What happens when not everyone in the family signs a lease. Does the oil company just need to get a majority to sign, or how does that work. What happens if that family member then wants to sign the lease a year later. Are they entitled to what was originally offered. I was told that the oil company doesn't have to date the lease the same. If that family member signs a new lease for 3 years does that prevent the other members from signing a lease with another company when there term expires.
Dear Mr. Lang,
Don't think of it as a family member situation. Think of it as if you owned part of the minerals and others owned part of the minerals. They are your minerals and you can lease or not lease, just like the other owners, to the same oil company or another.
If some choose to lease, then they get paid their lease bonus. If some choose not to lease, they do not get paid lease bonus monies. If some decline an initial offer, then the offer is off the table and if they choose to lease at a later date, the negotiations begin anew -- meaning they could be paid a higher bonus per net mineral acre, or a lower bonus per net mineral acre. The oil company may also decline to begin negotiations. This happens more often than you can imagine.
As to what happens later on down the road, when an oil company wants to drill a well, then the situation becomes fact specific dependent on what state the minerals are located, among other things.
Best,
Buddy CottenThank you very much for the reply. In my situation I was offered a 3 year lease 18 months ago, but at the time I was in the middle of probateing my mothers estate so my percentage ownership was going to go up and I asked if we could do the deal as soon as it was done. The rest of my family signed and got paid. I was told that they would wait. But when it was finalized and the ownership transfer was complete the oil company wanted a new 3 year lease that meant my lease would not have the same renewal date as the rest of the family. I was afraid to sign because I didn’t know how that would impact other family members ability to lease again to another company when there lease expired. How would that be handled? Can two different companies lease portions of the same land (minerals)?
Dear Mr. Lang,
Yes, two or more companies can lease the minerals under the same property. That might not be the best thing to do, but it can happen and does, often.
There is really no detrimental effect on the other family members. There might be on you, though. For example, if the other family members have leases that expire in January 2016 and yours expires in January 2018, then the oil company might have to renew their lease for drilling after January 2016 and before January 2018.
Jeff Lang said:
Can two different companies lease portions of the same land (minerals)?
Hi Buddy,
So I am still trying to figure out how this works. In a situation where there are leases on the same minerals to two different oil companies, does that give both companies the right to start a well?
The lease bonuses have gone up significantly in our area in the past two years. We are currently being offered 5 times as much now for 1500 acres as we were offered 18 months ago for 200 acres of adjacent property.
It might work out in my favor for waiting to sign on the 200 acres, but I am trying to figure out how to market that land at the current rate if I can in fact lease it to anyone I want. It doesn't seem like the company holding the current lease on the 200 acres is very motivated to pay me a bonus at this time. Is that because the have all the control they need already to do what they want with the minerals so they don't need to pay me.?
Again I really appreciate your expertise.
What I found interesting about your original post is that you were waiting on probate and your percentage of ownership in the acreage to increase. If the other family members signed for ownership interest amounts that have changed since probate, there may be problems for them down the road if production ever starts.
My increase in ownership did not effect anyone else. It was just a matter of getting my mothers interest split between my brother and I which increased our ownership % but didn’t change ownership percentage for any of the others.
Dear Mr. Lang,
The short answer is generally either company has the right to exploit their minerals. That may vary from state to state depending on forced pooling regulations and the amount of ownership in an unit to propose a well.
As to strategy going forward, that is too complicated a matter to delve into in this forum.
Best,
Buddy Cotten
Jeff Lang said:Hi Buddy,
So I am still trying to figure out how this works. In a situation where there are leases on the same minerals to two different oil companies, does that give both companies the right to start a well?
The lease bonuses have gone up significantly in our area in the past two years. We are currently being offered 5 times as much now for 1500 acres as we were offered 18 months ago for 200 acres of adjacent property.
It might work out in my favor for waiting to sign on the 200 acres, but I am trying to figure out how to market that land at the current rate if I can in fact lease it to anyone I want. It doesn't seem like the company holding the current lease on the 200 acres is very motivated to pay me a bonus at this time. Is that because the have all the control they need already to do what they want with the minerals so they don't need to pay me.?
Again I really appreciate your expertise.