Hi, we are nonparticipating mineral rights holders for a property that is about to be drilled in Reeves County. We've just received a Ratification of Oil and Gas Leases (Non-Participating Royalty Interest Owner) to sign and have been told this is the procedure to follow so that we can collect royalties if the drilling is successful. Is this normal?
It says, "NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, it is agreed by and between the parties that the undersigned hereby adopts, ratifies, and confirms the Leases and all of their terms and provisions, and does hereby GRANT, LEASE, DEMISE, AND LET to the Lessee, and the Lessees' successors and assigns, the Leased Premises to the Lessees of the Leases named therein, subject to and in accordance with all of the terms and provisions of the Leases. The undersigned agrees and declares that the Leases are binding, valid and cover all of the undersigneds' interests in the Leased Premises."
For one thing, there has been no consideration paid (which I understand is normal since we are nonparticipating, yet there the statement is that we are supposed to agree to). Second, we want to make sure we are not signing away something we shouldn't. The landman for the driller says this is normal protocol. We just want to check on it. Thank you so much.
Sounds like a lease to me. If it waddles like a duck, quacks like a duck and looks like a duck, . . . . . . and I guess roasting a duck could be called "normal" but will still taste like a duck. Some extremely interesting things are going on in Reeves, Ward, and Pecos counties right now and really hot, lucrative deals for landowners are available to those who understand the new oil business in West Texas.
If you have more than 20 net mineral acres, you better get some legal advise. It could mean big bucks for your family. Understanding your rights under oil and gas regulations will be key to your decisions.
In my experience, this is a normal and standard request by operators for non-executive NPRI mineral interest holders (not entitled to participate in bonuses, leasing, etc.). You should be able to do a quick consult with a good oil & gas attorney to give you the reassurance you need prior to signing.
This is a good time to get information for your files and to understand what you own. Ask the landman for the takeoff of your title which will include the original deed through which the NPRI originates and the subsequent deeds. Ask what the NPRI fraction is, the net mineral acreage involved and your fractional share of the NPRI. Example, if the NPRI is 1/64 and you own 1/2, then your interest is 1/128. Read the language carefully. Does it say that the NPRI is 1/64 so that you get your share of 1/64 royalty rate? Or does it say that the NPRI is 1/64 OF royalty? In that case, you will receive a share of 1/64 of the royalty rate specified in the lease or leases.
Next, ask exactly how many leases affect your NPRI. The executive rights have likely been divided over the years and, if so, then your royalty will depend on the terms of each lease. Suppose that the executive rights are held by 3 mineral owners - A, B and C - who each sign a different lease form. If one lease allows deduction of costs and another does not allow costs, then you could have some of your royalties paid less those expenses and some of your royalties paid cost-free. You have the right to ask for copies of each and every lease which applies to your NPRI. Also ask the fractional (percentage) proportion of executive rights that each lease has on your NPRI. A's Lease could be 1/4 executive rights; B's Lease could be 1/2 and C's Lease could be 1/4 (for total 100%). Hope you get a great well