Revisiting the enemy

Oil and Gas Leasing Help
1

In the fall of 2008, most of our neighbourhood signed with Carrizo oil in a SWAPO lease arrangement. We signed too, but our bonus payment bank draft bounced. Carrizo refused to discuss anything with us over the past two years, and while all but roughly 20 families were paid a bonus for their 3 year lease, we were not. We didn't hire a lawyer at that time because we couldn't afford to. We found out from the signing agent that roughly 20 households had been treated this way, (bounced bank drafts) but they wouldn't give us any information to find those people.

Every call, email, etc to Carrizo in Houston was met with a stone wall. They told us one time that they would get back to us, the person I last spoke to doesn't work there, blah blah blah. Eventually they disavowed any knowledge of the contract. I made calls and complaints, but got nowhere.

Now, today, after 2.5 years, they called us and want to discuss mineral rights. I did a quick search, and I see they have an active drilling permit in our area, dated roughly 3 weeks ago. I am still FUMING furious over their cheating us, their lack of concern over the bounced bank draft and refusal to discuss it with us, or make payment.That original three year term expires in September.

I would like to get back payment for the first contract before even considering discussing their future options. I expect that if they are going to drill, their other signed offers are going to get extensions that tie them to lower rates since they would just let them expire and offer lower if that worked for them.. therefore I think we might be able to negotiate a better deal.

What kind of leverage do we have now, that they are calling? I am going to try to see an Oil and Gas attorney, but would like a heads up of what we should be asking for. It isn't a huge amount of land, just your typical suburban lot of about an acre, but we were treated badly before and I don't trust Carrizo one iota.

Should we shop around our mineral rights and see what the other companies offer for it? Will Carrizo have to make a deal, or can they steamroll us?

I am rather overwhelmed by the volume of information on this site, and would like to be pointed in the right direction. A recommendation for a reputable Oil and Gas attorney in the Arlington area would also be hugely appreciated.

Cate.

2

Cate:

I won't advise you on who to lease to but I will advise that if you deal with Carrizo, don't take a bank draft and demand a "live" check. I would have an agreement with Carrizo that when the check clears, a signed and notarized copy of the lease will be mailed to them. You might remind them of your past dealings and if they are not agreeable, find another reputable company to do business with in regards to leasing your minerals.

3

You do not state whether or not the lease you executed was recorded. Before doing anything, check to see if the lease is recorded. if it is recorded and the company has no record of paying you, a cancelled check, a wire transfer receipt, a paid draft or any other means of proving you were paid, sue the company for slandering title to your land. Sometimes it is called a “trespass to quiet title” lawsuit. This puts the company in the position of proving that the Lease they recorded is a good and valid lease, which it isn’t. It also opens the Lessee up to damages for slandering your title, thus preventing you from taking advantage of opportunities to lease. It also gives the Plaintiff a reasonable way to ask for a summary judgement. Once you do this, you have put the company into a position where you can negotiate on a more level field. Don’t get caught up in suing them to release the lease, sue them for slander of title.

4

James, I finally got through all of the Tarrant County records, and they didn't register the lease. They just ignored it. I confirmed it by checking with my neighbours and their leases are recorded, and they were paid. So what is our best move? Can we be "pooled" out of any signing bonus? Where might I find out who else would be interested in the lease, if Carrizo offers us unsatisfactory terms? I don't hold out for any unreasonable dancing dollar signs, but I do think that they should make good on the previous lease amount on top of any new offer. Is there a way to find out what the other wells drilling in the area are putting out in production and what a conservative estimate of signing amount is reasonable for this area of Tarrant County?

5

If they just got a permit, they are trying to avoid paying for an extension. So, your neighbors that got signing bonuses already will not be getting any further bonus payments. If you just try to get your back payment, you wouldn't be entitled to anything further.

How big is this neighborhood? I think your options kind of depend on how big of a fraction you 20 lots are. If there are say a hundred lots for instance, you may just get force pooled if you won't agree to reasonable terms (or find someone else to lease your lot). Usually reasonable terms would probably be the average of what your neighbors signed for. In this case since your neighbors all signed 2.5 years ago, I'm not sure how the reasonable terms would be determined.

Is there anyway that you can, without too much effort, find out who these other lot owners are? Knocking on doors? Does the County Clerk have its records online? Leases are recorded. I'd definitely try to band together with them. If you are able to do that, you may be able to market your rights to another company. I don't know if you'd have much success doing that on your own. The other advantage is that it might help to run up the price of what is reasonable for purposes of forced pooling.

