So where have I heard this before, “before you sign anything an oil company presents to you, have an attorney look it over”. Excellent advice and wish we’d heeded that years ago. But now, a landman contacted us Friday about ratifying some documents ( not sure exactly what documents are involved ). Our lease and the existing well date back to about 2000-2001. The existing Well has about run it’s course . It is HBP though not producing much, I’m sure it’s HBP because they now plan to drill another Well and hold on to our existing lease. So here is what I’ve been told: we are going to be asked to ratify the existing Unit. The Unit has been recognized as a Unit for several years, but was never formally put on record in the County. Evidently a long overdue process overlooked by the operator. I’m told it changes nothing as to ownership, that our executing this ratification acknowledges that our interest in these properties is now pooled with and included within the unit.
Doesn’t mean a whole lot to me. What I’d love to have happen is for the lease to expire before they are able to continue their drilling program. A new lease obviously equates to new lease bonus. As executive right owner with no royalty, this is our only way to benefit monetarily from new exploration. In keeping with the solid advice to “always have an attorney review anything an oil company presents you”, do I pay $ 200 or so dollars to have it reviewed or ??? Keep in mind, I may never see another dollar from this whole ordeal.
If it changes nothing, then don't sign it.
Well, that was basically my feeling about it. But then I thought, maybe I’m just being stubborn about it all. If though what’s now happening would allow for some change in my favor, I’d sure like someone in the know to tell me. br/>
r w kennedy said:
If it changes nothing, then don’t sign it.
I thought that if some one only has 'the executive right' that they did not receive any bonus. The only way they could receive bonus was if they also had 'the right to receive bonus consideration'. Is this correct for all states or just Texas?
An oil and gas attorney in the state of Texas, I am NOT. Two things though I CAN tell you. 1. I’ve read several pages of the Title Opinion relative to the well we have interest in and they go to great lengths to know who’s who and what’s what. 2. They are NOT paying us royalties (which we believed for years we would receive), since they are not paying us royalties I can pretty much tell you they would NOT be paying us BONUS either if they didn’t think we were entitled to it. That’s really about all I can tell you.
Wilson Inc said:
I thought that if some one only has ‘the executive right’ that they did not receive any bonus. The only way they could receive bonus was if they also had ‘the right to receive bonus consideration’. Is this correct for all states or just Texas?
Executive rights are almost always the right to sign the lease and receive the bonus money. The people receiving the royalty payments from this interest were given a Non-Participating Mineral Deed at some point most likely.
Wilson Inc said:
I thought that if some one only has 'the executive right' that they did not receive any bonus. The only way they could receive bonus was if they also had 'the right to receive bonus consideration'. Is this correct for all states or just Texas?
I’ve never read or seen the actual conveyance, deed or whatever it was that brought about our inheriting these mineral interest. We knew they were spoken of in the family years ago. It came as a surprise when we learned of the inheritance. I guess what I was trying to say earlier is that there is Little chance they are going to make a mistake and give you the money if they aren’t sure you are entitled. I learned recently how confusing the term “mineral rights” can be. You have to learn what you TRULY own, not what you THINK you do.
Scott Pipkin said:
Executive rights are almost always the right to sign the lease and receive the bonus money. The people receiving the royalty payments from this interest were given a Non-Participating Mineral Deed at some point most likely.
Wilson Inc said:
I thought that if some one only has ‘the executive right’ that they did not receive any bonus. The only way they could receive bonus was if they also had ‘the right to receive bonus consideration’. Is this correct for all states or just Texas?
Yes sir, I am a second generation Landman. I have been doing this quite a while and I probably still call my Dad or other 30+ year Landmen/Title Attorneys with questions every week.
Tony Larman said:
I've never read or seen the actual conveyance, deed or whatever it was that brought about our inheriting these mineral interest. We knew they were spoken of in the family years ago. It came as a surprise when we learned of the inheritance. I guess what I was trying to say earlier is that there is Little chance they are going to make a mistake and give you the money if they aren't sure you are entitled. I learned recently how confusing the term "mineral rights" can be. You have to learn what you TRULY own, not what you THINK you do.
Scott Pipkin said:
Executive rights are almost always the right to sign the lease and receive the bonus money. The people receiving the royalty payments from this interest were given a Non-Participating Mineral Deed at some point most likely.
Wilson Inc said:
I thought that if some one only has 'the executive right' that they did not receive any bonus. The only way they could receive bonus was if they also had 'the right to receive bonus consideration'. Is this correct for all states or just Texas?
So Scott, as a landman let me ask you this question: would I be correct in thinking the operator of the existing well will do everything they can to keep it HBP even if it’s a trickle to buy time. My understanding is that they have 180 days from the time it stops producing to continue their program. Which is not in my interest but obviously in theirs. If they are able to continue under our 14 year old lease, then in my lifetime I will never see another dime.
