I recently received a new lease in Marshall County WV. This is different than the previous lease I have negotiated. The lessee in this one is the broker company, not the oil company.
This seems odd to me and wonder what problems I could have from this kind of lease. I did ask who it was and did get a name. It appears that it is a new company and after doing some research I find that the broker assigns the leases to them later.
Any advise on this situation would be appreciated.
Likely a brokerage firm that will shop the lease to an operator. if they can, they sell the lease to the operator for a fee and perhaps an override in the well. I am Texas and I have more brokers calling to lease property than operators' landmen. I call them "flippers," because they have no intention of drilling and wait to package my lease with others and then sell them. If i lease to them, i try to make them pay top dollar for the area.
You might post in the Marshall County group to see if anybody has any good information specific to the area.
thanks - I will do that
thank you James - that was informative!
That's a pretty standard practice. Also consider that the oil company may sometimes use a different subsidiary company as Lessee so as not to have the oil company's name show up in a leasing play. For instance, Chevron may have leases in an area taken using XYZ Company as the Lessee because it draws less attention than Chevron would. This is also done so that all the leases in a given project are 'containerized' by being taken with a different company name as Lessee.
The majority of Landmen are independent contractors who work on a project under a 'broker' who performs the work as a contractor to the oil company. It is fairly common for the 'broker' to be listed as the Lessee and subsequently assign all the leases to the oil company on completion of the leasing project.
The lease terms you negotiate are the terms that apply to your lease no matter who is the Lessee or what company ends up developing the minerals. Nobody is going to pay a bonus to acquire a lease without the intent to develop the minerals being leased.
Brokers perform leasing and title duties, usually under contract to the operator. Just because a landman works for a broker instead of being 'in house' for the operator, it doesn't mean they are only trying to 'flip' your lease. It is patently disingenuous to intimate that brokers are interlopers that only acquire leases so they can 'shop' them to operators. That is the tiny exception and not the rule.
95% of landmen work for brokers because the number of landmen working on a project can be scaled up or down more quickly as contractors than as direct employees of the operator. In a 'boom' area it is many times faster to scale up a project by using brokers and their crews of landmen than it is for an operator to try and hire individuals to fill those positions. Economy of scale and such. One hire as opposed to hundreds.
As to flipping leases, it does happen but doesn't affect the deal you have negotiated on your lease. Often times more favorable terms are given the Lessors so as to acquire the lease...which remain in effect after the operator acquires that lease from the Lessee.
Even leases taken by 'in-house' landmen working directly for an operator are often sold or traded. Operators structure deals where they trade interests in one well for interests in another well that another company owns. These are called 'farm-ins' and 'farm-outs' depending on which company has what interest and who they are dealing with.
I agree with your general comments, but more times than not, the brokers that contact me are in search of a lease and then a company to sell it to. Those that identify that they are working with a specific company don't fall into my category of flippers, nor did I intend to imply they do. I haven't had a broker refuse to tell me if they were working for Shell or Anadarko or ....