Since they have sought a permit, time is somewhat of the essence. As soon as they are ready to drill, they will either need to have your land secured under a lease, or have you force pooled by the oil and gas commission.

6

Go to the oil and gas commission website. There you can find out about well production. You can also find out who else has gotten permits in the area. Those are the people you want to hunt down. You could also go back and look at those leases for areas surrounding yours, and see if there are any other lessees that have leased land, and talk to them.

Cate said:

James, I finally got through all of the Tarrant County records, and they didn't register the lease. They just ignored it. I confirmed it by checking with my neighbours and their leases are recorded, and they were paid. So what is our best move? Can we be "pooled" out of any signing bonus? Where might I find out who else would be interested in the lease, if Carrizo offers us unsatisfactory terms? I don't hold out for any unreasonable dancing dollar signs, but I do think that they should make good on the previous lease amount on top of any new offer. Is there a way to find out what the other wells drilling in the area are putting out in production and what a conservative estimate of signing amount is reasonable for this area of Tarrant County?

7

Cate,

I'm curious as to what they have offered you this round. I have a freind (unleased) that lives just off of Green Oaks Blvd. south of I-20 who told me that a neighbor a couple of doors down from him had been offered by Carrizo 6000.00 per acre about 2 weeks ago. This is just the last I've heard regarding that area. If it's true, that's the highest offer I've heard of for a good while.

Joel

8

They haven’t been here yet with the offer, so I don’t yet know, we are south of green oaks over by Kelly Elliott. I am trying to get as much information as I can before we have them over, so we know what we are dealing with. I am very happy for everyone’s input!!!

9

Don’t let your emotions get the best of you. If you only own a small lot, they could either force pool you, OR, if you are on the edge of their unit or not within a certain distance from the wellbore, they could cut you out altogether. You should find out where your lot falls within the unit plat to determine whether they can cut you out. Being cut out of the unit is the last thing you want to happen because if that happens, you may never get another opportunity to be unitized. You’d hate to be a single lot left out of all the action, with no other alternatives. So in summary, figure out where your lot is, and then negotiate based on that information. As hard as it is to move past the past relationship you had with Carrizo, don’t miss out on future dollars by being overly stubborn, especiall if you dont have any leverage. If you do end up signing a new lease, make sure you get top dollar for the new lease AND that you get ideal terms (25% royalty, no deductions, etc). Hire a lawyer if need be to review the lease, it’ll be a few hundred dollars well spent versus getting stuck with inferior terms.

10

Woah. They dropped off the offer in the mailbox. It is 1/4 the bonus offered the first time, 23% royalty and 5 year term. Can you say shafted? I called a lawyer for advice.

11

Oh my gosh! That is ridiculous. That is one unscrupulous company! If you can’t find someone else who is interested, I would definitely hold out. I don’t think that would be considered a reasonable offer based on the prior offer. Therefore, you couldn’t be force pooled at that amount.

Cate said:

Woah. They dropped off the offer in the mailbox. It is 1/4 the bonus offered the first time, 23% royalty and 5 year term. Can you say shafted?
12

I could just be ill, I am so stressed out by this now. I am hoping a lawyer can force them to at least honour the original terms what the original offer was, since they never provided any reason for non payment (we obviously have mineral rights) and they paid our neighbors on all sides of us.

13

Cate:

Just remember that they are your minerals and YOU make the final decision on the outcome of this matter. If you feel that holding out would be the best for your interest, then that is what I would do since this company is not working with you at all. I hope your not out a lot of money on attorney's fees and end up disappointed. If you elect to hold out, the company might attempt to further negotiations. You make the decision that's best for you. Good Luck!!

Cate said:

I could just be ill, I am so stressed out by this now. I am hoping a lawyer can force them to at least honour the original terms what the original offer was, since they never provided any reason for non payment (we obviously have mineral rights) and they paid our neighbors on all sides of us.
14

Charles, my concern is that we will be force pooled and not get anything. Lets hope the oil and gas lawyers get back to me asap.

15

Cate:

As I said, you've got the final decision to make and be sure its what you think is best. Good luck!!

Cate said:

Charles, my concern is that we will be force pooled and not get anything. Lets hope the oil and gas lawyers get back to me asap.
16

The good news Cate, is that you aren’t just one day force pooled. You would be notified that they are seeking to do so, and would have the opportunity to accept a reasonable offer. As I said before, 1/4 of the original offer is probably not reasonable.

Cate said:

Charles, my concern is that we will be force pooled and not get anything. Lets hope the oil and gas lawyers get back to me asap.