I received a check from Devon, along with a copy of my original lease, that they bought. The very short letter simply asks me to sign the receipt & return it, and states that they are 'electing to extend the lease, pursuant to the existing provision.' The provision in the lease states that if the option is taken, they will pay bonus money equal to the original amount. The check is for 1/10 of the amount that it would be. I've emailed & left a message asking for an explanation of how they derived this amount, & have yet to hear back.
They have already drilled a horizontal well, back in August, but fracking is scheduled for later this month. My question is - do they have to renew the lease & pay bonus money since they haven't fracked? I assumed that I was already 'held by (attempted) production'. The check is more than the $1/acre shut-in would be. The wellhead isn't located on my property. Any ideas?
Go fast, the wellhead does not have to be on your property for you to be paid royalties but the "production interval" does. Since Devon wants to exercise their option my assumption would be they are not producing your minerals and therefore your interest is not HBP. You are right to get a clarification but I suspect your original lease has not yet expired and the 10% will be paid upfront and the balance when the new term kicks in. Or they've got their wires crossed and are mistakenly wanting to exercise an option on a section that is already Held by production..
I think Michael is on the right track. If you were to cash a partial payment, it would hold you just as well as full payment. If you never received full payment all you could do is sue because partial consideration is good enough, unless your lease specifically says that only payment in full makes the lease valid. I don't accept a partial payment form anyone for anything.
Thanks. Maybe one of these days someone at Devon will go to work & call me back! Or, it may take an accountant wondering why their check has never been cashed.
Well, I finally got a call back today, after calling a different number yesterday. The lady politely explained that when they acquired the lease, their title department shows I only own 5.8 acres instead of 85.5. According to that figure, the check is correct. I told her what we showed, & what I'd been paid for, and she said she will check with her landman tomorrow. Now I'll need to talk to neighbors, since their relative is who I purchased my place from, & see if Devon is saying they own less or more.
UPDATE - Devon finally figured out the correct amount of minerals we own. The only reason we are getting a check is because our attorney put a depth clause in the lease, & Devon wants to hold on to zones above & below where they drilled. They are exercising the 2 year option. So....I'm thinking that unless they do something in those zones in the next 2 years, they will either release them or keep paying to hold them.
I'm sure sad that our attorney was recently tapped by the governor to be a judge, & I'm told he's not practicing law anymore. :-(