My wife, her siblings and extended family inherited a 1/4 Royalty Interest in an approximately 4,000 acre parcel in Howard County, Texas. There are more than 100 heirs, so although the individual ownership is small, the cumulative ownership is considerable.
When first inherited, there was little oil production from the four vertical wells. However, within the last two years, the property has recently become very active. The owner terminated the rights of the previous operator and signed a lease with a new operator. They immediately received approval for a horizontal well. That well started producing in November of 2017. We received division orders about two to three months later and royalties starting in April of 2018. No problems.
Since that time however, the same company has drilled two additional wells. They started producing oil (and gas) in June of 2018. In turn, I contacted the company to ask when we could expect division orders and royalties. I’ve been given the run around since. In addition to the two new wells that we know are producing, the company has received approvals for seven more wells. Some of these wells may be producing as well.
At this point, based on TRRC monthly reports, the oil production for these two wells from June 2018 thru January of 2019 is almost 300,000 barrels. We’ve received no division orders nor royalties and only nasty emails from the company.
The lease with the owner (Ida Mae OldhamTrust) calls for royalties within a specific period of time (regardless of whether division orders have been issued.) If no royalties are issued, penalties in the amount of 12% per year are due.
Questions: As royalty owners only, are our rights the same? Does the interest provision of the lease apply to royalty owners, and should the family just let sleeping dogs lie, knowing that not only will we receive our royalties, but interest as well?
Should we make a demand of the company for our division orders, royalties and interest?
Do we need to consider talking to an attorney or report the company to the Texas Railroad Commision?
Thank you.
Robert Weinstein