Mineral rights passed on from mother

Oil and Gas Leasing Help
#1

Good evening all, I'll be brief.

I have two questions.

First, I learned after my brother was contacted by EOG that my siblings and I inherited the mineral rights to 10 acres in Fowlerton, TX. None of us was aware that my mother owned this and nobody recalls anything 'official' taking place to transfer the ownership to us. Any ideas as to what I can do to prove our ownership?

Second, we were offered $1000 per acre for a 3 yr lease with an option to renew for two more at the same price plus 25% royalties. Is this fair? We have no desire to dicker for every cent possible but don't want to be taken either.

Anyway, this is all new to me (us) and this website has been invaluable so far in answering a slew of other questions I have had. Any input would be greatly appreciated.

#2

Dear Mr. Albright,

Chances are there are no official documents tranfering title into you and your siblings. You do not have to prove your ownership, the oil company does.

Just make sure that you are protected with an adequate oil and gas lease.

#3

Thank you for the response. Would you know at which point of the game I should pull in a lawyer? Is one needed at all?

Buddy Cotten said:

Dear Mr. Albright,

Chances are there are no official documents tranfering title into you and your siblings. You do not have to prove your ownership, the oil company does.

Just make sure that you are protected with an adequate oil and gas lease.

Best,

Buddy Cotten

PLM-BBA-University of Texas at Austin

#4

Mr Albright, I have no idea of what bonus to expect in your area but the royalty sounds good, especially for your amount of acres. I would at least try some bargaining concerning deductions/charges for conditioning gas for sale. If you are not 100% confident in your understanding of the lease, having a good lawyer look it over is cheap insurance. There are many lawyers out there that might just take your money and say the lease is okay. I've heard horror stories about 1 year grace periods for continuing operations and shut in gas clauses for $1 per acre per year and no set time in which the operator must produce and sell your minerals. I think a professional actually trying to earn his pay will make you money. Good luck.

#5

Mr. Kennedy-Thanks for the heads-up. The more I research the more apparent it is to me that a lawyer would be a wise investment.

Does anyone know, for the bargaining end, is there any way to get an idea of how much potential income we'd be looking at if we signed, assuming the site produces, of course? Hundreds, thousands, billions????

I'm approaching this with some trepidation and am trying to keep things as real as possible. I will admit, though, that the thoughts of instant riches have been in the back of my head. I guess we'll see.

r w kennedy said:

Mr Albright, I have no idea of what bonus to expect in your area but the royalty sounds good, especially for your amount of acres. I would at least try some bargaining concerning deductions/charges for conditioning gas for sale. If you are not 100% confident in your understanding of the lease, having a good lawyer look it over is cheap insurance. There are many lawyers out there that might just take your money and say the lease is okay. I've heard horror stories about 1 year grace periods for continuing operations and shut in gas clauses for $1 per acre per year and no set time in which the operator must produce and sell your minerals. I think a professional actually trying to earn his pay will make you money. Good luck.

#6

First did you mother have a Will and was it probated? There should be a listing of properties and a description. Assuming there was a IRS Form 706, I believe, it should have this information at least to the surface estate unless the property was sold having reserved the mineral property. It sounds like the landman has already determined you and your siblings own an undivided interest in 10 net mineral acres.

Secondly, I could not think of a better Company (Operator) to lease too than EOG. There are a few others that have good results from horizontal drilling in shale formations but EOG is my pick of the litter and I have done a bit of research on their performance results in the Barnett Shale in N Texas.

I don't think it would hurt to ask for a higher bonus even though you have just 10 acres. I would not let the bonus be a deal breaker as the 25% royalty interest rate is top notch. EOG has two well permits located 8 miles SW and one 8 miles NW of Fowlerton in LaSalle County. They are targeting the EagleFord Formation and it appears this area contains oil and/or gas condensate.

#7

Mr. Igau- We only own the mineral rights. There was a will but no mention of any mineral claims.

Thanks for the input on EOG....I looked them up and they look great on paper but sometimes that doesn't translate to performance. The second hand insight is appreciated, and a little reassuring.

I though about haggling the bonus a little, but am afraid that with only ten acres we might be easily pushed aside in favor of more accepting parties. I don't even know if ten acres is a substantial amount of land in this game. How many wells can you put on an acre? If it looks like there will be decent royalties to come I don't think we'll push the bonus any.

Mike Igau said:

First did you mother have a Will and was it probated? There should be a listing of properties and a description. Assuming there was a IRS Form 706, I believe, it should have this information at least to the surface estate unless the property was sold having reserved the mineral property. It sounds like the landman has already determined you and your siblings own an undivided interest in 10 net mineral acres.

Secondly, I could not think of a better Company (Operator) to lease too than EOG. There are a few others that have good results from horizontal drilling in shale formations but EOG is my pick of the litter and I have done a bit of research on their performance results in the Barnett Shale in N Texas.

I don't think it would hurt to ask for a higher bonus even though you have just 10 acres. I would not let the bonus be a deal breaker as the 25% royalty interest rate is top notch. EOG has two well permits located 8 miles SW and one 8 miles NW of Fowlerton in LaSalle County. They are targeting the EagleFord Formation and it appears this area contains oil and/or gas condensate.

#8

EOG is one of the better operators out there so you are in good hands on that front. Also good that they are offering you the 25% royalty so you don't have to do any haggling there.

I would suggest you look that you post in the LaSalle County group here to ask if there members who have news about recent lease rates in the county.

Keep in mind that the O&G company rarely makes their best offer straight out of the gate, so you likely have some flexibilty there to get some improvement of the terms.

Most important, however, is not necessarily the upfront bonus money but rather that you have good contract terms in your agreement that are not only in the company's favor but also that protect your interests.