Scott Pipkin said:
Yes sir, I am a second generation Landman. I have been doing this quite a while and I probably still call my Dad or other 30+ year Landmen/Title Attorneys with questions every week.
Tony Larman said:
I’ve never read or seen the actual conveyance, deed or whatever it was that brought about our inheriting these mineral interest. We knew they were spoken of in the family years ago. It came as a surprise when we learned of the inheritance. I guess what I was trying to say earlier is that there is Little chance they are going to make a mistake and give you the money if they aren’t sure you are entitled. I learned recently how confusing the term “mineral rights” can be. You have to learn what you TRULY own, not what you THINK you do.
Scott Pipkin said:
Executive rights are almost always the right to sign the lease and receive the bonus money. The people receiving the royalty payments from this interest were given a Non-Participating Mineral Deed at some point most likely.
Wilson Inc said:
I thought that if some one only has ‘the executive right’ that they did not receive any bonus. The only way they could receive bonus was if they also had ‘the right to receive bonus consideration’. Is this correct for all states or just Texas?
Yes, I would imagine they will do what they can to extend the lease, unless they have soured on the area. That doesn't seem to be the case though.
If they can pool your acres with acres that are producing, they can save your lease that way without having to get production from your lease, they can plug your well and still keep your lease. If you think having the lease HBP by wells that are not on your original lease, by all means go ahead and sign the "ratification".
I wasn’t aware that they could do that, but then nothing surprises me with this. It does seem odd, their interest NOW in making sure this UNIT is formally put on record in the county when it’s about run it’s course of 13 years producing. Why now? Who would care? It hasn’t mattered for all these years. Unless things now have to be made right with the county records before they can apply for another permit to drill another well. Who knows? I don’t, that’s for sure. And maybe it’s nothing at all, just an honest effort to clean up their mess. Still, I’m not going to do anything to assure their holding on to our lease. It’s beginning to sound like any ratification may only be helping them to that end.
r w kennedy said:
If they can pool your acres with acres that are producing, they can save your lease that way without having to get production from your lease, they can plug your well and still keep your lease. If you think having the lease HBP by wells that are not on your original lease, by all means go ahead and sign the “ratification”.
Mr Kennedy, I re-read your comment from yesterday and it made me wonder about something. You had said "If they can pool your acres with acres that are producing, they can save your lease that way without having to get production from your lease ".
If I understood what the landman was saying to me in his email, they may have already been pooled. In effect he said we would be " executing this ratification acknowledging that our interest in these properties is now pooled with and included within the Unit ". My question, Can they go ahead and do something like that, which would as you say extend our lease, only to later ask us to ratify it? Or do they need our signature ratifying the documentsIs in order to pool our acres? Is our signature merely a formality, or do we in some way possess real power over what may or may not be done to pool our acres? This is the first time we’ve ever been contacted by them for ANYTHING and he told me this is a matter that should have been handled years ago. Thanks br/>
Tony Larman said:
I wasn’t aware that they could do that, but then nothing surprises me with this. It does seem odd, their interest NOW in making sure this UNIT is formally put on record in the county when it’s about run it’s course of 13 years producing. Why now? Who would care? It hasn’t mattered for all these years. Unless things now have to be made right with the county records before they can apply for another permit to drill another well. Who knows? I don’t, that’s for sure. And maybe it’s nothing at all, just an honest effort to clean up their mess. Still, I’m not going to do anything to assure their holding on to our lease. It’s beginning to sound like any ratification may only be helping them to that end.
r w kennedy said:
If they can pool your acres with acres that are producing, they can save your lease that way without having to get production from your lease, they can plug your well and still keep your lease. If you think having the lease HBP by wells that are not on your original lease, by all means go ahead and sign the “ratification”.
Tony, it depends on the pooling clause in the lease. Mineral owners, lessors and others with an interest can be severly damaged if a company has infinite pooling authority.
Not to be pessimistic , but if there is something to be found in the favor of the oil company, I can pretty well guarantee you it’ll be found in our lease. I will have to read it over. Thank you. I’m still curious though, if they can do this why go to the trouble to find us again and acquire all our signatures to ratify something that’s already done. Done in fact years earlier, if in fact that’s what’s happened
Oil companies sometimes undershoot, leave something out that they want badly to be in the lease because nobody thought of it at the time. I believe you that everything they actually did consider is in the lease. Sometimes things come up and they shrug and say "who knew?". It;s usually pretty easy to get a ratification from the lessor, they tell them it's "just a formality and doesn't change anything."
I would like for you to upload the document which creates your interest. Since you have never seen the document in the first place, all we can do is speculate.
