I own some minerals in Williams county and I'm told a well will be drilled in the next year or so. The current lease ends in a few months so I thought I'd get on the ball and see what my options are for renewing the lease with another landman in the event the offer I get from the current company is too low.
How does one go about seeking other companies who may be interested in signing a lease once the current one expires?
Joel:
I would let the lease expire and let these companies come to you with offers. If your minerals are in an active area, they will find you. Don't be in a hurry to lease until you negotiate the terms in your favor. Study the current lease bonuses and royalty %'s and be aware of this before you sign the dotted line. In Williams County, I would not consider signing for more than 3 years but 2 years would be my preference. This will be a factor in getting a well quicker on your mineral acreages.
Joel, I would keep in mind that your lease expiration and the time you are told they intend to drill the well are not hugely apart. How long is the continuing operations clause in your lease? Consider that on the last day of your lease that a caterpillar could show up and start pushing dirt for a road, pad or pit and extend your lease for probably 180 days, that within the 180 days, a less than fully capable rig could be brought in to drill the verticle part of the well only (common practice), resetting the clock on the 180 days (or more) continuing operations clock. I would say that if you are anticipating lease expiration that you need to keep an eye on prep for the well that has been done or may be done prior to lease expiration. I was helping a lady whose lease had expired and the company wanted another lowball lease from her and when she said no they told here she was held by continuing operations as a ploy to get her to lease cheap. If they really had her by continuing operations they would not have been trying to renew the lease. Keep a close eye on your spacing, by Google Earth if necessary.
Joel,
It is great advice to let your lease expire before contacting anyone. Check the fine print in your lease to see if you are obligated to the lessee if you take other offers. Williams is a very active area and things change frequently. It is best to keep your options open and make the best deal for you after your current lease expires if it does expire.
Thanks everyone.
Rumor has it a well may be drilled in the next few months. What happens if the lease expires and a new well is put in without a lease?
That might happen if you have small acreage in the unit. However, there are probably provisions in your lease that provides added time to drill past the lease expiration date. Both have happened to Williams CO clients of mine and worked out well in both cases. Be patient and keep your cards close to the vest.
Thanks Gary, There does appear to be a 60 day provision in the lease. If I sign a lease with another company after it expires, does that make the 60-day provision obsolete?
No, It may make the new lease invalid if a successful well is drilled under the time extension provisions.
Gary H
Joel S said:
Thanks Gary, There does appear to be a 60 day provision in the lease. If I sign a lease with another company after it expires, does that make the 60-day provision obsolete?
Joel, that would be the continuing operations clause and if the operator starts work before your lease expires, the clock does not start ticking until the operator stops work. If the operator starts pushing dirt around for a pad or road, digging a pit or water well for fracking water and is working with no stoppages longer than 60 days, the operator can extend your lease as long as they do not let more than 60 days pass without working on the well or it's preparations. It's not all bad though, 60 days grace period for continuing operations is about as short as I have heard of. Recently there was someone on here asking about his lease expiration and his continuing operations clause grace period was 1 year and he said he never noticed that. I still think he was lucky, the lessee could have put 10 years as the grace period with the stroke of a key just as easily. If the operator does start work before or soon after your lease expires you might want to know when they started. I wouldn't count on them telling you the truth if it means they don't have to pay you for a new lease at possibly more bonus and they certainly wouldn't want to have to pay you a higher royalty percentage. Come to think of it, you may not even lease the acres to them again. Good reasons to tell you you are held by continuing operations, even if you aren't.
My situation needs help!
I am age 83 and Minot lawyer James R Maxson left me off the 8/1/13 deed,splitting my 76.8 mineral acres above Sloulin International airport among my kin, he and judge Rustad both in cahoots in this matter. larrywagenman@yahoo.com