Seeking advice regarding Oil Properties in Texas

Oil and Gas Leasing Help
21

Hi R. W. Kennedy,

This is a very helpful thought and makes great sense to me. I don’t know if my mother owned the surface or just the royalty interest, since I don’t keep a copy of her Will. I was young when my mother passed; and both my sister and myself have moved several times since then. My uncle told us 20 years ago that the remaining assets on these oil properties would just eventually dissolve. But it never happened, in fact these oil properties continually produce $5,500 - $6,000 annually over the last 8 years.

Do you have any advice to what kind of experience the person needs in order to draw up a good purchase contract for me on these oil properties? I only have a good real estate broker, but I don’t think that’s what I need in this case…or do I? Thank you in advance for your help.



r w kennedy said:

I think you can hire the talent and experience to draw up a good purchase contract. and all the trustee will be required to do is sign and notorize it and send you and your sister your checks. Then the trustee can do what he was going to do after the Texas co bought the minerals, except possibly take that vacation cruise to Alaska (or wherever) for choosing a particular company that did not make the highest offer. If these minerals ( you never said if you owned surface, or I missed it ) are the remainder of the trust, after you have purchased them, your relative can dissolve the trust as he wishes. I'd just be firm and tell your relative that you want those minerals. I am not a tax lawyer but I'm pretty sure neither is your uncle. You will have capitol gains tax whoever buys the minerals, won't you? 1/2 of $20,000 is $10,000 X 15% = $1500, that I suppose you would have to pay whether you are the purchaser or not. I think you should talk to a good CPA also. My opinion is that if you want them and can afford them , you should buy the minerals. Ditto to Ms. Malone's reply. Good luck whatever you do.
22

Chris, if the surface was involved the real estate broker would probably have a boiler plate purchase contract that would serve for land and minerals. For minerals only I would seek a minerals manager, as they must have seen many purchase contracts and doubtless have some on file. My personal choice would be Buddy Cotten, but there are others who I am sure are good also. I think your uncle just wants to sell the minerals to someone other than you for unseen reasons. If you get the purchase contract drawn up it could be no more work for your uncle than if an oil company did so. It might be a little more work if your uncle had to find a lawyer and engage him to create the contract, but we aren’t talking about that. This talk of hassle, that need not exist for your uncle whether you are the purchaser or someone else and the false direction about the capital gains. Something screwy is going on. I’d act quickly.

23

Chris, I would call you sister and try to find out what is going on if you already haven’t. Your uncle may have done you and your sister a good job. Have you ever heard of the “Bush Tax Cuts” Zero Capital Gains! I’m not a tax man and most likely you are going to need past accounting from your uncle. It might be hard to get after the fact.

24

Thank you very much for your prompt advice. I just sent my uncle a short email; basically I said I would do everything in my capability to take over this headache from him. I also informed him that as I mentioned earlier I am interested to purchase these oil properties myself and put together a purchase contract for him. I also asked him if he would be able to send me the list of these oil properties with their description as well. Hopefully I have not waited too long to respond to him. When Dillon mentioned that my uncle could still make this sale to the Texas Corporation without my signature, it really caught me off guard.

r w kennedy said:

Chris, if the surface was involved the real estate broker would probably have a boiler plate purchase contract that would serve for land and minerals. For minerals only I would seek a minerals manager, as they must have seen many purchase contracts and doubtless have some on file. My personal choice would be Buddy Cotten, but there are others who I am sure are good also. I think your uncle just wants to sell the minerals to someone other than you for unseen reasons. If you get the purchase contract drawn up it could be no more work for your uncle than if an oil company did so. It might be a little more work if your uncle had to find a lawyer and engage him to create the contract, but we aren't talking about that. This talk of hassle, that need not exist for your uncle whether you are the purchaser or someone else and the false direction about the capital gains. Something screwy is going on. I'd act quickly.
25

OMG, here is my uncle's response:

-------

YOU OBVIOUSLY HAVE NOT READ MY LAST 3 OR 4 EMAILS!!!
IT'S TOO LATE FOR YOU TO CONSIDER BUYING!!!