The oil company should send you a copy. Having executive rights comes with a price. You have a fiduciary representation of the non-executive or NPRI interests. For example, in a place where 20-25% royalties are common, if you lease for considerably more bonus for a 1/8 royalty, you have created a real problem for yourself. If you lease for 20% (and bind the non-executives to that rate) and you have a side letter agreement or assignment of overriding royalty, you have breached your duty as well. Being an executive is like being an executor of a will. I never want to be an executor of a will. Too much risk for someone who is risk averse, like me.
Likewise, if it becomes "an ordeal" for you, then you should convey the executive rights back for a dollar consideration. Life is too short to deal with ordeals.
I also suspect the type of interest that you claim that you actually have until we see the document creating the interest.
Buddy Cotten
Mr Cotten, I appreciate your observations. You make an excellent point about obtaining or seeing the document that creates our mineral interest. It is something that I really need to obtain, if only to satisfy myself. With regard to being unfair to the Royalty owners we may represent, I don’t believe any of them would ever accuse us of being self-serving as we negotiated for 1/4 royalty for them.
If it appears that this has been " an ordeal " for me, I apologize for making more of this than needs to be. Trust me, if anything this has brought a little excitement and education into my life. I am curious about your comment " I also suspect the type of interest that you CLAIM that you actually have ". To this point I would tell you, I only know what I’ve been TOLD I have and what I’ve been PAID for having. Thank you for your interest…time will tell.
Buddy Cotten said:
I would like for you to upload the document which creates your interest. Since you have never seen the document in the first place, all we can do is speculate.
The oil company should send you a copy. Having executive rights comes with a price. You have a fiduciary representation of the non-executive or NPRI interests. For example, in a place where 20-25% royalties are common, if you lease for considerably more bonus for a 1/8 royalty, you have created a real problem for yourself. If you lease for 20% (and bind the non-executives to that rate) and you have a side letter agreement or assignment of overriding royalty, you have breached your duty as well. Being an executive is like being an executor of a will. I never want to be an executor of a will. Too much risk for someone who is risk averse, like me.
Likewise, if it becomes “an ordeal” for you, then you should convey the executive rights back for a dollar consideration. Life is too short to deal with ordeals.
I also suspect the type of interest that you claim that you actually have until we see the document creating the interest.
Buddy Cotten
Mineral Manager
First, Spend the $200.00 and see an attorney. Now it has always been my understanding as a land and mineral owner that if you owned mineral rights and sold or transferred a portion that you as the person selling or transferring them could retain Executive Rights (ER). To have ER I would think you would still own some interest in the minerals. Therefore, I don't understand you having ER on this property and not getting royalty from past production. You really need to find out what you own and who owns the rest of the minerals.
Tony Larman said:
Mr Cotten, I appreciate your observations. You make an excellent point about obtaining or seeing the document that creates our mineral interest. It is something that I really need to obtain, if only to satisfy myself. With regard to being unfair to the Royalty owners we may represent, I don't believe any of them would ever accuse us of being self-serving as we negotiated for 1/4 royalty for them.
If it appears that this has been " an ordeal " for me, I apologize for making more of this than needs to be. Trust me, if anything this has brought a little excitement and education into my life. I am curious about your comment " I also suspect the type of interest that you CLAIM that you actually have ". To this point I would tell you, I only know what I've been TOLD I have and what I've been PAID for having. Thank you for your interest......time will tell.
Buddy Cotten said:
I would like for you to upload the document which creates your interest. Since you have never seen the document in the first place, all we can do is speculate.
The oil company should send you a copy. Having executive rights comes with a price. You have a fiduciary representation of the non-executive or NPRI interests. For example, in a place where 20-25% royalties are common, if you lease for considerably more bonus for a 1/8 royalty, you have created a real problem for yourself. If you lease for 20% (and bind the non-executives to that rate) and you have a side letter agreement or assignment of overriding royalty, you have breached your duty as well. Being an executive is like being an executor of a will. I never want to be an executor of a will. Too much risk for someone who is risk averse, like me.
Likewise, if it becomes "an ordeal" for you, then you should convey the executive rights back for a dollar consideration. Life is too short to deal with ordeals.
I also suspect the type of interest that you claim that you actually have until we see the document creating the interest.
Buddy Cotten
Mineral Manager
Joe, I agree with everything you just said. I’m on it. Thanks
Joe Aldridge said:
First, Spend the $200.00 and see an attorney. Now it has always been my understanding as a land and mineral owner that if you owned mineral rights and sold or transferred a portion that you as the person selling or transferring them could retain Executive Rights (ER). To have ER I would think you would still own some interest in the minerals. Therefore, I don’t understand you having ER on this property and not getting royalty from past production. You really need to find out what you own and who owns the rest of the minerals.