How do I deal with Landman who says he can not change lease?

Landman Discussion
1

I am in a battle in Elbert Co not only with residents that want to fight the oil companies and whoever else is involved with drilling. But i am in a tussle with my landman who says his company does not want to change the lease AT ALL. So we have gotten down to working on an Addendum But the Company does not want to get rid of the Warranty clause or even change it to a Special Limited Warranty. I'm not making any headway on paying royalty "at the point of sale" instead of at wellhead. And he will give me a 3 yr term with 2yr. option but not pay additional bonus or give me the option to opt out at that time. Aren't these issues possible to work out? I'm not so worried about bonus, although I would hate to loose out initially, but may be there is more to look forward to later in fair and equitable royalty, IF there is oil to be retrieved here in southern DJ Basin. Any help would be appreciated. THANKS.

Don Jones

2

Don, I am also in Elbert County. I was able to get a few items added to my contract. I was dealing with Chesapeake who are you dealing with?

3

Hi Mike,

It is Chesapeake. I sent you a request to be a "friend", so I can contact you personally if that is alright.

Don

Mike Miller said:

Don, I am also in Elbert County. I was able to get a few items added to my contract. I was dealing with Chesapeake who are you dealing with?
4

Mike:
We were approached by Red Sky representing Chesapeake, and now most recently a landman with Conoco-Phillips. We have considerations we would like to amend the contract with as well and will soon be meeting with the landman with Chesapeake to discuss this. Would we be able to contact either of you?

Regards-Rod and Dawn Miller

5

"Red Sky" representing Chesapeake offered us $450 a mineral acre plus 3/16 royalty. This is in Section 13 7S 64W.

I questioned the landman about the $1500 an acre that I had seen here by Conoco. Got the impression that small 5 acre plots probably are offered more as on a small plot there is not enough money to make them get off the fence and sign. Costs the oil company more that way but I can see the reasoning. Would like to know if anyone with 35 or more acres has received the $1500 an acre offer. I heard that Conoco had sent letters out to some in our area but I did not receive a letter. Rod and Dawn, I will send you a PM.

6

This was the same offer we were extended by Red Sky/Chesapeake. I have only received the letter in the mail from David Dixon/Conoco. We have 40 acres Township 7 South, Section 23/County Rd 29.

Mike Miller said:

"Red Sky" representing Chesapeake offered us $450 a mineral acre plus 3/16 royalty. This is in Section 13 7S 64W.

I questioned the landman about the $1500 an acre that I had seen here by Conoco. Got the impression that small 5 acre plots probably are offered more as on a small plot there is not enough money to make them get off the fence and sign. Costs the oil company more that way but I can see the reasoning. Would like to know if anyone with 35 or more acres has received the $1500 an acre offer. I heard that Conoco had sent letters out to some in our area but I did not receive a letter. Rod and Dawn, I will send you a PM.

7

Dawn, you need to accept me as a friend for me to send a PM. Mike

dawn.miller.7684 said:

This was the same offer we were extended by Red Sky/Chesapeake. I have only received the letter in the mail from David Dixon/Conoco. We have 40 acres Township 7 South, Section 23/County Rd 29.

Mike Miller said:

"Red Sky" representing Chesapeake offered us $450 a mineral acre plus 3/16 royalty. This is in Section 13 7S 64W.

I questioned the landman about the $1500 an acre that I had seen here by Conoco. Got the impression that small 5 acre plots probably are offered more as on a small plot there is not enough money to make them get off the fence and sign. Costs the oil company more that way but I can see the reasoning. Would like to know if anyone with 35 or more acres has received the $1500 an acre offer. I heard that Conoco had sent letters out to some in our area but I did not receive a letter. Rod and Dawn, I will send you a PM.

8

SORRY all, this is turning out to be more on leasing discussion than landman discussion. I was looking for help from ex-landman or experienced negotiator or the like. MY mistake!!

Don

9

hmmmmmm.

This comes up all the time. Lanowners become stymied in the negotiation and are looking for help. Unfortunately, the negotiation process has many times become contaminated by the time that they realize that they need help.

