Fayette County, TX - Oil & Gas Lease

We have received our lease check. We signed with the company in Schulenburg. I do have a question though…the original land owner gets half of the royalties. But is it normal for them to also get half the money from the lease? We own the land.

A great discussion issue:

First, I am sure no expert here; but, when working with deeds or oil leases, there is no such thing as "normal"! IMO, it all goes back to what the land/mineral deed stipulates and then the next step is how well the oil/gas lease was negotiated. Lots of variables can be dreamed up in both the deed and the lease; but, IMO, the deed is still the driver. That is why it is so important to use a reputable and knowledgeable attorney in both situations. Plus, the more homework we do on our own never hurts either.

My wife’s cousin signed with an outfit called HBR. They promised her $700 per acre and never paid. And to boot they made her sign some 30 day option. Oil isn’t low enough to warrant a contract such as that.

Sadly we did use a attorney. We completely understood they get half of the royalties. Our previous lease, we did get all the lease (bonus) money. But for some reason this time we didn’t. They said the deed states the original owner has a “minerial interest reservation” which entitles them to half of lease money (bonuses) not just royalties from production. They said the other company messed up when we got it all. I am pretty amazed at the power someone with a “minerial interest reservation” has over our property. Not sure how everyone involved in our previous lease messed up and/or missed that in our deed when paying us twice for our lease.

There are two important issues brought out here.

First: We have to remember that in Texas, Minerals are separate from the surface even though they are part of the same deed and the authority that a mineral owner has controls. Probably not written the way an attorney would write it; but, in Texas minerals control. As a surface and mineral owner, I understand your frustration; but, that is the way it is. Now that we have that out of the way, deeds can be written as many ways as people have ideas. In my experience, especially since the 1980's people that sold property, also included some mineral percentage (20%-50%). In this case, the person getting ownership of the surface will be getting the full mineral rights percentage they pay for and unless there is some stipulation otherwise, the selling person will retain the % they didn't sell and that includes full ownership which means they are entitled to sign a lease and get the royalty percentage as well as the bonus money they negotiate. In some cases, the property purchaser will get 50% along with the Executive Rights as well, i.e, there is a lot to this issue.

Second: Previous lease mess up! Too many inexperienced people handling this very technical issue without much oversight. In your first lease, evidently some person screwed up and if there was a renewal, then it was done without ever looking at the deed again. Now, the second lease comes along and the lease hound did his/her do diligence and knew what they were doing.

The interesting part here is that the original owners never raised a red flag about the oil leasing and the loss of bonus money. Of course, that isn't really that uncommon either, since very few of us really understand all of this mumbo-jumbo to begin with until it hits us square in the behind.

Thanks for bringing this up, since these are great learning experiences for all of us.

Sanchez has sold all it's Fayette and Lavaca county holdings to Lonestar Resources out of ft.Worth.

This outfit also bought out our wells in Gonzales County from Battlecat

Thanks for the update! Any followup information on what the new kid on the block might have in mind will be appreciated.

Lonestar's MO has been to purchase the more marginal properties of companies like Clayton Williams, Goodrich and Hunt and then commence new drilling. They seem to be able to get wells drilled and completed for $$$ less than the norm for the areas in which they are active.

Their position spans from Burleson Co all the way to S Tx (LaSalle Co)

Getting an offer from Tri-C resources. $600 bonus, 3/2 @ 20%. We are FM 1295 at county line. Anybody else seeing this or better?

We have not received this offer from this company, however, we are working with Penn virginia right now on a block of 700 continuous acres, exact area you are talking about....mostly in Lavaca county but some in Fayette right on the county line on right side of 1295. $1000/$500 3/2 25%. Little delay since this started working right before Harvey, and they are in Houston...but they are still working on it

Has Tri-C actually drilled anywhere around here ? what type of well are they considering to drill ?

I haven’t done enough research yet to know what the have or haven’t drilled. Supposedly it Eagleford well, not chalk.

AW...any updates on the Tri-C resources offer?

Nothing in writing. Lots of phone tag. I believe Steinhauser has a stack of Tri-C leases he is working on, but I don't know where they are located. There also may be another company showing interest, but I don't have name. I'm not much help and would be interested in others Tri-C offer. They are telling us they are in-concrete on their $600 3/2 20%. We've kicked the dirt with them but they don't want to budge. Hoping Penn-V moves over into Fayette to push up the rates.

Penn V has their hands full with the recent asset acquisition. There is talk of them adding a rig but its a budget thing also after coming out of bankruptcy

Penn v will not be leasing in the area Tri-C is trying to acquire...which is mainly the old expired Sanchez leases in fayette county from Praha to engle, and south of I-10. This will probably be the best offer you can get...about the same as the others are paying...Ross, Geo and what Jeter paid. Also someone called HBR ? or something like that is leasing same area. Mike Steinhauser is probably not liking the language of the lease..because the money is ok. Penn V did lease back the acreage to do the Big Five unit that Devon had permitted but never did...and Penn paid between $550-$650/ acre...and all of them accepted......

Penn will not be adding a third rig this year. they are going to have some extra expense in the next 18 months since they will be adding 8 new units during this time frame so they can HBP all of their current leases. From now on they will only be spending their net revenues for operating expenses...no more borrowing.

My lease option is up for renewal after 3 years in March. Any word on if Penn Virginia is renewing or dropping the 4th year for other leases? It was a 5 year - 3 year with option for 2 more.

Where are you located ?

Actually, I found your tract. You will be getting the 2 year option...no doubt....the $500 is cheaper than the $650 they are paying now.

Penn will drill the Big Five unit Devon already permitted...however, the permit will change. Penn just got finished leasing the land that had expired there. there will be 1 unit made to the east of the Big Five that will border the Olsvosky unit...You, Larry will be in that one. The units to the north of Olsvosky, and the units to the east of Prost unit "I" will be in 2019, since Penn has 1200 acres of 2year options expire in march 2020 in that area (the ones they are paying the options in March 2018). Penn just leased last month, another 800 acres in that area that had expired in that area as well, since it is close to their pressure boundary, and Area 2 looks to be better than Area 1 at this point.

Only issues here will be the tracts that leased to delago...about 6 in the Mary Lewis and fox surveys. i heard if Delago is unreasonable, that Penn will just not include those tracts in any units it will make. I know Devon did that a couple of years ago in 2 units close to Hwy 95.