As sudden and completely new mineral interest owners at the time, we had some lease offers a couple years back and basically let them slide because we needed to get our bearings on the industry (e.g. “What even is a mineral rights lease?”) before entering any agreements.
In recent months I’ve received numerous phone calls from landmen about purchasing those same interests. [FWIW: I own rights in several counties and states, but it is just this one location that seems to be generating enthusiasm.] There are currently no wells on it, but there are active wells nearby, e.g. just across the street. We have declined all offers to sell, but so far we haven’t been contacted by any operators with lease offers since that time some offers came in a few years ago.
So my question is whether mineral interest owners ever do anything to alert operators that, “I’m ready to lease,” or if they just wait to be sought out?
Unlike surface real estate, mineral rights are not as proactive. Make sure that your name and address and probate documents are filed in each county courthouse where you have minerals. Landmen start any leasing hunt at the courthouse. They will find you if they are interested.
If you are getting interest, then most leasing and buying offers are ahead of the bit. You might post in the state and county where you are getting interest and ask if there is activity. Most of my offers to buy have been well below what I eventually earned in royalties from hanging on. But that is very specific to the area of interest.
If you have already turned down leases in the past then the oil company probably won’t be coming back to you and your minerals may be being produced without payment to you. You may want to contact the oil companies to see if you could still lease to them. Be prepared for them to say no and instead offer to make you a working interest. In that case, your interest will be charged with its proportionate share of drilling costs and it may be a long time before these are paid off and you actually get paid royalties. The oil company does not need to have everyone in a tract leased in order to drill and produce. That’s why it is generally a bad idea not to lease.
Aimee’s comment may apply to some states, but in OK, the pooling can be an advantage over leasing and you are not automatically a working interest owner. OK requires royalty payment to all mineral owners. Those that cannot be found will have royalties held in suspense.
What happens in OK to unleased mineral owners, when a well is drilled and producing, but the operator made the decision not to apply for a pooling order because the well wasn’t producing as much as they anticipated?? Thanks!
The pooling order usually comes before the permit is issued. The pooling order is to catch all the remaining mineral owners that did not lease. Occasionally, there is a cleanup order if someone’s lease expired right before the spud.
If you give a section, township and range, we may be able to help better.
Thanks, Martha and Tim! It is the Wilson 1H-16 well in 16-05S-04W Jefferson County. I am part of a group that owns over 5% of the minerals for the 640 ac spacing. The operator (Cimarex, who sold it to MACH) leased other mineral owners and drilled back in 2018, thinking our interests were NPRI. When they sent out the division orders, after five months of production, they found out we actually have the executive rights. When asked to either lease, or pool us, we were told the well wasn’t producing like they had hoped, and refused our request! Instead, they said we were now carried working interest owners, and have been taking our mineral royalties every month to help pay their drilling/operation costs! I guess if it had been a “gusher” they would have been falling over themselves to lease or pool us?!?!
Drilling without a lease is a very stupid thing for anyone to do. Another company or person could lease or buy the mineral interest and they could do the drilling or flip the lease!.
Drilling with no lease at all would indeed be a foolish thing to do. However, if an Operator has 99% of the minerals leased, they aren’t going to let that unleased 1% stop them. That’s what the pooling statutes are there for.
Thanks, Martha! I did, and apparently, as long as a single mineral owner is leased, the operators can drill and get a “free look down the hole”…then decide if they want to pool/lease or not??? I always thought pooling had to be done prior to drilling?? Meanwhile, we sit here as carried working interest owners on an underperforming well! We will see what happens???
First i have not heard of the “free look” in OK, but there can always be exceptions. What is the penalty for your carry? It can be up to 300%, so you had best ask and find out the actual amount.
It’s the only time I’ve head of an operator not leasing and then pooling all the remaining mineral owners. After about a year of production, Cimarex said our unleased/unpooled mineral interest had been adjusted to 7/8 working interest and 1/8 royalty interest at a 1/8 royalty rate, based on 52 Okl. § St. 87.1(e). I’m not an attorney, but I read the statute to include language regarding a pooing?? I had an attorney request different working interest info, such as JOA-JIBs-AFEs and monthly operating reports, and was told by Cimarex that as an unleased co-tenant, they don’t have to provide anything more than the total costs and revenues. We asked for my actual working interest percentage, and they refused to provide it. I’m not sure about the carry penalty, but if I understand correctly, it’s part of the JOA, which I didn’t sign, or elect to be carried for non-payment?? Now that MACH is the operator, I’ve talked with yet another attorney with a large OKC firm, and will see what they can do!?!? As a small mineral owner, it’s tough to fight their deep pockets and inhouse counsel!!
Well by law they have to send you a Notice to pooling. If you havent received a ‘Notice’ probably wasnt an Oil CO… Remember landman like to make offers to lead, doesnt mean anyone is going to drill. Pure speculation. A gamble.