We have been approached with a "Top Lease" for our old lease from 1974 that is barely producing in paying quantities (32,000 to 100,000 Mcf month gas only) in Blaine County, Section 33 14N 13W. We have 160 net mineral acres here on a 1/8 lease that is held by production currently by Singer Petroleum. We have been offered a $1500 per acre lease bonus and a new 3/16 lease. It could take 3 - 9 months to "break" the old lease either through the court or by buying out the current operator. The new lease would give them up to two years to make this happen. My question is; could we just get a good attorney to do the same thing for us and hopefully get a new lease in the future for a better bonus and at least a 1/4 to 1/5 lease since this is such a high production area in the STACK or should we seriously consider this Top Lease offer? Thanks to all who help us answer this. Greg Turner
I am not a fan of top leases, as they can have undesirable consequences.
Also, 3/16ths is not as good as 1/5 or 1/4. This is not the highest production area in the stack and is just warming up, so you will probably not get enormous offers-yet.
479-AnOverviewofRecurringandRelatedIssuesInvolvingTopLeasing.pdf (210 KB)Thank you M Barnes. This top lease legal overview is helpful. Have you heard of or seen any mineral rights owner (with attorney) going directly to the leasing company and negotiating (buying) a depth clause / Pugh clause that would give the MR owner the right to lease below the current vertical well depth? Our lease has been held by production since 1974 and we need to find any and all options for getting a new lease when that time comes. We are going to talk to a good OK attorney but would love to hear what others in our situation have had success with in breaking bad leases.
The old 70's leases generally did not have depth clauses. I have not heard of anyone buying the depth clause, but that doesn't mean it couldn't happen. The oil companies guard those old leases jealously because they do get to keep them active. On the other hand, some of those leases are quite nice and simple with gross proceeds, so they can be good leases. The only way I have heard of breaking a lease is if it can be proved that the well is not producing in "economically paying quantities" and I think yours is too high. That is why I would not get tangled in a top lease here. Let the guys who really want it broken get the well declared dead and then you can lease cleanly.