Lease Offer From Bearcat o/b/o Continental Resources

Oklahoma Mineral Rights Stephens County, OK
1

Family has owned rights on two sections in Stephens County, Oklahoma for years.

Over the years, we’ve had previous Leases (2) with intermittent offers to Buy (all refused) holding out for another fair Lease. Still no interest in Selling, optimal Lease offers will of course be considered/negotiated.

The Sections in Stephens County are Section 5, Township 3 South, Range 4 West; and Section 32, Township 2 South, Range 4 West.

Recently Bearcat (a company we’ve pleasantly dealt with previously) contacted us with three Lease options (No Deadline for response yet)..

Option 1: Lease Term of 3 Years with no Option; at one-eighth Royalty (1/8) and a Lease Bonus of $1,002 per mineral acre.

Option 2: A Lease Term of 3 years with no Option; at 3/16th royalty; and a Lease Bonus of $752 per Mineral Acre;

Option 3: Lease Term of 3 Years with no Option; at one-fifth (1/5) Royalty; and a Lease Bonus of $502 per mineral acre.

We own (inherited from 2 generations ago) approximately 4.44 net mineral acres in 32-2S-4W and approximately 1.10694 net mineral acres in 5-3S-4W.

Is anyone aware of other companies than Bearcat “suddenly” anxious to negotiate Leases (not purchases) in Stephens County, Oklahoma? We’d like to get other Lease Offers to consider but don’t want to overthink this. Note too we received a random phone message from Evan (Last Name Unknown) from “Land Hill (?)” with an OK Area Code Phone Number. Does this flurry mean prospects for drilling, etc. are promising for these companies?.

Thanks for any thoughts on our pending Lease Offer from Bearcat. If more details are needed, please let me know. You folks have been invaluable over the years. Everyone be safe.

693

2

Continental has a drilling program in that area. Looks like they are heading your way. Many of us would like the highest royalty possible as the royalties from successful wells over many years from a higher royalty choice will usually far outweigh one time bonus for the lower royalty option.

It would be very wise to get a good oil and gas attorney to review any lease draft as they are usually in the operator’s favor and not the mineral owner’s favor and require substantial edits. If you cannot get a good fair lease with the operator, then there may be other agents who are working for third parties who may be more amenable to better terms.

You can also wait for pooling as it has its own advantages.

1 Like
3

Add another sincere Thank You for your wonderful feedback. You have helped us on this Forum many X over many years. I’ll try to keep everyone updated as discussions proceed.

4

Hi Michael, My family has multiple acres on that same area in Stephens county & we are continually getting notifications in the mail regarding multiple filings for new wells & extensions on existing wells on the springer, woodford, & others, yet no payments being made… wondering who do we need to talk with to get our payments structured… spoke with Delvin at Continental division orders to confirm our heirs / probate and awaiting payment structure or Something … going to head up to OKC soon to discuss with clerk of the court & judge who presided over our previous case.

5

Interesting Update on the Lease Offer from Bearcat o/b/o Continental regarding Stephens County holdings in Section 5, Township 3 South, Range 4 West; and Section 32, Township 2 South, Range 4 West.

The original proposal and options from Bearcat are set forth by me above to start this Thread. We had not responded to it in any detailed way.

Yesterday I received an e-mail from Bearcat stating the following:"I understand you were planning to review other proposals, and I wanted to let you know that (Continental) increased its offer last week for the minerals in (the two Sections involved)

Section 32-2S-4W

4.444 net mineral acres

At $1,500 per acre for a 3/16 Royalty: $6,666.60 Total Bonus

At $1,250 per Acre for a 1/5 Royalty $5,555.50

Section 5-3S-4W

1.10694 Net Mineral Acres

At $1,500 per acre for a 3/16 Royalty $1,660.41 Total Bonus

At $1,250 per Acres for a 1/5 Royalty $1,383.68 Total Bonus

Total for Both Sections

5.55134 net mineral acres

$8,327.01 total bonus for a 3/16 Royalty

$6,939.18 total Bonus for a 1/5 Royalty

Questions: Does them upping the oriiginal offer options for both Sections indicate anything to you folks?

How likely is it I would have further leverage to negotiate an even more favorable Lease(s especially regarding the proposed Royalties? Note no additional time option has been proposed by Bearcat beyond the three year proposed Lease period(s)

May I ask Bearcat to mail me a proposed Draft Lease with all Exhibits, Addendums, etc. for my close review before committing?

