Re-enter and re-complete a well

I have received a letter from a law office informing me that Viridis, OK, LLC proposes to “re-enter and recomplete a well at a permitted location in the captioned land for production in the [16 places named and possibly others]” The letter informs me that I own an interest in [S30, T4N, R20E Latimer, OK] and that I could participate, or they offer to lease my interest at $25 an acre (my share is 25% of 40 acres) and a 1/8 royalty. This seems way too low to me. If I don’t respond “soon”, they will proceed with pooling. I’m away from home, and my minerals files, so I can’t verify anything until I return, which may not be for another couple of months. I am asked to respond to a lawyer, instead of anyone showing an association with Viridis. I don’t know how to handle this and would appreciate any suggestions.

Karen V

It is normal to get these sorts of letters. The operators do have attorneys represent them on this sort of issue.

Did they say which well? Probably the Laura 1-30. The well was a moderately fair gas well until 2019. It may have some life in the Jackfork or other reservoirs.

The “places” were likely the alternate reservoir levels.

You probably do not want to be a working interest owner since that requires a thorough understanding of the risks and rewards, deep pockets, accountant, attorney, insurance, etc.

I always ask what they are offering at 3/16ths, 1/5th and 1/4 just to see the full range of offers. This area is probably only going to offer 1/8th or 3/16ths. Bonus offers are lower this year than in other years.

You can get a draft of the lease. It would be very wise to get an oil and gas attorney to review as the first drafts are usually all in the operator’s favor and need a good bit of edit work. Or if you do not want to spend the attorney fees, you do not have to reply and can wait for pooling. That has its advantages as well.

I appreciate your helpful response. I got in touch with person to whom I was referred after some discussion, i was comfortable deciding that being pooled in my current situation was the best choice for now. I’ve never been pooled before so I’ll see how that goes. Karen

I prefer pooling in many cases, so it is a strong option. I usually pick the highest royalty.

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Wow, that seems like a really low offer. It is hard to believe that a pooling order would provide terms that are worse. Many in that situation would wait for a pooling order unless the offer increases substantially, especially on the royalty side of the equation.

This post is not legal, investment or tax advice, it is for discussion purposes only. Reading or responding to this post does not create an attorney-client relationship.

Another option is leasing to someone other than the operator. There may be an independent that is willing to take risk of WI.

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