--------

I honestly did not receive any emails from him other than the one that I copied earlier... so I really don't understand why it is too late. If he already closed the deal at his discretion.... can I ask him to cancel the sale? Is there any way to ask him to cancel this sale, since I have not approved the sale; and, I did address my interest to purchase it. PLEASE HELP ME...

26

Chris,

This almost sounds fraudulent on your uncles part. I'm not sure who you'd contact to report fraud, and sometimes there is a period of time that a transaction can be rescinded, but I don't know anything about this, if either can be pursued. I'd start with the county courthouse where your uncle currently lives, and see what actions you can take. I'd let him know you're filing a fraud claim against him. That might get some answers from him. Also, get your sister involved as much as possible. There is power in numbers.

good luck.


Chris said:

OMG, here is my uncle's response:

-------

YOU OBVIOUSLY HAVE NOT READ MY LAST 3 OR 4 EMAILS!!!
IT'S TOO LATE FOR YOU TO CONSIDER BUYING!!!

--------

I honestly did not receive any emails from him other than the one that I copied earlier... so I really don't understand why it is too late. If he already closed the deal at his discretion.... can I ask him to cancel the sale? Is there any way to ask him to cancel this sale, since I have not approved the sale; and, I did address my interest to purchase it. PLEASE HELP ME...

27

I would suggest you get a board certified oil and gas attorney asp. What ever you do, do not get one in that county or someone who your uncle knows or works with. In Texas “small town politics” rules! Attorneys usually communicate important matters by certified mail in Texas. You probably have the option to reverse this. Most likely the company buying it has not paid him or even ran the title completely! Hurry!

28

Chris, It doesn't matter who buys the minerals as long as the buyer makes the contract it won't put any more work on your uncle. I think a fast one is being pulled here. It isn't rational for your uncle to be so vehement against your purchase of the minerals. Something is wrong. I'm thinking possibly your uncle doesn't want you to see the books. I think it's audit time.

29


I agree with Mr. Kennedy. Buddy Cotten is who I also recommend. Your uncle, in my opinion, has betrayed your Mother's trust and confidence ...in my opinion.

Don't waste anymore time with your uncle except to demand that he send you a copy of the legal instrument that governs the estate (Will or Trust.) I thought that by now you would have requested or received a copy.

To set the facts straight, you will have to know what type of legal instrument you are dealing with.

In the meantime, contact the expert, Mr. Buddy Cotten. He is one of the leaders of this forum. He has a website and his direct phone number is listed. He is very knowledgeable and very ethical in his dealings. He is not your typical "snake in the grass" attorney.

I am appalled at the terseness of your uncle's response.

It's time to turn this over to a Pro. Yes, and act quickly.

Pat


r w kennedy said:

Chris, if the surface was involved the real estate broker would probably have a boiler plate purchase contract that would serve for land and minerals. For minerals only I would seek a minerals manager, as they must have seen many purchase contracts and doubtless have some on file. My personal choice would be Buddy Cotten, but there are others who I am sure are good also. I think your uncle just wants to sell the minerals to someone other than you for unseen reasons. If you get the purchase contract drawn up it could be no more work for your uncle than if an oil company did so. It might be a little more work if your uncle had to find a lawyer and engage him to create the contract, but we aren't talking about that. This talk of hassle, that need not exist for your uncle whether you are the purchaser or someone else and the false direction about the capital gains. Something screwy is going on. I'd act quickly.
30

Ok here is the latest update:

I just learned that there is a long list of oil properties involved here (somewhere around 300 small oil properties or probably a little bit more). However, my share percentage of this interest is only about 0.00001%.

I don’t know what this percentage means for me. I am hoping it is worthy enough to put this much effort to keep them (does anyone have an idea on this?)