Sorry this was so long. Thanks have a great holiday weekend.

6

Ask for the 1/4 royalty option. May not be on the table, and their offers aren’t bad, but before settling on less royalty, fight for it. But only if you have a great Exhibit A to counter all the deductions. Otherwise, wait for pooling

7

Petroven, Sobo I and Blue Ox holdings are also leasing in sec 5. Many at 1/4.

The clauses are the most important issue. Sometimes the other leasing agents will give better clauses.

8

Just an update. We received a “bare bones” unsolicited Lease Offer (via Text) from Todd Baker, presumably a Landman at “SBC Global”(?). Just bare bones but it clearly said a component of “his” Offer was a 1/4 (25%) Royalty. He did not address whether the offer included an Option of any kind/length. I haven’t responded yet.

I have asked the Bearcat Landman (Julie Carruth) whether she would provide us with a Draft of the complete proposed Lease (details above in this Thread) o/b/o Continental Resources. I certainly agree from past advice on this Forum that the clauses, including Exhibit A, are the most important issue. Holiday weekend so no response expected from Bearcat until later in the week.

I hope you are all having a pleasant holiday weekend (cold and rainy here in the East..all weekend!).

9

SBCglobal is an email carrier, not the name of a leasing company.

The lease clauses are the most important part of a lease. It is wise to get a good oil and gas attorney to review all draft leases and make the appropriate edits to get them more favorable to a mineral owner. If hiring an attorney is not feasible, then the force pooling is a good alternative. I pick the highest royalty in known productive areas.

10

I used Ward Hobson, an attorney out of Oklahoma City. He was able to get me a 1/5 lease and no production costs, plus no use of my water, which were most important to me, as I own 160 surface acres too.This was on 106.87 nma in Sec 25, 2S, 4W. Three 2 mile horizontal wells were approved April 15th. I’m hopeful we may see some drilling in 6 months. This process has been over 20 years, as I bought the property in 2005. We have had many leases over the years. Attorneys aren’t cheap, but they know what to do.

1 Like
11

Another update on the Lease Offer from Bearcat o/b/o Continental.

The Landman (Ms. Carruth) modified the third Offer Option AGAIN on the family’s holdings in Stephens County Oklahoma in Section 5, Township 3 South, Range 4 West; and Section 32, Township 2 South, Range 4 West. as follows:

1,500.00 per acre Bonus and 3/16 Royalty (Total Bonus $8,317.01)–same

$1,250 per acre Bonus at a 1/5 Royalty (Total Bonus $6,939.18) --same

$200 per Net Mineral Acre at a 1/4 (25%) Royalty) Total Bonus $1,180.27)–Lower Bonus, Higher Royalty.

She supplied by e-mail, as we requested a complete Draft Copy of the Proposed Lease, including Exhibit A. What was previously understood to be a Three Year Lease with No Option, per Exhibit A is now proposed to be a Three Year Lease to be extended by two years from the expiration of the original Three year Term. Further per Exhibit A, “the Lessee may exercise the option at any time prior to the expiration of the original primary (3 year) Term by paying or tendering the sum equal to 100% of the original bonus paid or to the Lessor’s credit in Lessor’s Depository which will operate to extend the primary Term for 2 additional years and it shall be considered for all purposes as though the Lease originally provided for an original Term of five (5) years”.

We are in no way anxious to even Lease our rights unless we get a Bonus, Royalty, “Cost Clauses” and Three Year Term exactly to our liking. The Bonus must be in hand before anything is Finalized not after the Lease is signed. This is the Third Offer from Bearcat/Continental and other companies may also be Leasing per Ms. Barnes’s Post above.

Any thoughts appreciated as usual. Thanks.

12

It would be exceedingly rare to get the bonus up front without having a lease signed. Many owners will sign a lease and have a third party such as an attorney or accountant hold the original until the bonus payment hits the bank. Then they will hand over the lease to be filed.

You can always wait for the pooling if you cannot get the exact lease that you want.

13

Update

Negotiations on Bearcat/Continental’s ongoing Lease Offer on our interests in Stephens County OK 32-2S-4W and 5-3S-4W

Working with a very pleasant Landman for Bearcat (Julie Carruth). Last update mentioned we received per our request a complete copy of the proposed Lease including Exhibit A. Also mentioned that a proposed 2 year Option (in addition to the 3 year Term of the Lease) had crept into the written proposed Terms.

