My family is negotiating an oil and gas lease for mineral rights in Section 6, 10n 11w with Silver Oaks Natural Resources. They have requested we sign and notarize a Memorandum of Oil and Gas Lease which they will file with the County Clerk’s office in lieu of the full lease. Has anyone else encountered this situation and have any idea why they do not want to file the full lease?
This a common practice as companies don’t want to disclose key aspects of their leases. Pretty rare for an actual lease to be filed these days.
It is extremely important that your family retain both hard copies and scanned copies of the executed lease in permanent records. Otherwise you will have no way to prove the terms of the lease, including royalty rate, depth and acreage releases etc. This practice of only filing a memorandum has been become a serious problem for both the lessor and heirs or assigns. It is only beneficial to the lessee and often the lessee or its assigns will either be unable or unwilling to produce the original lease.
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Thank you. Are we required to agree to the memorandum replacing the actual lease being recorded or can we object and request the entire lease be recorded?
I wonder what would happen if you decided to file the actual lease on your own. I’m not saying you should do that! Anyone have an idea about potential legal issues?
Could be language in the lease that prevents you from doing that.
To file the lease, you need to have a signed and notarized original. So the lessor should consider executing multiple originals and retain one in the files.
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Thank you for your help. I will ask for the entire lease to be recorded or alternatively to obtain 2 original notarized copies for each Lessor.
Hi Dorothy. My recommendation tracks with the others. Get the true lease with the final negotiated language completed. I have found that the lease language can be a key variable in your negotiation of terms like lease bonus and royalty fraction. Also, make sure to get a negotiable check in hand at the same time as you hand over the executed lease. Don’t accept a check draft pending the title work. Its also good to get an oil and gas attorney to review the lease and to adjust the initial language to better protect your interests, especially if you are new to leasing.
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It is commonplace, kind of frustrating to landmen working title though. They always just disclose the primary term and thats about it, coupled with a legal. I would echo what most others say but I would say if the deal is good, do some research and talk to neighbors relatives etc, accepting a check is not the only way to get it done. OFTEN companies are racing in to establish a footprint, many of them with the intent to flip for a profit, and due to that many times they are operating off a quick lease check so they do not know what you actually own. So, most times they offer a draft with orders to fund the draft at time at which the title is sorted out and they know just what you might own.
The memorandum concept is the stupidest thing ever created in the oil and gas business. In prospect development I have found many times where a copy of an old lease simply does not exist. There is vital information in the lease that needs to be of record, such as Pugh clauses and depth severances. If these are not of record and a copy of the lease is not available then there can be an unknown that can’t be solved. Focus on editing the memo as well as the lease if you are going to execute one.