Richland County, MT lease help

Oil and Gas Leasing Help
1

I just received a Top and Oil and Gas Lease–

Several concerns that I have and I’m hoping for some insight. I am a small mineral owner in 26N-57E Sections 33 and 34. I have only 4.444 acres total.

  1. Is it feasible to think that the oil company would do two separate leases for this? I don’t want to push my luck but everything I read says to NOT put them in the same lease. I’m unclear whether a pugh clause would help in this matter. I’m not exactly clear on the pugh clause.

  2. Lessee shall have the right to use FREE of cost gas, oil and water produced on said land for Lessee’s operation thereon, except water from the wells of Lessor. Is this a common verbiage in a lease? Why on earth would I want to give them free use of something they could pay a royalty on? Can I ask that this be deleted?

  3. There is about a half of a page in legal jargon about pooling. No specific acreage is identified. Can I stipulate that it be limited to the 1280 acres?

  4. Lessee warrants and agrees to defend the title. I want this deleted as well. They can do the mineral deed searches on this vast acreage and many many mineral owners. Am I out of line here?

  5. Finally…3/16th royalty…18.75% I don’t think it’s unreasonable to ask for 1/5 or 20% from what I’ve been reading on here in different places. I think the $500 an acre is probably fair.

What do you guys think? There has been a temporary spacing unit assigned to Section 34 on this and landman says could drill in less than a year.

I want to thank you in advance for any help or advice given!

Joanne

2

Hi Joanne,

First, it sounds like you need to get an experienced attorney to help with the lease. Almost anything in these leases is negotiable. You won’t get everything you ask for, but you can negotiate any issue.

An attorney in the area can tell you what bonuses are being paid close to you. He can tell you what royalty is being paid. Believe me, it varies, so go for the gold.

I agree that there is no reason to give away production. Eliminate it.

With a small acreage, you WILL be pooled. The permitting process will determine the spacing. You probably won’t change this.

Delete the defense of title.

Hope this helps.

Gary Wofford

3

Hi Gary…thank you for your response. I’m going to attempt to go forward without an attorney but may end up taking that route. I certainly need all the help I can get without being stupid-if you know what I mean.

Joanne

Gary Wofford said:

Hi Joanne,

First, it sounds like you need to get an experienced attorney to help with the lease. Almost anything in these leases is negotiable. You won’t get everything you ask for, but you can negotiate any issue.

An attorney in the area can tell you what bonuses are being paid close to you. He can tell you what royalty is being paid. Believe me, it varies, so go for the gold.

I agree that there is no reason to give away production. Eliminate it.

With a small acreage, you WILL be pooled. The permitting process will determine the spacing. You probably won’t change this.

Delete the defense of title.

Hope this helps.

Gary Wofford

4

Hi Joanne,

One of the big advantages of using an experienced oil and gas attorney from the start is that you can find out realistic expectations. If they are offering you $500 per acre, and the attorney tells you that most of his clients in that area are getting more than $1,000, then you will have the patience to wait for a reasonable offer. I have seen hundreds of neighbors settle for $25 and $50 per acre. The attorney told us that we should expect around $300 an acre. We got almost exactly that. If you know it is worth $300, you will scoff at an offer of $50 and not even consider anything much lower than $300. If others in the area are getting 20%, you will not even entertain any offer much lower. Setting your sights on a reasonable, realistic goal will help you ignore low offers and hold out for the right offer. If you are holding out for $2,000 an acre, and no one in the county has gotten more than $1,000, then you are on the wrong track. Realistic expectations are very important. You may have the only 4 acres not leased and the one missing piece of the puzzle. You may get more than anyone else. All depends on the situation.

I have a neighbor that leased 6,500 acres for $25 an acre. I told him to hold out for more than $200 and closer to $300. He found another 1,500 acres recently and they offered him $25 again, knowing that this is the standard that he was expecting. I think he is going to get around $275 this week. There is a huge difference in $25 and $275, especially when he has 8,000 acres to lease. He passed up 1.3 million dollars by following the neighbors and not seeking professional help. What a tragedy. Don’t do the same.

Thanks,

Gary Wofford

Joanne G said:

Hi Gary…thank you for your response. I’m going to attempt to go forward without an attorney but may end up taking that route. I certainly need all the help I can get without being stupid-if you know what I mean.

Gary Wofford said:

Hi Joanne,

First, it sounds like you need to get an experienced attorney to help with the lease. Almost anything in these leases is negotiable. You won’t get everything you ask for, but you can negotiate any issue.

