Expired Lease 06-06N-03W

Looking for advice, so thank you in advance for anyone’s help.

I leased some drilling rights out to a land man 3 years ago. The lease expired in October this year and an extension was never executed. I know there has been quite a bit of activity in this area, but I can’t tell who currently has the authority to drill here. Could be Warwick-Bacchus, could be Native Exploration. Do they have to renew the lease? Do they have another Land Man do it? Should i simply contact them and ask if they are interested in leasing my rights?

Sorry, but kind of lost with this process.

Thanks.

Harry

Actually, Native Exploration spud the SixKiller 7-6-0603 1WXH on August 27, 2018, so your lease may not have expired. I do not see a completion record for it yet, so you are in a bit of limbo. Native sold the well to Warwick-Bacchus LLC on June 20, 2019. Contact Warwick-Bacchus LLC 6608 N Western Ave, Box 417 Oklahoma City, OK 73116 to find out what your status is. Since they spud the well before your lease expired, you may still be in the primary term. Your lease may have a paragraph about continuing operations, so is important to your status. You need to ask about W-B plans and whether you are held or not if the well is not yet completed. It could be completed, but the paperwork has not been filed at the OCC. I am not seeing any production on the OK Tax Site.

OUTSTANDING information! Thank you. Having watched you respond to so many others, it’s like getting a reply from a celebrity. I appreciate you sharing your valuable knowledge and insight.

Harry

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You are too kind… A lot of folks are in a similar situation. When a well is drilled, but not completed, it is called a DUC. (Drilled UnCompleted). Oklahoma does not yet have rules on how long a well like that can be considered to still be in “operations” and hold a lease past the primary date. Given that this was purchased by another company, who knows… Call Warwick-Bacchus and see what your status is.

Ms. Barnes:

I have an update on this activity, but I’m still a bit in the dark. If i followed all of the paperwork correctly a horizontal well was finally approved and the plan is to drill across Section 6 and 7 in 6N-3W. We just received a letter from Warwick requesting we fill out a W-9. I assume this means they are close to disbursing revenue. The wells described in the letter indicate they are in sections 06 and 07 of 06N-07W, but all of the survey maps show them crossing our section, 06-06N-03W. (CALVERT 0603-6-7 1WHX and SIXKILLER 7-6-0603 1WXH) What’s the best way to follow the trail of progress to first sale and what’s the best way to figure our share, small as it may be? again, I assume that asking for a W9 is a good sign.

Calvert has a location in 3107N03W SE NE SE SE, so you have to look up well information from that section.

Sixkiller has a location in 0706N03W SW SW SW SW, so you have to look it up from section 7.

Since both these wells are multi-section wells, the OCC will post the final splits between the sections. 6 & 7 of 6N-3W, (not 7W).
The decimal equation is net acres/actual spacing acres x royalty x % perforations in each section. Sections 6 & 7 are not 640 acres due to the curvature of the earth. The Division order usually posts the actual acres, but you can look it up yourself on the Bureau of Land Management website. https://glorecords.blm.gov/search/default.aspx#searchTabIndex=0&searchByTypeIndex=2

Pending OCC cases at the following link: http://www.occeweb.com/caseprocessingonline/default.aspx Actual cases if you have the case numbers: OAP Docket proceedings: Oklahoma Corporation Commission Office of Adminstrative Proceedings Well activity: Test Production: Gross Production

Both wells are listed on the OTC site.

Make sure the W-9 is the most current one, not the 2014 one. Yes, that is a good sign. The wells have been drilled already and are listed at the OTC tax site.

Well the money has begun to flow! Revenue checks have been sent and it really is exciting having followed the process for the last 4 years. I still don’t know right from wrong in this process, but it has been fascinating following the court documents to get to this point. Now i have a couple of questions for moving forward:

  1. Payment was made without executing the Division order i received. Does the division order still need to be signed and is there any up/down side one way or the other?

  2. The lease is in my wife’s name. Is there a specific provision that should be added to her will regarding the mineral rights, or do they typically fall to the nearest heirs?

  3. Are there specific deductions I should pay attention to if the lease was to deliver “free of cost, in the pipeline, etc”?

Thank you , thank you, thank you in advance for your continued good council with everyone on this forum.

Congratulations!

  1. In OK, no Division Order is required to receive payment. You have several options.
    a. Don’t sign anything if the DO is correct.
    b. Do sign it so your heirs have a record (highly recommended) and so that you have a document if there is an operator sale down the line and suddenly, the decimal changes.
    c. Don’t sign the DO, but send a letter that states your name, address, description of the acreage, well name, confirmation of the decimal amount and a statement that says the letter and confirmation of the decimal amount does not change any terms of the lease.
    Personally, I like to have a paperwork trail.

  2. Wife needs to get legal help to properly word how the minerals are to be passed down. There are intestate laws in each state, but that does not guarantee that the minerals would pass like she would want them to. Make it crystal clear with the correct legal document.

  3. Definitely keep an eye on your check stubs for any deductions that are not allowed under the lease. Certain taxes are normal.

  4. Talk with your accountant about your taxes now! You need to plan for how to pay them properly. The first few months of royalties may put you into a higher tax category and you need to be prepared for what is to come.

  5. Our family sets aside 10% of the revenue as a thanksgiving to God for allowing us to be good stewards of His good gifts. We give to charity.

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Thank you for the great guidance. We will certainly be taking action on #5 as well !

I appreciate your willingness to share your wealth of information and experience.

Harry

Oklahoma does not require a division order. I like to see their proposed orders to see that they have the decimal interest correct. They still must pay even if you refuse to sign. Many companies attempt to add items in DOs that are disadvantageous to mineral owners.

Your wife does not need to specifically mention the property in the Will unless she intends to make it a gift to a specific individual. A better solution may be to deed the minerals into her trust to avoid probate. If she doesn’t have a trust, a simple mineral trust can be created. Alternatively, a Transfer on Death Deed also avoids probate. There are pros and cons for each. Therefore, this post is just to provide information and is not legal advice.