Primer on establishing title?

General Mineral Rights Discussion
1

How can we proactively establish clear title? Is there a primer, or good article or forum thread anyone can recommend?

Six siblings/cousins own 8 acres in Reeves County, Texas, 21 miles NW of Pecos … thought property worthless then received a landman’s bid to purchase outright $7,500 per acre, and discovered heightened drilling is occurring surrounding our section … long story why drilling not started in our section.

  1. 1st generation (great grandmother) bought 8 acres in 1950.
  2. 2nd generation grandmother inherited 100%. Will left estate equally to 2 children. Child recorded the 2nd generation probated will in Reeves County to “document” ownership.
  3. 3rd generation siblings owned 50% each, first (father) died intestate with 4 children, aunt died will left her 50% to 2 sons.
  4. 4th generation, six of us, suppose we should hire a lawyer in Texas? Any idea of cost? I’m retired, could I assemble documents and prepare “Affidavit of Ownership” for filing in Pecos? Does an heir affidavit have death certificates, probated wills attached?
2

Hi Roy!

Congratulations to you and your family on your inheritance! Your family is just one of hundreds out in West Texas finding out that what they thought were pretty much worthless acres of rocks and dirt are now worth thousands of dollars an acre.

There are a number of Geological Basins in the area, but people generally refer to the entire area as “The Permian Basin”. And from Pecos, TX, north through to about the Southern 1/3 of Lea County, New Mexico is one of the most exciting places in the entire Country these days.

$7,500 per acre sounds like a pretty “Lowball” offer for the area you are in. Perhaps half or even less of what you can possibly get. Crikey! I know of people who have received $8,000 an acre just as a Lease Bonus Rate!

If, as you say, your Father died Intestate and your Aunt died, Testate, then you will need an Affidavit of Heirship on at least your Father (you can actually prepare one for all of the four generations) and a Certified Copy of your Aunt’s Will and at least the Order Approving Will for Probate from whatever County her Will was Probated in. File those of record in the Reeves County Official Public Records and your title should be clear.

Neither of these are complicated or particularly expensive issues to address. You can hire an Attorney or a Landman to gather and prepare the documents and file them of record or you can do it yourself. The least expensive way to “clear” your title, however, is to let a Lessee or Buyer do it for you. That would be for free.

If you will post your legal description(s), one or more of us will be happy to look up your lands and show you what is going on in your area. We may even be able to provide you with the names of a few other potential buyers you might be able to receive competitive bids from.

If you would like to send them to me privately, click on my name at the head of this response and invite me to become A Friend on The Forum. You can send the legal description(s) to me more privately that way.

In the meantime, I would advise that neither you nor any other member of your family sign or even verbally agree to any offers you receive until you have a better handle on what your situation is. You may even want to consider hiring an experienced Oil and Gas Attorney to help you with your negotiations.

Hope this helps -

Charles Emery Tooke III Certified Professional Landman Fort Worth, Texas

3

Thx. I may want to record docs in Reeves to establish our ownership, inasmuch as ownership in this Section 30 Block 2 H&GN RR Co Survey has been murky in the past. Also, isn’t it true leases today are vast acreage due to 10,000’ horizontal lateral lines, and oil companies don’t even know all the owners of record? Our names don’t appear on the Reeves property tax card because we are 1/5 interest and the other owner pays the taxes. I know a buyer landman would perform title search free, my concern is if we hold for future lease, to make sure lessee operator knows we’re owners of record.

Don’t yet know if we want to sell or hold for future lease, so I didn’t want to invite a bunch of bids (yet).

4

I’ll look up Sec 30 for you.

For the deep horizontal wells they pool acreages up to make either 640 acre Units (mile x mile or Sectional), or 1280 acre Units (1 mile x 2 mile). Even then, the Surface Location that they drill from might not even be on any of the unitized (pooled) lands, just the first and last perforation points (“Take Points”).

The idea is to get the longest possible section of horizontal borehole that you can perforate. The more footage perforated, the more possible production.

The companies don’t follow what the Tax Rolls say when leasing land. They have Landmen review and research the County Clerk’s Records, the County Court Clerk’s Records, and the District Court Clerk’s Records from Sovereignty (original Land Grant or Patent) through to the present day ownership. Only then will they contact you about leasing.

Unless the land is presently under production, the Tax Roll would only have the surface taxes, anyway. Once it is producing, the MINERAL Tax Rolls (completely separate set of tax rolls) will have everyone of you listed.

Every County taxes the surface owners. Texas also taxes producing mineral and royalty interests.

A company may initially contact the family through whoever is paying the taxes, but they will not just lease that person. They’ll find you all or at least spend a great deal of time and money trying to.

As to whether to “hold for future lease” or sell, are you certain that your family holds the Executive Rights to the interests? The right to negotiate a lease? Or do you just have Royalty Interest?

The reason I ask is, if you just own Royalties, you may already be leased. If you do hold the Executive Rights, you can get a much higher price for your minerals if you sell them unleased.

The Forum doesn’t allow us to exchange private contact information on this, the general Forum Page, but I believe I am allowed to send it to you via the Friends Page or vise versa.

Hope this helps -

Charles

5

Thx. I’m told there has never been production in our section, due to bizarre fragmented ownership from 100 years ago, although our 40 acres is clear title. RRC map shows only 1 dry hole and 2 expired permits in our section, but raging production and new wells in all surrounding sections.

