Royalties and Leasing info

Oil and Gas Leasing Help
#1

Garfield County, OK. My grandfather left some land to my father and his sisters. My dad left his interest in the land it to us kids putting our land in a trust. I called the trustee, my brother, last week and he told me that they hit oil on the land across the road in July of last year and that in April I should get a check. He told me that 45% of the well is under the farm. I searched and got a land description from the Tax Assessor's office and located the well but it's a private company and I can't find any production reports.

In a 2009 trust financial report there was an oil lease signed with Raulston Oil Co. The money was received by the trust in April 2009. The Company that completed the well in July 2011 is NOT Raulston.

My dad's sister was contacted last week by someone who wanted to lease the mineral rights on the farm for $600 an acre. She is the trustee over the entire farm. My brother thought we shouldn't with oil already found under the property.

Thank you in advance.

#2

1. What do you want to know?

2. What is the legal description (Section, Part of Section, Township, Range) of your land?

3. What is the legal description (Section, Part of Section, Township, Range) that the producing well is located on?

#3

The oil completion is Plymouth Exploration Sebranek No. 1-3H Well, NW/4 NW/4 NW/4 NE/4 (SL) of 03-23N-04W

It is a horizontal well.

Our land is, description obtained from the Tax assessor is 0000-03-24N-04W-1-100-00. There is a second property description is 0000-03-24N-04W-4-100-00.

How long is a lease generally? The one with had with Raulston would have been made in early 2009. They completed the well in July 2011. I am just trying to find out if the mineral lease would have still been with Raulston since a different company did the drilling and completion.

Was the land Pooled or do we need to do another lease? I am also looking for the production of that well. I have spent probably 40 hours trying to learn about all of this and doing searches. Have learned a lot of terms and a lot about the oil industry. Thank you for your help.

#4

Oh, there are no property ownership issues. It has been in the family for 5 generations.

#5

The primary term, extension (if any), bonus, royalty etc. of a lease is always a matter of negotiation. What you need is a copy of the lease to determine what the facts are. Most County Clerks offices can make you a copy of the lease given the legal description of the property for a small fee. You can call them at (580)237-0232.

Oil and Gas leases are often conveyed to other parties before a well is drilled on the leased acreage. Some County Clerks will research that for you. Sometimes you need to make a trip to the courthouse and review the records yourself. The Clerks staff will usually assist you if you need help.

I noticed that the Plymouth Exploration Sebranek No. 1-3H Well is in Section 3 of Township 23N and your property is located in Section 3 of Township 24N. Is that correct?

Production data is not easily obtained if you don't have access to a database like Pangea.

#6

Nancy, Raulston is just a broker and does not do the drilling. The Operator, as you now know, is Plymouth. From what you said it appears that your trust has interests in both 3-23N/4W and 3-24N/4W. I found on the OCC website that Plymouth has wells in both locations. The Sebranek 1-3H (23N) was completed on April 28, 2011. The Chain 1-3H (24N) was Spud(started) on Aug 5, 2011, no completion information is yet posted. By law the operator has 6 months to start paying royaltys and if they take longer they are supposed to pay interest. A typical lease is for 3 years and some will have an option to extend it for usually a term of 2 years. However, unless you are talking about a third property you can not lease a property where drilling has begun under the original lease and if it results in a producing well the lease is "Held by Production" and remains in force as long as the well produces. I have posted below a link to the OCC website. It can be a bit difficult to navigate so feel free to ask if you need help. These sections are 640 acres each, if as you said your share of one of them is 45% you would have about 288 acres. Does that sound about right?

http://www.occeweb.com/index.html

#7

Nancy, If your lease had expired before drilling started and you ie. the trust did not sign a new one then in all probability you were force pooled. If you didn't respond to the pooling order within a certain amount of time then your lease bonus and royaltys have been put in escrow or suspension, not sure the proper word...being held for you!

#8

There are 2 pieces of property listed under the trust at the OK Tax Assessor, the 1st property description 0000-03-24N-04W-1-100-00, second property description 0000-03-24N-04W-4-100-00. The trust only has 320 acres, I've been told that the well Sebranet 1-3H 23N is on the land across the road and that 45% of the oil from that well is said to be under our land. I din't know about a chain well being drilled. So are you saying that a new well, on Sebramek 24N is being drilled? That one would be actually on our property if I'm understanding this correctly.

I asked about a new lease as my Aunt, one trustee, called my brother, the next generation trustee, and told him she had gotten a call from a man wanting to lease the land for $600.00 an acre. I couldn't understand why we could or would sell a lease with a producing well. When the Sebranek 1-3h was completed they projected the production to be 1021 BOPD. I went to the OCC web site and there was no production listed for the Sebranet 1-3h. On the Plymouth Exploration Companies Web Site it shows that Sebranek 1-3h 23N is producing 1241 BOPD. I didn't know a thing about a second well. You bet I'm going to look for it.

My sister and I are really trying to understand all of this. Thank you so much for your help. Nancy

#9

Good Luck. I don't quite understand the part about the 45%. What is under your land really doesn't matter if the actual production is in another section. If a horizonal went from one section into another then the mineral owners of the section which the oil comes from gets the royaltys, but there is nothing on the OCC which indicates this type of drilling.

#10

It is a horizontal well. Plymouth Exploration is the one that told us that 45% of the oil is under our land. They are drilling a lot of horizontal wells in that area.

#11

What I mean is the horizonal portion of the well. If the land across the road is not in the section you own in and the drilling stays in that section then it is not yours unless the horizonal actually crosses the section line and produces oil from your section. I guess there could be an exception to this if the operator has stated that the oil is draining from your section and has agreed to pay you a portion of the royaltys. Concerning 3-24N/4W; Plymouth started a well named the Chain 1-3H on 8-5-11. It should be completed by now but nothing is posted. The only respondents on the Pooling Order were named Lackey. If you are not part of the Lackey Trust maybe someone in your family leased your land. You might try calling Plymouth and asking for completion information.

#12

If your farm and the land across the road are in the same section, sec.3 then your share is in proportion to the number of acres you own. It doesn't matter where on that 640 acres your part is. If I owned one acre right where the well was drilled I would still get only 1/640th of the royaltys. You could have 100% of the oil under your land or 0% under your land you get paid the same as long as your share is somewhere within the 640 acre section.

#13

Thank you for explaining that to me.

#14


I FINALLY figured out land descriptions. I discovered that even though they are both in Section 3 the township isn't the same so we aren't entitled to a royalty on the well Sebranek 1-3H at 3-23N-4W. Our land is at 3-24N-4W. Different Township. On the up side the 1-3H chain well, which is on our property, is producing and we will get a much smaller royalty check then was originally researched and that we hoped to get.

Michael Hutchison said:

If your farm and the land across the road are in the same section, sec.3 then your share is in proportion to the number of acres you own. It doesn't matter where on that 640 acres your part is. If I owned one acre right where the well was drilled I would still get only 1/640th of the royaltys. You could have 100% of the oil under your land or 0% under your land you get paid the same as long as your share is somewhere within the 640 acre section.

#15