In the lease documents, I am clearly named as “lessor” of my 13.125 net acre interest. I received my lease bonus. The lease clearly states that " as royalty, lessee agrees to deliver to the credit of lessor the equal 1/4 part of all oil and gas produced and saved by lessee from said land". The terms of the lease are very clear. Who lessee is, who lessor is, 1/4 royalty and 3yr term. My question: Is the lessor ALWAYS entitled to receive what was spelled out in the lease, that is to receive the royalty? Or are there factors that may override and give the royalty to another party?
Tony,
I can understand why you would ask this. Before I joined this site as an adviser, I read with great frequency all kinds of worst case scenarios. It seemed like the most frequent advisers were the ones who delivered the most doomsday type advice. That is why I came on a few months back. I thought that I could bring more balance to the table. I could tell that most of the advice was coming from people who were outside of the industry, or who had a personal vendetta against the oil industry in general.
All of that aside, the answer to your question is that if you are the mineral owner, and have executive rights, then you are the one who is entitled to sign the oil and gas lease. Will you receive 100% of the royalties under the terms of the lease, or the full 1/4th? Not necessarily. It depends what has transpired over time, or in the chain of title. Mineral and royalty deeds during the Great Depression were very common. People would prefer to listen to their stomachs as opposed to dreaming of visions of another Spindletop. If they could sell all or a part of their minerals to get some money to buy a hog, to feed their family, they would do so.
Those are the factors that you are inquiring about. Prior in time, or before you signed the lease, a lot of the minerals and royalty could already have been carved up. You don't know unless you have a full mineral and royalty title search done.
Thank you Mr Quincy. Some that I’ve talked to, or have seen and read my similar type of question here about my mineral rights, might think " boy, it’s really hard to get through to this guy". I will admit, it has been somewhat hard to grasp. Though I do get the “bundle of sticks” explanation. It’s the wording of the lease that just would make it SEEM that the lessor ( as in me ) is definitely the recipient of the royalty. I’d just like to have this settled in my mind by reading the deed/ conveyance/ title opinion or whatever legal document exists that will set the matter straight. My hope is that the well operators landman will help me to put this to rest. Thanks again for your response. Dave Quincy said:
Tony,
I can understand why you would ask this. Before I joined this site as an adviser, I read with great frequency all kinds of worst case scenarios. It seemed like the most frequent advisers were the ones who delivered the most doomsday type advice. That is why I came on a few months back. I thought that I could bring more balance to the table. I could tell that most of the advice was coming from people who were outside of the industry, or who had a personal vendetta against the oil industry in general.
All of that aside, the answer to your question is that if you are the mineral owner, and have executive rights, then you are the one who is entitled to sign the oil and gas lease. Will you receive 100% of the royalties under the terms of the lease, or the full 1/4th? Not necessarily. It depends what has transpired over time, or in the chain of title. Mineral and royalty deeds during the Great Depression were very common. People would prefer to listen to their stomachs as opposed to dreaming of visions of another Spindletop. If they could sell all or a part of their minerals to get some money to buy a hog, to feed their family, they would do so.
Those are the factors that you are inquiring about. Prior in time, or before you signed the lease, a lot of the minerals and royalty could already have been carved up. You don’t know unless you have a full mineral and royalty title search done.
What is the likelihood that the company landman will produce for me to read either the title opinion , mineral or royalty deeds which I’m guessing would answer many of the questions I have? Is that too much to ask?
If it was up to me, I would turn you down regarding the Title Opinion. I would tell you that it is confidential work product paid for by the company, and that you as a lessor are not entitled to see it.
If you didn't understand your interest, I wouldn't mine showing you the deeds or references as to how I calculated it.
I think I get your drift. You might ask the landman what you own, but going back to your original question, if in fact you were paid for 100% of the bonus, does not mean that you own 100% of the royalty. It depends on what transpired over time, or in the chain of title.
And that is really all that I’m after. HOW we arrived at executive rights, no royalty. Since this was an inheritance, someone surely conveyed something. The landman made a diligent effort to find me, had us sign a lease, paid bonus, made grandiose speculations… Then nothing. Disappointment…sure. But a part of this whole thing is just … Knowing for sure.
