Hill County, TX Currently EOG (Assigning to Bluestone Natural Resources II) McMullen Unit #1 and #2 Thomas J Irvin Survey 85.97 Acres
We received a registered letter stating that our lease was being reassigned from EOG to Bluestone and that our consent within the next 7 days would be appreciated. I called EOG and asked if I had and options and they said no that it was really a formality. Is anyone familiar with this type of transaction and/or Bluestone? Thanks for your input, Don
It depends what your lease says. If you have a clause that reads they can't assign the lease without the permission or consent of lessor, then you can deny consent if you want to. If that clause is in your lease, then it is more than just a formality. It may also read that they have to give lessor notice before they can assign your lease, and that may be what they are getting at. Not sure. What does your lease say, if anything, in this regard? In general, assignments of leases are very common. I have heard of EOG, but not Bluestone, but I'm sure someone has.
I just checked them out. They were formed in 2006. Out of Tulsa, OK. Appear to be well funded by a private equity firm in Irving in the Metroplex called Natural Gas Partners. They have bought at least 75 wells in SO TX in the past year. They were said to have operated them as well.
Only one experience with the transfer situation or transfer lease language. I'm not really a fan of EOG from what I've been seeing in Gonzales County; but, they do deserve a positive pat on the back for at least notifying you in a timely manner if at all. With that said and assuming you have a prudent operator, it all depends on the lease language as Dave said. If there is any language in the lease that addresses the transfer at all it will usually be that they must notify the lessor within 30 days of the transfer or that they must notify the lessor prior to the transfer being official with potential penalties if this isn't followed. Lease language here can be as creative as the attorney or the lessor can come up with; however, I doubt that we could ever get a lease finalized where the lessor has absolute veto power. Again, with that said, you might be able to get some wording written in the transfer clause that restricts transfer to certain operators, i.e., Chesapeake and others. Since these guys have so many shell games going, even that won't prevent Aubrey and his clowns from calling the shots on one of their shell companies.
Good luck!
Thank you I will check my contract.
There definitely are leases executed where a lessor has absolute veto power on an assignment. I have seen them with my own peepers.
If you believe their site, Natural Gas Partners in Irving has very deep pockets. They prefer to manage "billions" vs. millions.
It says this, which I believe to mean unless I have some good reason not to allow a transfer then I agree to allow it.
Assignment or Conveyance of Interest. No assignment
of this Lease, or interest therein, may be made without written approval of the
Lessor, such approval shall not be unreasonably withheld. Subject to the
preceding condition, the provisions hereof shall extend to the heirs,
executors, administrators, successors and assigns of Lessor and Lessee, but no
change or division in ownership of the land, rentals, or royalties, however
accomplished, shall operate to enlarge the obligations or diminish the rights
of Lessee. No such change or division in
the ownership of the land, rentals or royalties shall be binding upon Lessee
for any purpose until Lessee is furnished with the instrument or instruments,
or copies thereof, evidencing such change or division. In the event of a permitted assignment of this
Lease as to a segregated portion of said land, the liability for breach of any
obligation hereunder shall rest exclusively upon the owner of this Lease or a
portion thereof who commits such breach.
Wow! First phrase in the first sentence is great and it goes down hill from there. I read this as Attorney "fodder" if you decide not to let them do what they want to do.
Thanks for sending this out for all to see how complicated this clause can be. I like what Dave said in his post and it would be nice to get a lease with this absolute veto power in it and I believe it would be something to strive for in upcoming leases; but, I still believe it will be tough to get.
Don Crawford said:
It says this, which I believe to mean unless I have some good reason not to allow a transfer then I agree to allow it.
Assignment or Conveyance of Interest. No assignment
of this Lease, or interest therein, may be made without written approval of the
Lessor, such approval shall not be unreasonably withheld. Subject to the
preceding condition, the provisions hereof shall extend to the heirs,
executors, administrators, successors and assigns of Lessor and Lessee, but no
change or division in ownership of the land, rentals, or royalties, however
accomplished, shall operate to enlarge the obligations or diminish the rights
of Lessee. No such change or division in
the ownership of the land, rentals or royalties shall be binding upon Lessee
for any purpose until Lessee is furnished with the instrument or instruments,
or copies thereof, evidencing such change or division. In the event of a permitted assignment of this
Lease as to a segregated portion of said land, the liability for breach of any
obligation hereunder shall rest exclusively upon the owner of this Lease or a
portion thereof who commits such breach.
Define unreasonable, far too vague.
In the event of a permitted assignment of this
Lease as to a segregated portion of said land, the liability for breach of any
obligation hereunder shall rest exclusively upon the owner of this Lease or a
portion thereof who commits such breach.
I don't particularly like the sentence above. If the lessee were still liable for any breach, they would think twice about who they assigned it to, I figure they should be a party to any lawsuits which may crop up.
That explains why you got the registered letter.
If you don't give your consent, you will be unreasonable to them.
The way I would view it, you would need to provide a legally justifiable reason for not wanting to consent to the assignment.
Then, depending on what reasons you give, the reasonableness issue might kick in. Their lawyers could say, he won't give us consent and doesn't give a good reason, so therefore he is being unreasonable.
I agree totally with RWK and Dave. I doubt very seriously that the Lessor attorney put this clause in the lease and if he/she allowed this to go through then I don't believe their representation was very sound. The last thing the lessor wants is to get in a legal battle with the deep pockets of an operator and the best way to avoid that is to avoid vague and subjective language. This forum is a great place to help us learn some of the pit falls of signing a lease with language like this imbedded in the body of the lease. Not often do we get a second chance to sign a lease; but, if and when we do, maybe we will have gained a little more personal knowledge as well as which attorney to use and the one not to use in the future.
I don't have a reason not too currently. It would just be frustrating to find out down the road what my good reason was which is why I posted. Thanks to all for the replies. Looks like I'll be taking my chances with NGP which will probably be fine.
It's true that some things happen in the middle of the lease. There was a lady on the forums recently who provided a shut in clause that read no more than 2 years cumulative shut in, but she allowed the landman/lessee to insert the clause and they changed cumulative to consecutive, so they could save the lease forever just by producing a little every 2 years. It almost makes me want to suggest that lessors resort to photoshop to move punctuation or slightly alter a word to change the meaning of a lease clause, just to have parity. I don't want to stoop to that level though.
What you just said is one reason that I want to have the final lease in hand for long enough to give it a good going over, even before my attorney gives it his last and final review.
r w kennedy said:
It's true that some things happen in the middle of the lease. There was a lady on the forums recently who provided a shut in clause that read no more than 2 years cumulative shut in, but she allowed the landman/lessee to insert the clause and they changed cumulative to consecutive, so they could save the lease forever just by producing a little every 2 years. It almost makes me want to suggest that lessors resort to photoshop to move punctuation or slightly alter a word to change the meaning of a lease clause, just to have parity. I don't want to stoop to that level though.