In a productive follow-up phone conversation with Ms. Carruth she readily said they would drop the proposed 2 year option. A Forum Member (sparkle-motion) had suggested above in this Thread that I ask for the 1/4 Royalty option on our two interests. As set forth above, I didn’t even have to ask for the 1/4 Option it was offered in a follow up to Bearcat’s original offer though with a very low Per Acre Bonus (which I still may want increased).

Now here’s the sticky part (I’d love some Feedback if any of you folks get a chance to do so).This is what Ms. Carruth (The Landman) put in a written response to me about the proposed Exhibit A “Costs” paragraphs: "“The only deductions that may be shared are certain downstream costs incurred after the product has been made marketable and is being transported or marketed beyond the initial point of sale or processing facility. For oil the clause specifically prohibits deduction of line-fill fees, which is a significant protection for the royalty owner. For gas, Continental bears all costs through the inlet of the processing plant, with only downstream transportation and processing-related costs after the tailgate of the plant remaining deductible”

Soooo, given their so far above and beyond willingness to accomodate our reasonable requests (e.g. readily dropping the proposed 2 year option and offering a 1/4 Royalty) does “danger” still lurk in the Exhibit A language I just quoted?

Everyone have a great weekend and my usual sincere appreciation for any feedback.

14

Landman’s response is not a legal interpretation and is not binding, For that, you need an oil and gas attorney to review the exact language.

1 Like
15

You’re going to get a substantially bigger bonus and way better terms leasing with a 3rd party other than the operator. The operator is incentivized to keep bonuses low so they can keep pooling values down because they have to attest to them at the pooling.

For example, someone who participates in wells (like myself) would give you 5x that bonus at 25% for a 3 year with that exhibit you want and pay you before the lease is in hand

16

An attorney would have to comment on the whole of the lease. A single clause taken out of context is not particularly useful. Oklahoma is an "implied covenant to market "state. That means that an operator has to get your product to market without charging you. That clause puts charges right back in. Danger still lurks, and I suspect there are other clauses in that lease that also need to be struck, are missing or need to be reworded. An investment in a good oil and gas attorney on the front end of the lease can save or make you money on the royalty end.

A third party group may often give much better lease clauses and higher royalties.

1 Like
17

Very intriguing. Interested in hearing more from you but at some point I’d need to see a complete copy of the proposed Lease(s) including Exh A language that I’m comfortable with after further Forum feedback.

Can we get a proposed Lease with specific terms in writing and perhaps some alternatives with varying bonuses combined with varying royalties? We’ve concluded Leases on these interests over the years–none pending presently–but never dealt with a “3rd Party” and I have no idea what that would entail especially all benefits (which you have mentioned in general and also not in a legally binding form) as well as risks in doing so.

Keep in touch.

18

As always your responses are incredibly helpful.

We are in absolutely no hurry nor in any present need to conclude a Lease on these interests (though we’ve do several in the past) and although of course upfront costs to a knowledgeable attorney of course make sense and would be justified my concern is that we’d pay those upfront costs and the lawyer would say to us after reviewing and negotiating “hard pass” on the Lease in question. I certainly would want the best Lease possible with the least or no risk costwise but for now I’m highlighting the more obvious concerns while realizing more may lurk.The key being if it doesn’t “knock our socks off” whatever that may turn out to mean, we won’t move forward.

The Forum has often said if it comes to pooling that would not be a disaster even if not maximum terms result.

Thanks for you superb advice.

19

Non-operators can be more generous on the terms and bonus because if the operator offers you a “special deal”, then that factors into the terms they have to attest to at the pooling that needs to represent “fair market value”. The operator wants cheap leases at low royalties. If my math is correct you have ~5.5nma which is not big enough for an operator to not give you any special treatment because they are looking at the big picture and their bottom line. They can live without the 5.5 ac lease.

@M_Barnes might be able to chime in on some nightmare scenarios that could happen by leasing with a non-op but other than someone not paying you or having some intense clause that the operator won’t accept idk.

Unfortunately Michael A., the forum prohibits solicitation or direct contact etc. so maybe our paths will cross organically, Michael A. in 5-3S-4W and 32-2S-4W. I just wouldn’t sign with the operator even if their landmen are nice, you’ll likely be leaving a lot on the table (5x+ at least) IMO.

2 Likes
20

NEVER hand over a lease without getting payment. With an operator or a third party. Legitimate agents are fine with a third party holding the lease until payment arrives.

1 Like