I inherited some mineral rights in Martin County. All are royalty interests, but three wells from Legacy Reserves (now Hiberion) are working interest. I get JIBs every month or two and the cost of JIBs is less than half of the revenue amount. Each horizontal well produces a little over 1000 barrels per month.
My question is… Do I have any options on converting these working interest wells to a royalty interest? I asked Hiberion for a Joint Opperating Agreement. They said I am not subject to a Joint Operating Agreement because my interest was a carried unleased mineral interest.
I asked them for some options and they said “I believe your interest is a Non-Executive Mineral Interest (NEMI). The executor did not sign a lease. You would need the executor to sign a lease.”
Can anyone explain what this means and what I should do with these?
Thanks!
The executive rights holder in Texas has a fiduciary responsibility to act in your best interest ahead of their own interest. I’m curious why they didn’t lease. I’ll wait for others to chime in, but depending on the size / value of your interest it may be worth contacting a good attorney in this case.
It depends on all the facts, in particular who holds the executive rights. If the executive rights holder chose not to lease his minerals because he believed it would be more profitable to be unleased, then he would have made a good decision for all. For example, the oil company may have only proposed a 1/8 royalty to the executive rights owner (ERO) or offered other bad terms. NEMI will be subject to whatever lease terms the ERO signs. If the executive rights holder could not lease because his chain of title is not established or because he could not be found, then that creates a problem for the NEMI owner. Another problem is establishing who and many people hold the executive rights. If the NEMI was established many years ago when Owner A sold part of the minerals to B but retained executive rights, then the executive rights may now be split among multiple heirs of A. Does that mean all of A’s heirs have to sign leases or only one heir has to sign a lease for NEMI to be leased? NEMI should ask oil company for title related to his minerals to determine who holds executive rights. Alternatively, NEMI should find the deed which reserved the executive rights and trace forward to find the the heirs /assignees. Possibly he could petition the courts to terminate the executive rights if the heirs cannot be found. For others reading this, the situation is different from an NPRI. Here A sold a portion of his minerals to B but kept the right to lease B’s minerals. Or A retained a part of the minerals but gave B the right to lease A’s retained minerals.