can Casillas offer new leases before the Ovintiv dispute is resolved. Both companies are proposing multiple wells. 3) Since this seems to be a disputed area between two companies, should I take no action until the case is resolved?
If you had an option on the first lease to renew held by Casillas, then you may or may not be able to negotiate a bit. Depends upon the wording of the first lease. If not option to renew, then I would wait a bit and see what happens in the next few weeks.
If you are open at the deeper depths, then anyone can offer you a new lease.
If I were open to lease, then I would wait to see what the terms are in the new pooling and then either choose to lease in the first ten days if I could get a better lease (I mean lease wording to my benefit) or I would take the pooling offer at the highest royalty and lowest bonus for that particular section. I would hope the company that wanted to drill the most wells would be granted operatorship (if the reservoir geology and reservoir perceived performance could handle the greater number of wells.)
Thanks you for that… very helpful!
I was told by Casillas that they intend to send out leases next week. How long does it normally take for a pooling order to be issued? I would assume the pooling order should be released prior to leases being signed and returned. Am I right on that?
Casillas would like you to lease before the pooling orders come out. But you actually have until 20 days after the orders to finalize a lease with them or anyone else. I like to have any leasing done at about 10 days just to allow for mail, etc.
Nothing is normal about pooling orders this year due to the OCC not being able to meet in person.
I doubt that the Casillas lease is going to be in your favor on several of the clauses. First drafts rarely are. Make sure that you have no post production charges whatsoever. That is the big one.
NoBS: Not knowing your specific lease clauses, the important thing is that your correct contact information is of record at the county clerk’s office. That way the landmen or companies looking to lease interests that are available to lease can find you if that is your situation.
As per your questions- 1) You can negotiate anything up until the expiration of any pooling order time frame. 2) Anyone can offer you lease terms and you can lease to whomever you choose.
3) This scenario is quite common. Although Casillas was awarded operations under the original pooling order, that order does not preclude others from trying to operate wells. Ovintiv is more than likely just trying to get wells drilled on acreage that it owns that they feel needs to be developed. You can take whatever action you believe is in your best interests.
If at all possible, I negotiate and keep control of the drafting of all my leases, and try not to sign an producers boiler plate. Some Companies have a harder time taking leases they have not sent themselves. Either way, I make sure to have language added, especially depth clauses, and trying to limit gathering and processing expenses.
Because the Pugh clause protects you and they would rather have all the clauses protect them. I am almost always able to negotiate a Pugh clause in. There are two kinds of Pugh clauses, one is vertical and one is horizontal.