Lease Expiring and Operator Wants Surface Agreement

Oil and Gas Leasing Help
#1

We have an oil lease that expires the end of October. The lessor contacted us and wanted to extend the lease and stated that they plan to drill in the near future. The terms of the existisng lease are not favorable now since producing wells have been completed on surrounding properties. The current lessor has refused to negoiate a new more favorable lease and instead advised us that they intend to drill before the lease expires.

The lessor has sent us a surface damage claims release offering $5000.00 for damages caused by drilling, completion, production, and/or abandonment. They are insisting that we sign it even though we are unhappy with the terms.

My question is if we sign the surface damage claims release and accept the money does that by default extend the term of the expiring lease.

What should we do? Just refuse to sign the surface damage release and wait for the current lease to expire and risk the possibility of going to court?

#2

If they want to extend it then just start all over with a new lease! Your in the “drivers seat”.

#3

They refuse to discuss a new lease. They just keep saying they are going to drill soon and we have to sign the surface release agreement so they can get started. They did admit that they don't even have a rig yet so I feel like they are just blowing smoke at us.

I already have a much better offer from another oil company if the current lease expires. This company has already drilled a producing well on our nearby property. We are very pleased with this operator as he has done exactly as he promised. I really want to lease the land to them.

#4

Ms. Osborne, if you have caller ID I would just ignore them until the lease expires. The surface damage contract sounds way too low. I think you may do well to hire a mineral manager to negotiate for you after the lease expires. If you signed a poor lease before they may think you are easy pickings. If so, I hope you prove them wrong.

#5

Ms. Osborne:

DO NOT SIGN ANY DOCUMENT!! This document could very well contain wording which would be harmful to your future negotiations. You have not stated where these minerals are located but from what you have said it must be in a "hot" area. Let this lease expire and shop around for a new lessee with terms which are currently being negotiated such as bonus/acre; % royalty. You are in the drivers seat and by all means, don't let them bully you into terms against your will. If this operator drills prior to the expiration date, all bets are off but these rigs usually work on a schedule and most likely they either don't have a rig avaiable in that time frame to drill prior to the expiration date. This type of scenerio will probably become common in the future as many, many leases will begin to expire and these companies are too far behind schedule to meet these expiration dates. Good luck!!

#6

Don’t sign anything without seeing an attorney - you are being bullied.

#7

on ou mineral rights and royalyies in goliad the operator last time he drilled as 2007 he has since abandoned the wells hasnt kept up mowing and left it growed up with grass it expired last april how do we get him and his styff off the property he told me he is tring to sell his stuff, ias there away to force him out and open it up for someone else to lease

#8

Dear Ms. Osborne,

Everybody has suggested that you get some representation. That is a great idea.

Your current lease needs to be examined to see what types of operations will hold the lease. Also, the force majure clause on the current lease needs to be reviewed. Some of the newer leases will stipulate "inability to obtain equipment" as a force majure event (this may be a real problem if they do not have a rig under contract). Lastly, some of the more recent leases give to the lessee the first right of refusal on top leases or even new leases solicited within XX days of expiration of the current lease.

Once you obtain the answers to those questions, additional questions will arise and when those are answered, a proper strategy can be developed to hopefully maximize your assets.

#9

Dear Ms. Peterson,


Goliad is one of my absolute favorite counties. Do they still have the Blue Quail Cafe on the courthouse square?

You may absolutely have some recourse. Contact Steve Paulsgrove on the courthouse square. He is a great attorney and absolutely knows his oil and gas law. All of my dealings with him have been pleasant.

nancy peterson said

on ou mineral rights and royalyies in goliad the operator last time he drilled as 2007 he has since abandoned the wells hasnt kept up mowing and left it growed up with grass it expired last april how do we get him and his styff off the property he told me he is tring to sell his stuff, ias there away to force him out and open it up for someone else to lease
#10

Ms. Peterson:

You can always contact the Railroad Commission of Texas (Corpus Christi office) and make a complaint in regards to the over grown vegetation on location. The Statewide Rules addresses this, except the vegetation must be inside the firewall area at the tank battery. A field inspector could also check for other violations on the lease (pollution, etc,). If violations are found, the operator will likely recieve a letter detailing the violations.

#11

thanks for the info the cafe was still open the last time we were there i will try the rrc first we are near diebel rd near weesatche tx

#12

Will you tell us who the current operator is? Thanks.

nancy peterson said:

thanks for the info the cafe was still open the last time we were there i will try the rrc first we are near diebel rd near weesatche tx
#13

Thank you for your advice. We will definitely seek legal counsel before signing anything.

#14

As stated by everyone including the esteemed Mr. Cotten (1) don't sign anything that would have the semblance of a new or amended lease ... keep them to the terms of the incumbent lease unless they want to up the royalty of course (2) as to the Surface Use Agreement/Release ... yes, too, look to the terms and provisions of your original lease: if the payment of damages and methods of operation were not addressed then you are pretty much at their mercy and their seeking the SUA is a method of stipulating their duty and get release of further damages, etc.; rather, I always include in my lease form provisions for payment of agreed-sum damages in advance of entry and standards of operations/procedure, etc. for roads, well-site location, tank battery installation, ROW's/easement, etc. ... makes for an easier experience when they do drill that everyone knows their responsibility.

I'm from Cuero, worked a lot in Goliad and, yes, the jalapeno cheese soup at the Blue Quail is to die for!

#15


Will you share who this company/operator is? I would like to know who to avoid when leasing.


nancy peterson said:

on ou mineral rights and royalyies in goliad the operator last time he drilled as 2007 he has since abandoned the wells hasnt kept up mowing and left it growed up with grass it expired last april how do we get him and his styff off the property he told me he is tring to sell his stuff, ias there away to force him out and open it up for someone else to lease
#16