10

AHHHH, Mr Cotton,

Thanks for some response! The only reason I placed this question was because after my efforts to negotiate with SOME success I did hit a wall and finally sat down with a lawyer on Friday to discuss my concerns that weren't being met. I frankly paid a real fee for not so good advise , in my opinion. This lawyer said there was not much I could do to change the Chesapeake lease because "it was a standard lease they all use" !! She also said the best place to get paid royalty was "at the wellhead"!! That too threw another flag in my original understanding. She looked up her answers in what seemed to be a little book on "how to right leases"?! So I have made an attempt to go beyond myself for help and was failed. I sent this lawyer some info from this site and other TLMA site on "how to negotiate a lease" and she said she would send my check back. I hope so because I will need it for someone else more qualified to help. ANY suggestions? I have had limited experience with leasing 4 yrs ago on our mineral rights in Reeves Co, TX. Along with all the info here and plenty of other places I thought I had a good idea of what I wanted but just can't get there. So!

Thanks.

Don

11

Hey Don!

All Oil, Gas and Mineral Leases are bi-latteral agreements and can be amended, added to and deleted from in any number of ways. I know - I've negotiated them for over 30 years on behalf of oil and gas companies.

Bonus consideration paid for leases in the Niobrara play will continue to climb over the next few years. A little patience on your part may result in a much greater amount of Bonus monies being offered in the coming months.

Do an online search of the recent State and Federal Lease Sales in your area - you may be pleasantly surprised at the amounts being paid to the State and the Federal Government for leases on land just like yours.

Never give anybody a two year option to extend for no additional Bonus payment. I've never even heard of such a thing - the Landman should be ashamed of himself. An extension of a primary term without adequate consideration offered and accepted might not even be legally binding.

I would suggest a substantially higher amount of additional bonus for any additional years - perhaps 3 times what they neogtiate for the first 3 years. That is, if you allow them any option to extend at all (I would not).

It's your land and your minerals and you need to have all of your rights completely protected at the point of signing, because once you've committed the company is highly unlikely to agree to any further amendment(s) your lease.

What do you do with the land? There are environmental indemnity issues, damage and loss of use issues, drainage concerns, roadway and padsite construction and placement issues, fencing, gates, cattle guards, water wells - all sorts of issues you should address before signing anything.

Royalty to be retained, Pugh Clause, Depth Severance Clause, Free Royalty Clause - these and other issues should also be considered before signing. And, yes, Warranty Clauses can be amended or even completely stricken from the lease - it's done all the time.

If you have not already done so, I strongly advise you to consult an Oil & Gas Attorney before continuing any further negotiations. Even if you have to travel a bit and his or her services cost more than you expect, it will be worth it for your peace of mind.

Hope this helps -

Charles

Charles Emery Tooke III

Certified Professional Landman

Fort Worth, Texas

12

Thank you Charles, if I may call you by your first name?

These are all issues that I was looking to confirm with somebody knowledgable. The person I saw was recommended by a Colo. Bar Assoc. oil & gas lawyer as being an oil & gas lawyer. That is what bothered me most. I run cattle on 40 acres every other year, and we are on well water 290 ft deep also. So much to be concerned about. My difficulty has been intensified(?) by everyone around me signing these "standard" leases because they didn't take the time to research their options or ask questions. This is all new to them and this area especially with the new technology. There are wells here for a long but verticle only. I'll keep looking for help close by and Thank you again. And I will do more research like you suggested.

Don

13

Of course you may: My Father was "Mr. Tooke"...

Did I understand you correctly that you saw an Oil & Gas Attorney that was suggested to you by a Colorado Bar Association Oil & Gas Attorney and that Oil & Gas Attorney advised you to accept a lease on the standard printed form? And to give the company leasing your land a free option to extend the primary term for an additional two years?

Maybe I misunderstood.



Don Jones said:

Thank you Charles, if I may call you by your first name?