Once the company drills a well you, and your heirs, will be locked for decades into whatever terms you agree to in your contract now. Too many people accept the company's contract without challenge and only think about the bonus and royalty without thinking about the larger long-term picture.

Attached is a starter on a few points that you should work towards getting added/amended in your Schedule A addendum to your contract. Good starting point, but I do also suggest that you have a good Oil and Gas attorney look over your agreement prior to signing/executing the contract.

Best of luck with your journey.

2951-jfhintsonlease1997.pdf (170 KB) 2952-oilgasleasechecklist.pdf (20.1 KB)
#9

This is great…thanks so much.

DJG said:

EOG is one of the better operators out there so you are in good hands on that front. Also good that they are offering you the 25% royalty so you don't have to do any haggling there.

I would suggest you look that you post in the LaSalle County group here to ask if there members who have news about recent lease rates in the county.

Keep in mind that the O&G company rarely makes their best offer straight out of the gate, so you likely have some flexibilty there to get some improvement of the terms.

Most important, however, is not necessarily the upfront bonus money but rather that you have good contract terms in your agreement that are not only in the company's favor but also that protect your interests.

Once the company drills a well you, and your heirs, will be locked for decades into whatever terms you agree to in your contract now. Too many people accept the company's contract without challenge and only think about the bonus and royalty without thinking about the larger long-term picture.

Attached is a starter on a few points that you should work towards getting added/amended in your Schedule A addendum to your contract. Good starting point, but I do also suggest that you have a good Oil and Gas attorney look over your agreement prior to signing/executing the contract.

Best of luck with your journey.

#10

Dear Mr. Farmbright,

Lawyers are great, if you get a good one. And they are expensive. I think you may find that you give up too much to an attorney for the limited acres.

The Farmbright article is fine, but it was written 14 years ago. Long before the real boom in horizontal drilling. The John Daugherty article is only 5 years old, so it still has some value.

I do suggest that this is not a do it yourself situation. Ask all the others on the board who signed the lease presented by the oil company in order to get the bonus money.

#11

Hey Buddy, whole-heartedly agree that this is not a DIY situation. The articles that I attached were just to give a starting point regarding some of the points that one should look at having added to their agreements - although there is plenty of other items left out from those documents due to the age.

I do not confer, however, that because of the limited acreage that the Mr. Albright might be giving up too much by making sure he has a good O&G attorney look over his contract.

If the attorney's role is left to only vetting the contract - and not actually having them negotiate the deal - then the billable hours should be able to be kept to a reasonable level.

Even if he ends up spending $1K-$2K of the $10K bonus that is currently on the table, it is my opinion that the expense is well worth it so as to not get locked into an unfavorable O&G skewed contract for years and years to come.

Spending that upfront money to get things right now, will in most cases end up paying for itself many times over in the (many decades, likely) life that the contract will end up binding his minerals once they do get into production.

#12

DJG: I couldn’t agree more about retaining an experienced O&G ATTY. The issues regarding mineral leasing changes all the time. I would not sign any agreement regarding real estate or mineral property/rights without an Attorney’s review. I have never had a mineral lease that was not modified and wording changed. Also if you own both the surface estate and minerals you want to be sure to have a comprehensive surface protection clause added typically as an addendum. Other issues with the newer horizontal drilling go to Pugh Clauses, definition of what constitutes spudding and drilling a well prior to lease expiration, cost free royalties, pooling, etc. It may be tempting to be, as the ole saying goes, “penny wise and pound foolish” but once a mineral owner signs that lease and there is production you will have to live with the agreement as long as the lease is held by production.

#13

Thanks everyone for the input. Here's where I stand:

It turns out the rights are split among many heirs along my mother's lineage. Our share is rather small. We're still going to pursue it......even a little compensation is better than nothing at all.

My brother happens to have a good friend who lives in Corpus Christie, Texas and is in a firm that has mineral rights lawyers. He offered to look over our lease at no charge.

So now it's all a waiting game, I suppose. No instant riches, but the supplemental income will be nice.

Thanks again to everyone.

#14

Hi, Seann, I too am an heir to some oil rights. In Saline County Ill. Your messages have been very helpful. I am totally out of my league with this. I'm in the healthcare business and just opened a new very small practice and have zero funds so I am not able to hire a lawyer but all of the postings have been helpful. My Uncle died and left it to my mother who died 14 years ago not knowing about this, somehow?? No money has come my family's way over this. My question is, where has the lease money been all these years?

Then there's taxes?? I'm looking forward to reading how the saga continues with you and others on this forum. I am so glad I sat down tonight and googled all this!!! I'm a midwife and waiting for a baby to appear so I took a short break to do this. Oops go to go .....

Betsy from Washington state

#15

Mr. Albright,

Yes, definitely get professional help. If things don't work out with the lawyer in Corpus Christi, I can highly recommend Mr. Cotten as a good advocate to negotiate with the oil company and provide you with an oil and gas lease (it will cost you less money in the long run; free attorney work only goes so far). I don't recommend agreeing to an extension after three years. If they don't drill by then, you can renegotiate with them and/or others - perhaps at a higher bonus.


Seann Albright said:

Thanks everyone for the input. Here's where I stand:

It turns out the rights are split among many heirs along my mother's lineage. Our share is rather small. We're still going to pursue it......even a little compensation is better than nothing at all.

My brother happens to have a good friend who lives in Corpus Christie, Texas and is in a firm that has mineral rights lawyers. He offered to look over our lease at no charge.

So now it's all a waiting game, I suppose. No instant riches, but the supplemental income will be nice.

Thanks again to everyone.

#16