You may have royalty as well.
Well, it would be nice if that turns out to be true. After 10 years of not knowing anything about what’s happened with the well, this next week after the holiday I’m planning to get some resolution. I don’t mean to seem unappreciative for what I did inherit, it was an unexpected gift for which I’m thankful. Any sticking point though that I do have in this whole ordeal, is having been led to believe one thing (by the landman) only to find something quite different some years later. I am more than ready to put this to rest.
Hey, Tony -
Dave is correct, it is possible to have Surface Ownership, Mineral Ownership, Royalty Ownership and ownership of the Executive Rights all owned by separate parties.
In the State of Oklahoma, I once had to get one guy to sign the Lease, paid the Bonus and Annual Rentals to a second, with the Royalties all going to some half a dozen other people. And then had to negotiate a Damage Settlement with the Surface Owners. Crazy World, Oklahoma.
As to being provided copies of Title Run Sheets and Title Opinions, you can include such a provision in your lease, but you apparently did not do so.
Even after 10 years, the company might be willing to send you a copy of their Title Run Sheet regarding your property - something for your files. Well, if they have one: Properties can change hands and Land Files are not always passed forward as the should be.
Dave is entirely correct, again, in that they might hesitate to provide you with a copy of their Title Opinion. Liability issues.
If it would help in any way, I may be able to provide you with some information about the Well itself. What is the name of the Well and where is it located?
If you don't know that, then what is the legal description on your lease? I may be able to identify the Well that way.
Hope this helps -
Charles
Charles Emery Tooke III
Certified Professional Landman
Fort Worth, Texas
Thank you Charles, I received a return phone call from Endeavor Energy in Midland today. The gentleman I spoke with was very helpful. His assurance was that they go to great lengths and considerable expense to be sure of aspects of ownership. He read from the Title Opinion our names and said next to them was an asterisk stating we had executive rights, no royalty. I suppose that is the FINAL word on that, can’t imagine that a mistake would be made.
I’ve been told that theKellison well is active , but not producing much. It would seem that my only hope would be that they would let the lease expire and sometime down the road a new lease could be negotiated. Again,I I can’t imagine they would let that happen if they thought it was worth having and continuing their operations. We shall see.
I’ve certainly learned a lot about oil & gas the last couple of weeks. Some that I’ve learned hasn’t been the best financial information for me personally. But I’ve met and talked with some very nice mineral owners and very helpful people such as yourself Charles. Thank you very much. Tony. br/>
Charles Emery Tooke III said:
Hey, Tony -
Dave is correct, it is possible to have Surface Ownership, Mineral Ownership, Royalty Ownership and ownership of the Executive Rights all owned by separate parties.
In the State of Oklahoma, I once had to get one guy to sign the Lease, paid the Bonus and Annual Rentals to a second, with the Royalties all going to some half a dozen other people. And then had to negotiate a Damage Settlement with the Surface Owners. Crazy World, Oklahoma.
As to being provided copies of Title Run Sheets and Title Opinions, you can include such a provision in your lease, but you apparently did not do so.
Even after 10 years, the company might be willing to send you a copy of their Title Run Sheet regarding your property - something for your files. Well, if they have one: Properties can change hands and Land Files are not always passed forward as the should be.
Dave is entirely correct, again, in that they might hesitate to provide you with a copy of their Title Opinion. Liability issues.
If it would help in any way, I may be able to provide you with some information about the Well itself. What is the name of the Well and where is it located?
If you don’t know that, then what is the legal description on your lease? I may be able to identify the Well that way.
Hope this helps -
Charles
Charles Emery Tooke III
Certified Professional Landman
Fort Worth, Texas
Tony,
If you had the executive rights only, you would be entitled to the bonus, but you were basically leasing on behalf of the mineral/royalty owner. Even though it would appear from the language of a lease that THIS lessee is going to pay THIS lessor XYZ royalty, in reality it is saying that whoever owns the lease will pay that royalty to whomever owns those minerals, not necessarily the person who signed.