These are all issues that I was looking to confirm with somebody knowledgable. The person I saw was recommended by a Colo. Bar Assoc. oil & gas lawyer as being an oil & gas lawyer. That is what bothered me most. I run cattle on 40 acres every other year, and we are on well water 290 ft deep also. So much to be concerned about. My difficulty has been intensified(?) by everyone around me signing these "standard" leases because they didn't take the time to research their options or ask questions. This is all new to them and this area especially with the new technology. There are wells here for a long but verticle only. I'll keep looking for help close by and Thank you again. And I will do more research like you suggested.

Don

14

Charles,

On most of the points she said I "would not" or "could not" get them to change. I believe she had tried to help someone else in my area with a lease, so she gave me that "advice". On the 3yr/2yr. , all she said was 'I hope you get it". No other advice, especially on the contrary, was offered. But the attorney senario is correct. I don't want to be at all missleading, so thanks for the follow up.

Don



Charles Emery Tooke III said:

Of course you may: My Father was "Mr. Tooke"...

Did I understand you correctly that you saw an Oil & Gas Attorney that was suggested to you by a Colorado Bar Association Oil & Gas Attorney and that Oil & Gas Attorney advised you to accept a lease on the standard printed form? And to give the company leasing your land a free option to extend the primary term for an additional two years?

Maybe I misunderstood.



15


HERE IS A LINK TO COLORADO STATE LAND BOARDS LEASE. HOW ABOUT THESE CONDITIONS??

http://trustlands.state.co.us/Sections/Minerals/Pages/Minerals.aspx

DON

16

Reading your comment, are you positive that Colorado follows the law that came out of the majority decision in the Heritage vs NationsBank case?

Don Jones said:

"The only reason I placed this question was because after my efforts to negotiate with SOME success I did hit a wall and finally sat down with a lawyer on Friday to discuss my concerns that weren't being met. She also said the best place to get paid royalty was "at the wellhead"!! That too threw another flag in my original understanding."
17

Mr. Cotton,

Here is a great article that I found on the case you mentioned and a similar case in Colorado in 2001 that had different language with opposite intentions (all depending on your position in the argument). I will read it over and over again. But as of the writing of the article there was no decision in Colorado law as to how to determinepost production costs. I'll continue my research and get back with you.

Thanks for the challenge! Hope this link works!

Don

http://findarticles.com/p/articles/mi_qa5447/is_200210/ai_n21323347...

Buddy Cotten said:

Reading your comment, are you positive that Colorado follows the law that came out of the majority decision in the Heritage vs NationsBank case?

Best,

Buddy Cotten

www.cottenoilproperties.com

18

John McFarland is a wonderful oil and gas commentator. I have not read this article and will do so with gusto.


Don Jones said:

Mr. Cotton,

Here is a great article that I found on the case you mentioned and a similar case in Colorado in 2001 that had different language with opposite intentions (all depending on your position in the argument). I will read it over and over again. But as of the writing of the article there was no decision in Colorado law as to how to determinepost production costs. I'll continue my research and get back with you.

Thanks for the challenge! Hope this link works!

Don

http://findarticles.com/p/articles/mi_qa5447/is_200210/ai_n21323347...

Buddy Cotten said:

Reading your comment, are you positive that Colorado follows the law that came out of the majority decision in the Heritage vs NationsBank case?

Best,

Buddy Cotten

www.cottenoilproperties.com

19

In my searching the Public Records of Elbert County, there were NO 3 yr. leases that I saw. I did see ONE 4yr. I heard both have been hard to negotiate with because they are the only Big players. But Chesapeake is not way "out of line" on their offers. They ARE trying to agressivly progress through the County. It boils down to whether or not you want to jump on the wagon now or have patience for SOME possible future gain.

Don

Tim Metz said:

Is everyone getting offers for a 3+3 or 3+2 from Chesapeake and Conoco and what terms have you gotten Chesapeake to change?
20

I can help with negotiating and I have years of experience as a landman. Contact me

Don Jones said:

SORRY all, this is turning out to be more on leasing discussion than landman discussion. I was looking for help from ex-landman or experienced negotiator or the like. MY mistake!!

Don