Hello, I have a couple questions about a lease and I’m not sure if someone here can answer it. My mom owns almost 21 acres of surface and mineral rights in Doddridge County WV. (Before anyone says it I am NOW well aware the importance of getting an attorney for ANY lease. 5 years ago my mom had never heard of O&G drilling and leases so she was caught blindsided when Company A contacted her. Unfortunately now she can't afford one unless she can find one that does an “override” which means they get a % of the Royalties).
She originally signed a lease with O&G Company A (Sept 6, 2011) which included a 5 year Term with a 5 year Extension at the Lessee's sole discretion with all the same terms. Also there was an Assignment Clause that said the lease could be assigned in whole or part and be binding to its respective assigns and successors. Foolishly she jumped the gun and signed without an attorney so the lease was written with the Lessee's benefit in mind. This past April, another company (O&G Company B) sent us a new lease with a letter saying they "would like to obtain a new lease directly.” Company A had "assigned" the lease to Company B. Over the past couple of months my mom emailed Company B asking if we can legally sign a new lease with them when the original lease was taken out with Company A and also the fact it states the current lease can be Extended...here was one of Company B’s responses
Tracy,
Please see attached your current Lease and Memorandum of Lease on this tract that was originally taken with Company A. They offered you 14% and I am giving you a 15% Royalty. If you look at the Extension Clause within the lease as #15 it does specify another 5 years, but if you look at the Memorandum it specifies a five year lease unless you agree to an additional 5 years. You can legally sign a lease with us because #1 Company A did assign us the lease so we are now the current owners of that lease, and #2 You would have to agree to any lease you sign regardless who it is with. I also put in the new lease the following wording: (but having an effective date of September 7, 2016) which will be the day after the current lease expires. I honestly don't know if Company A is even leasing much anymore. But like I said we are the drillers and so what he does lease he turns around and has to assign it to us or somebody else to develop. I hope I have answered some of your questions and not confuse you further.
Company B even highlighted a section on the original Memorandum that led my mom to believe she could negotiate bc it states "To have and to hold the Premises for a primary term commencing Sept.6, 2011, and terminating five years thereafter unless extended for an additional five years by LESSOR..."
She still didn't sign and maybe they were getting anxious because they then sent her this email (below) which included a New Lease (for the 2nd time) with a greater Royalty (16%), an omitted Extension and with an effective date of Sept. 7, 2016 which is the day after the current lease expires:
Tracy,
Please find attached the revised Oil & Gas Lease. I have changed the 15% royalty to 16% in #3 and I also deleted #22 which was the Right to Extend for an additional five years. Like I had pointed out previously, this new lease will not take effect until the day after the current lease expires. I also want to make clear that you will not have to wait until September to receive your money, you will be paid in full once you send the executed lease back.
My mother then figure she was in a place to negotiate with Company B (contacting them AGAINST my advice of having an attorney because she can't afford one....although I was going to look into hiring one with an "override") so she ask for a greater Bonus, Royalty and several Clauses (with an IMPORTANT one being an Indemnity Clause, also a Gross Proceed Clause etc). This was their response:
Tracy,
We had a meeting yesterday concerning your lease that we got through an assignment from Company A. It appears that I was wrong with the wording concerning the Extension in paragraph 15 of the original lease. Company A would have the right to extend it for an additional 5 years at XXXX an acre with the same terms and conditions with no changes being made to the current lease. Since Company A has since assigned the lease to us that now gives us the right to extend it as well. The Memorandum was put on record letting others know that the tract had been leased. There is no Supersede Clause in the Memorandum overriding anything within the lease so therefore Company B is going to exercise their right to extend this lease for another 5 years at XXXX an acre on the same terms and conditions. In the next couple of weeks I will be sending you an executed Extension from Company B as well as a check for XXXX. Sorry for any confusions it should have been taken care of this way in the first place.
So FINALLY MY QUESTIONS....After Company B sending my mom a letter saying they would "like to obtain a new lease directly" and sending her, not just one, but 2 NEW Leases offering a couple of NEW terms than what the current lease has which lead her to believe she could negotiate terms on the new lease so my mom emailed them with terms she wanted, can they just all of a sudden basically say WHOOPS our mistake we are choosing to execute our right to EXTEND the current Lease?? I'm assuming Company B did this because my mom asked for a greater Bonus, Royalty and Clauses which would make the new lease be more favorable towards LESSOR than the LESSEE. But can Company B LEGALLY do this after sending her new leases which is them basically NEGOTIATING NEW terms with her then rescinding after she tried and negotiate with them?? Is this something an attorney can help with or is it what it is and she has to suffer with the Current Lease being Extended which was NEVER favorable for my mom??
Thank you in advanced for your help, opinion and guidance :)