Good day everyone. Newbie here and thanks for having me. I have a bit of a dilemma. I inherited working interest in about 50 O&G wells in McMullen county a number of years ago. They were in Dominion's hands but are now in XTO's care. The problem is the monthly maintenance is becoming more than the revenue I receive. I requested XTO to buy me out but they weren't interested. I have tried several royalty interest companies but they aren't interested either. I'm wondering if I can just "quit claim" my interests back to XTO. I cant afford to use part of my SS every month to pay the maintenance. Any suggestions would be greatly appreciated
How do you know XTO isn't cooking the books on the Maintenance Fees? An audit of their books on these wells may be in store.
I know what you mean. I have contacted them and asked if they use "in house" crews or if they use subcontractors. I asked why, in the past, cost of maintenance went up with the price of O&G and went down with the price of O&G and yet now it seems very high in comparison. I got a lot of blah blah blah official language. I am only a minor decimal, less than 1%, owner. There are more 9%, 15%, and larger interest owners whom I'm sure would have done what you are suggesting. They do send an itemized breakdown of costs every month.
I'm basically looking for a way out at this stage of the game
I would like to keep this topic alive as long as possible because it is an old problem that will not go away. When people call me to do an audit and the have a very small ownership, I advise them to NOT do an audit since the audit cost will probably exceed any recovery. Also, we might find some great recoveries that the operator can deny; then the the only recourse is an expensive lawsuit. Let's please not give up too easily on this subject. Bob Malone, Malone Petroleum Consulting
You should inquire if there is a Joint Operating Agreement. Under the Joint Operating Agreement, typically, nonoperators (i.e, you) have the right to request a plugging of a well(s). If the operator disagrees, then he takes over the interest from you.
I’m the same with a working interest in Rusk County, Texas. And I agree, let’s keep this discussion going. I’m learning some things here, as usual. Thanks, guys.
there are as many as 12 other working interest owners in these wells besides XTO and myself. I am one of the smallest working interest holders
If there is a JOA, Article vi.E.2 recites:
Failure of a party to reply within sixty (60) days of delivery of notice of proposed abandonment shall be deemed an election to consent to the proposal. If, within sixty (60) days after delivery of notice of the proposed abandonment of any well, all parties do not agree to the abandonment of such well, those wishing to continue its operation from the Zone then open to production shall be obligated to take over the well as of the expiration of the applicable notice period and shall indemnify Operator (if Operator is an abandoning party) and the other abandoning parties against liability for any further operations on the well conducted by such parties.
Tim, this is fantastic! I think you have contractually nailed it! Thank you! Bob
Another option would be to list the working interest on a site like EnergyNet or OG Clearinghouse. If you just want to unload it, you can list it with no reserve price to see if you can get any takers. Be aware that if the well is plugged & abandoned, you will be responsible for your proportional share of the expenses.
why would I still be responsible for P&A expenses if I were to no longer own any interest? Are you telling me I cant really sell my working interest without still being involved with them after the fact?
Sometimes the well can be plugged free with payment of the used equipment and tubular strings.
Sorry for the confusion, what I meant is that as a Working Interest owner, you are responsible for P&A expenses. So, if you requested abandonment of the well(s) and it was accepted by all parties, you might be responsible for this additional expense. As was mentioned, the JOA should outline all of the details in your specific circumstance. Of course, if you sold the interest then you would be transferring that liability to the buyer.
Have you hired a Lawyer?
WHY WOULD THEY BUY YOU OUT? YOU HAVE ALREADY SAID THE WI IS NOT PAYING THE BILLS. I HAVE OFTEN SAID THE FIRST YEARS ARE GREAT----THE LATTER YEARS A REAL Pain! I HAVE HAD WORKING INTERESTS IN AT LEAST 50-70 WELLS, BUT NO MORE.
I WOULD CERTAINLY ASK XTO TO TAKE MY INTEREST.
Tim, I have inherited several of these deals and the operators won't plug because of the current plays in Reeves, Ward and Pecos Counties. They also won't buy me out or even take the darned interest!. I have a few of the JOA contracts that date back to the 50s or 60s. What section heading is that in the older JOA agreements (AAPL) forms? Also, I would need to send a letter to all other nonoperating interest holders asking for abandonment of the well? I am asking how I could use this process to force them to take the nonprofitable interest.
Thanks for your expert and insightful advice John. SMH