If/when somebody figures out how to lease in this fragmented-owner section, they’ll probably pump a lot of oil. My concern is whether they can track us down, our names are not on the tax rolls because one of the other 1/5 owners of our tract is paying the taxes.

6

If the land is worth drilling, don’t worry. We Landmen will find you or die trying.

Just hope that whoever mentioned the word “fragmented” anything meant title to the land and mineral interests, not the geological formations underground.

As far as prior title goes, whether it be in your 40 acres or throughout the entire Section, “fragmented” is quite the norm rather than the exception anywhere you go. All of that can be sorted out and corrected by the Landmen. Even if it is a total wreck, time itself “cures” title.

“Fragmented” formations, however, might be a Deal Killer.

7

“Fragmented” is my term, refers to surface ownership … landman offered to buy us out said promoter in 1919 sold 1/10 acre lots in Chicago train stations, peddling the “micro-lots” (my term again) to commuters & travelers. Result was hundreds maybe thousands of owners of this one section, back in 1919, imagine the honeycomb ownership after a century of deaths & inheritances, and probably most threw their titles & tax bills in the trash in the 1920s. Said whole section has been in receivership 1999-present.

8

Ha Ha! That’s hilarious.

They’ll do what they can to figure it out and then take the rest of the names before the County or District Court and ask for a Receiver to be appointed, typically the County Clerk, and they will sign a lease. As the owners show up and prove who they are to the Court, they’ll get their money.

Attached is what I could dig up on Section 30. It’s in a fantastic area!

The South Goat 2 Unit No. 2204H, which is immediately to the North, Northwest of Section 30 was completed 8/25/2016 at 1,861 BBL / 4,745 MCF and more than a year later is still making 1,728.9 BBL / 4,699.1 MCF. A DAY.

And the Ranger B106H, which comes in from the East and terminates at the NE Boundary Line of Section 30 was just completed on 9/26/2017, coming in at 1,446 BBL / 4,972 MCF a day.

The Ranger No. L 07H, which is located just to the NE of Section 30’s NE Boundary Line was completed 9/26/2017, but no IPs have been reported yet.

And you have another 6 wells in the immediate area listed as Drilling In Progress!

Note the last page of Item 01. attached. It is a table of recent leases taken in Section 30. Some of them are from as recently as July of this year, so they are working on straightening it all out.

Hope this helps -

Charles

47-01.MOSTNOTABLEAREAWELLSwMU.pdf (232 KB) 48-02.4238935144RESOLUTESOUTHGOAT2UNITNO.2204H.pdf (277 KB) 49-03.4238935976RESOLUTERANGERB106H.pdf (227 KB)

9

You are the man! I had no idea leases recorded in this section, the landman who offered to buy our 8 acres must not know … 3 leases in 2017, six in 2016, one in 2014 … but no drilling yet. What do you make of this disparity? Because of the landman’s explanation of murky ownership/title? I am grateful Charles.

10

Roy -

I would imagine that he is aware of all of the leases in the Section. He needs that information to prepare an offer to you.

It occurred to me that if some guy divided the Section or any part of it up into 1/10th acre lots, then the subdivision would be on record in Reeves County. Ask him for a copy of it for your records. I’d love to see that one!

Attached is information on two wells that Energen permitted in Section 30 back in 2011, but never drilled. That might be because of how difficult the title is, but nobody seems to have given up on it yet.

Also attached is a full list of the leases for Section 30 that DrillingInfo has in their records. They go back to 2004, but not back to 1999.

If the landman has told you the lands have been in receivership since 1999, that indicates to me that a receiver was appointed and lease entered into back then. Possibly a lease with a 10-year term.

Either the guy back in 1919 only subdivided a part of the Section or only purchased and sold off an undivided percentage of the whole thing.

What the other landman is doing is trying to buy out anybody he can, which is not a bad idea from his point of view.

Mine, neither.

Hope this helps -

Charles

11

Roy,

I just stumbled across this thread. It took me a few minutes to recall, but I recognize this section.

I stumbled across a Judgement in OPR 1449/637 a month or two ago while doing some due diligence for a lessor in another section I leased. The ownership of that section (Sec. 30/ Blk. 2) was tied up in some litigation. I think the judgement should put that to rest. It’s interesting that a bunch of those owners were put into a Receivership. As I understand it, the lessee (the oil company) must hold an interest in each tract, meaning they must at least have some interest leased in each one of those tiny little lots/blocks.

If y’alls interest is not leased, I do work for a client that targets sections like this for non-op interests (takes leases in order to participate in the well with the operator). I suspect this tract has several lessees in it.

As to that offer, that seems awfully low in an area with that kind of production. My only thoughts are perhaps there is a geological reason or someone is spooked by the litigation if your interest is subject to it (although that judgement should have put it to rest)? If this interest is subject to that receivership, then I bet there is money sitting in the coffers of the County Clerk. Not personally knowing any of those things- I think that offer is closer to a lease bonus price than a purchase price.

Best Regards,

Mike

12

Thanks Mike. I heard the litigation was resolved, but thanks to your book/page cite I downloaded the judgment. Defendant was 1,100+ “unknown owners” in receivership, dispute was competing claims of title over 487 acres, 76% of the section. Appears the unknown owners lost, and their claim crammed down to 160 acres, although difficult to understand the judgment. My family’s ownership is among the 153 acres never in dispute. I think drilling activity was frozen out of this section due to the contested ownership, maybe this judgment changes things.