Oil company not paying

Oil and Gas Leasing Help
1

I own the mineral rights to 20 net mineral acres in Golden Valley County, North Dakota. I just found out there is a well that has been producing since 2007 on my acreage.

I have advised the operator that I am one of the mineral owners, have provided him my claim of mineral interest a quit claim deed from my grandmother whose will was probated in North Dakota.

I figure my share of the oil sold would be about $10K.

If the operator continues to ignore me what steps can I take before having to go to court.

My local lawyer is not too quick in responding to my voicemails and emails.

I have no lease and was never contacted by the operator.

Is court the next step or is there a government agency that I can contact.

2

Joel, you may have more coming than you think. You may be a partner in that well already and not know it. If that well has paid for itself, you may be entitled to 100% of the proceeds less cost of production, on your 20 nm acres, not the 18 to 20% lease royalty they will want you to settle for. They can’t assess a risk penalty if they never offered to lease you or offered participation. Wells were pretty cheap by today’s standards in 2007. I can look up the production for you if you give the legal description, if you haven’t already looked it up yourself. Keep your options open. Good luck.

3

Joel:

I would gather all of my paperwork involving your ownership of these minerals. I would then contact another attorney (one located in the area) and present your evidence including all the facts from the time this well has been drilled and completed. It sounds like this operator does not want to work with you so you must take other measures. There are several scenarios that could be at play in your case such as the one that RW brought up.

4

What is the spacing of the well? Are you certain your interests are within the spacing unit?

5

Joel:

I would think that the NDIC office records would reflect all the historical data on this well. I think this would be public information but you might have to go to the office where these records are maintained to review the information. Again, make sure your records are accurate and you are in the spacing unit.

Joel said:

Yes but how do I know what the well cost? Isn’t only the company that has that information and how do I trust them.

This whole thing is driving the accountant in me crazy.

charles s mallory said:

Joel:

I would gather all of my paperwork involving your ownership of these minerals. I would then contact another attorney (one located in the area) and present your evidence including all the facts from the time this well has been drilled and completed. It sounds like this operator does not want to work with you so you must take other measures. There are several scenarios that could be at play in your case such as the one that RW brought up.

6

Anyone paying to see NDIC production can look and see what the well spacing is, it will state right there and it sounds like it is 160 spacing and his minerals may not be within that well spacing, it’s almost always the case.

Joel, what is your legal description, does it state all of the section or just parts of the section?

7

Normally there is more than meets the eye, did 20 years go by without a lease or statement of claim? 80/2240’s sounds a little strange even for an attorney unless there were more gross acres, but nevertheless, what was the company’s reply when you came forward? You stated you had 20 acres but from the figure of 80/2240ths of SW/4 or 160 acres the 4 of you would own 5.7 net mineral acres together or 1.429 acres each in the SW/4.

8

You must have replied last time with the legals as I was writing, from the description the attorney wrote there are 1120 gross acres and your family owns a total of 40 net in the 3 sections so you yourself own a total of 10 net in those 3 tracts, not certain why he doubled the net/gross acres. You yourself still own just 1.429 net in Section 28. There’s not much you can do but wait and see what the attorney hears back. Have you tried to call them? You might want to see what the spacing is and re-figure what you believe they will owe.

9

Joel:

I googled “FH Petroleum” and the phone # is (406) 245-2009. I have never heard of this operator and will guess they are very small with not much capital. One thing I would also do is contact the BBB in Billings and see if they are a member and find out about their business history. Again, get your records and facts in order and get a good oil and gas attorney which is familiar with that area.

10

Joel said:

the 1120 acres was owned by my step-grandfather and my maternal grandmother. Ergo 1120 X 2=2240.

1/2 went to her on his death, his portion went to about 6-8 kids and her portion went to us. I checked the wells and production in the area and some wells have done 165,000 barrels so far/ 900 per month. It is FH and Whiting. No new wells all from 2004-2007. Still though I figure 7-10K in my pocket. Probably no lease will be offered, given there are no new wells in the area. No wonder Whiting did not include it with my other sections in T141.

Is there a way of finding production costs without having to take FH’s word on it?

11

Joel, I have not been keeping up with the (very interesting) intricate details of your issue, but, about finding out about production costs: generally, royalties are paid as a percentage of the gross mineral production. So, the production company’s costs do not enter into the problem at all.

Carolyn S Lutes said:

Joel said:

the 1120 acres was owned by my step-grandfather and my maternal grandmother. Ergo 1120 X 2=2240.

1/2 went to her on his death, his portion went to about 6-8 kids and her portion went to us. I checked the wells and production in the area and some wells have done 165,000 barrels so far/ 900 per month. It is FH and Whiting. No new wells all from 2004-2007. Still though I figure 7-10K in my pocket. Probably no lease will be offered, given there are no new wells in the area. No wonder Whiting did not include it with my other sections in T141.

Is there a way of finding production costs without having to take FH’s word on it?

12

I am not sure where you can find the cost to drill, but surely somebody knows.

I used to work for an oil company away back in the 80s, and THEN it cost an average of $100,000 to $200,000 to drill any well (just an average); now I believe an “average” would be more in the nature of over a million or two to drill one. Of course that would have to do with the difficulty/depth/etc of any particular well.

If you had a well number (like from a neighbor’s well), you could look that one up on your state’s oil and gas division and find out lots of interesting details, like how deep it is etc. In Texas that’s the Texas Railroad Commission and in New Mexico, it’s the NM OCD. Sorry this is so general.

What I meant is the cost to drill, as this well is a low producer they may come back and say they have not recovered their costs.

The well has only produced 16,000 barrels so far, even at $70 per that is only 1.12 million as an original cost to drill a vertical well

Joel, I have not been keeping up with the (very interesting) intricate details of your issue, but, about finding out about production costs: generally, royalties are paid as a percentage of the gross mineral production. So, the production company’s costs do not enter into the problem at all.

the 1120 acres was owned by my step-grandfather and my maternal grandmother. Ergo 1120 X 2=2240.

1/2 went to her on his death, his portion went to about 6-8 kids and her portion went to us. I checked the wells and production in the area and some wells have done 165,000 barrels so far/ 900 per month. It is FH and Whiting. No new wells all from 2004-2007. Still though I figure 7-10K in my pocket. Probably no lease will be offered, given there are no new wells in the area. No wonder Whiting did not include it with my other sections in T141.

Is there a way of finding production costs without having to take FH’s word on it?

13

Joel, too bad. The interest at 18% a year from 150 days after first production might have made it worth something, if you had good title. Better luck next time. Also the well might be low producing, but they will produce it probably for decades. It may be something with that particular well, since there is fair production around it, there may be another well in the future. That low producing well is serving a purpose also, it is holding those acres by production, so they don’t have to lease them again. More factors than immediately meets the eye in this.