An attorney in the area can tell you what bonuses are being paid close to you. He can tell you what royalty is being paid. Believe me, it varies, so go for the gold.

I agree that there is no reason to give away production. Eliminate it.

With a small acreage, you WILL be pooled. The permitting process will determine the spacing. You probably won’t change this.

Delete the defense of title.

Hope this helps.

Gary Wofford

5

Hi Joanne,

It is very risky business not seeking a reputable attorney who works with oil and gas leases in your area. Just make the call, you will find out that it will not cost you but a few hundred dollars to get professional help. The attorney will do all your negotiations with the company you want to lease with. The attorney will inform you of the Pugh clause or (you can “Google” it on your computer for info). Whatever you do, do not sign a lease for longer than 3 years, no less than 3/16th or 1/6, and don’t forget that at the end of the contract, if they want to lease it again, to get more money per acre stated in THIS contract. It will be their choice if they want to lease again.

Good luck.

6

Thanks Lyla and Gary…you may have just talked me into finding an attorney. To think if they ever drill I’d be stuck with this lease forever has me running spooked. Thanks for your time.

Joanne

7

Joanne:

If you are looking for a good attorney, I would recommend Laura Christopherson, who offices in Culbertson, MT. I used this lady back in 2003 and her price was fair and her work was precise. Since that time I have heard from others who was extremely satisfied with her work. Since she is a local in the area, this is a real plus. Good luck.

8

Charles, thanks…I’m in Billings, MT. It would be easier to find one here without having to travel to see one. I understand it’s near to impossible to find a place to stay up there or in Sidney. It’s exciting. Thanks for the reference and I’ll keep it in mind.

Joanne

9

I live in Billings too, but it was very easy to converse with our attorney via phone, and scan or fax contracts for him to look at. A lot of the time, the attorneys who live in, or near the county where you have land, are the ones who perhaps know what your neighbors, or who people in your county are leasing to, and would be able to know a good contract for you. These local attorneys are “up” with what is going on in their counties, as they probably have worked with the reputable leasing companies and landmen and women on a regular basis. There are scammers out there, so be careful, and here wishing a great contract for you.

Charles M. is right, Laura Christopherson has a great reputation in the Culbertson area.

10

Best Western has just opened up in Sidney, Montana. I’m told Microtel will open May 19th. Holiday Inn Express is still in progress, no date announced yet. So hotel rooms may open up a little bit, still need reservations as soon as you know dates.

11

Any other recommendations for an attorney? After several calls and waiting, I just heard back that Laura Christoferson is not taking any new clients till at least summer. So now that I’ve made the decision to find an attorney, she isn’t available. Go figure.

12

I cannot recall if your land is in Sidney, Montana, Richland County, I believe it was. I would “Google” for info on attorneys in that area. Call them, find out how long they have been established in the Sidney area. Find out if they work a lot with Oil & Gas leases, etc. Use a network of people in that area to confirm what attorneys are reputable, and who are working with the Oil & Gas leasing companies; and preferably a LICENSED Landman or Landwoman. There are so many people out there who claim to be Landmen, and have no idea what they are doing. They get people to sign leases, then AUCTION off the lease to others, (which isn’t totally bad). They take their percentage, and move on to the next unsuspecting person. I would not be in any hurry, and please do not let anyone rush you into a contract. We were told many times… “This is the final offer, and I will not call you again”!! Yaa right! LOL Your land is in a very HOT area, and there will continue to be very interested parties that will want to lease what you have. Good Luck. Lyla

13

Joanne:

Sorry to hear that L. Christofferson is unable to assist you. I do have another law firm, which I have not used for actual legal matters but have had numerous conversations and that is the O’Toole Law Firm in Plentywood, MT. I believe the person that I spoke with was Mr. Mike O’Toole. He was informative about the Eastern MT area and was willing to do some short research work free of charge. Maybe someone else on this board has dealt with this law firm and can give you some further assistance. The O’Toole Law number is (406) 765-1630.

14

Yes, for sure; I too recommend Loren Sr. and Larry O’Toole. My family has known their family for over 50 years. Loren Sr. and his sons are very reputable. I am originally from Plentywood, MT, so can attest that the O’Toole Law Firm is a good bet for your needs.

15

Thank you for the suggestions and the phone numbers. I’ll let you know the results.

Joanne

16

Joanne:

Again, I think that you will find the O’Toole Law Firm very easy to work with. Keep in mind, the “boom” is just now hitting the Eastern Montana area so all oil and gas attorneys probably have more business than they can handle.