I’ve had two incidents in the last year, one where an oil company backed out of a lease after all of the paperwork was signed, but the checks hadn’t been sent out and another just today where a company pursued an easement from us only to back out, once again after the contracts were signed but before the checks were sent out.
We’re small and I don’t feel it would pay to pursue legally (if there would be anything to pursue), but it’s kind of disheartening to have this happen.
Is this common, and/or considered normal practice in this industry?
If they go and record the lease it may be a problem for you if they have run into financial difficulties and can’t pay. The lease may still be valid. You may want to seek legal advice. Some good general advice for the future: use an intermediary or meet in person and trade the lease for payment.
Yes, it is common. Just for the future. Never send an original lease to a lessee without getting a check. Many of them flip the leases to someone else for a higher amount and then use the money to pay you. Nothing wrong with that, but you do not want a lease filed without you getting paid. Many of us have our accountants or attorney or bank hold the signed lease until the check shows up and then the lease is exchanged. We send a copy of the original via email with BIG BOLD LETTERS, COPY- DO NOT FILE on every page, especially on the signature page to show good faith.
Is it the same for selling a percentage of your NRA? A company we are thinking about possibly selling to has on their website that they send the paperwork we sign, then they send the money.
I will give the same advice for a sale. Never send a signed deed until you have money in hand. Have a reputable third party hold it. Not sure what “paperwork” they have in mind. It might be a letter of intent. NRA is net revenue acres. Are you talking about the royalties from a well or an override or a working interest? Same thing. I would not let someone drive my car away without paying for it.
I have heard of Legacy Royalties. They have been around for a while. If you are thinking of selling, be very informed about what is going on in your area, what is the future potential, do you know your original basis and that you may have to pay capital gains. Lots of good reasons to sell and lots of good reasons to hang on in certain areas. Never sign paperwork you do not understand. Get an attorney to look it over and explain it to you.
The word is there are 2 good zones in our 2330 acres. Right now there are 6 of us splitting 200 a month. In the last year it started out at 150,000 for the 1%. It is now at 2.3 million. We might sell half and keep half for our kids. The bidding isn’t quite over yet.
Look up your operator and see what they are telling their investors and see if your area is on their maps. Talk to your neighbors. Look up the area on the state GIS maps to see activity. You are correct that you do not have to sell the whole thing.
Well, this is what I have been up to. A lot of info on the forum. NMoilboy has helped me a lot; he brought up maps for me and wow, a lot of activity all around us in Lea County, NM. We have 19 S 32E sections 22, 23, 26, 27, about 230 acres shy of the 4 now. With that being said, I decided to make my own calls. I called both operators EOG and Apache. Now Apache said they didn’t buy ORRI but gave me the name of Legacy Royalties. Haven’t heard from EOG and just for fun I thought why not Matador. Tilden Capital had already made an offer at 10,500 Net Royalty Acre and it was the best until Legacy came in and Apache turned me on to them. Very interesting. Got my wheels turning.