I am working on getting the list of these oil properties at this moment.
31

Chris, It sounds like the “fox has been guarding the hen house” in you and your sisters case. Maybe not, you have never told us about what your sisters position is. Are you letting her in on all of this? If you have 300 separate interest you better pay attention! I have seen many times over the year’s where estates large and very, very small where the siblings hate each other and are trying to slip something by on each other. Is your sister on your side or your uncle’s? None of my business though. If a company or 6 company’s have gone to the trouble of doing all the land and title work it’s probably worth many, many times more than the $26,000.

32

This is why I advise people to be very careful about setting up a trust instead of having your estate go through normal probate.

Once the Trustee is in power in most states they can do whatever they want & that includes not providing you with an accounting.

Still I would suggest you politely ask your uncle to furnish you with a copy of the contract on the sale

I would hope your uncle has done nothing wrong, but if he has at his age there is likely little you can do about it.

33

Does anyone have any advice on the activities on the following areas:

Sacroc, Mitchell, Hockley, Levelland, Hale, Scurry, Ector, Lamb, Westbrook. Most of the units that I have partial interests are in Sacroc (almost 50 units), then North Westbrook, and Hockley.

The annual royalty checks that my sister and myself have received have been around $6K each year for the past 8 years; and they are from these following companies:

$3K from Kinder Morgan, location: Sacroc, $2K from Occidental Permian – location: Westbrook, $1K from Energen Resources - location: Hockley/Hale, and a couple hundreds dollars from Devon, Sunoco, Chevron (location: Mitchell & Ector).

Given this information, and no other information that I can receive to find out the potential on these 300 – 400 units… from a business sense, would it be worth to fight further? I have less than 24 hours to pursue and draw a purchase contract to stop the sale.

It would be much easier to make an educated decision if I knew the exact lot numbe,r so I can check the potential future of these oil properties. Unfortunately, there is no way I will be provided with that info by my uncle. I spoke with my sister earlier today and she doesn’t have any information either. Agreeing with my uncle’s opinion, she said “Why you want to spend time and money on hiring a lawyer and get more headaches for such a small amount of annual return?”

The whole transfer process will take about 3-4 months. As advised by Pat & Kennedy, I will hire a mineral manager to draw up the purchase contract and handle all documentation/transfer. The unknown cost will be the lawyer. Anyone know or has any experiences on how many hours it will take for a lawyer to review this kind of transaction? I am trying to gather more information cost wise, on how many thousands of dollars that I will risk here and is it a wise choice or not? I am making a lifetime decision within a very narrow time, not enough detailed information (sounds like gambling). I feel like I want to hold these oil properties, but the difficulty in the process is wearing me out. I don’t like to gamble and I wish I knew more about the details, or know how much money will I spend for an attorney during the transfering process (I am not going to sue anyone). If I am going to pursue further, it will be just an individual offer to match or a little bit above the current offer on the table.
34

Dear Chris,

Go to the courthouse and get an injunction against the sale using possible/probable fraud as a reason to stop the sale. That will give you time to sort it all out. In the first place, he is no longer executor if he ever was. Three years is the limit on getting loose ends tied up and probated. You have probable cause, use it. He can't legally sell it without your and your siblings permission.

Yours,

Wes

Chris said:

Does anyone have any advice on the activities on the following areas:

Sacroc, Mitchell, Hockley, Levelland, Hale, Scurry, Ector, Lamb, Westbrook. Most of the units that I have partial interests are in Sacroc (almost 50 units), then North Westbrook, and Hockley.

The annual royalty checks that my sister and myself have received have been around $6K each year for the past 8 years; and they are from these following companies:

$3K from Kinder Morgan, location: Sacroc, $2K from Occidental Permian – location: Westbrook, $1K from Energen Resources - location: Hockley/Hale, and a couple hundreds dollars from Devon, Sunoco, Chevron (location: Mitchell & Ector).

Given this information, and no other information that I can receive to find out the potential on these 300 – 400 units… from a business sense, would it be worth to fight further? I have less than 24 hours to pursue and draw a purchase contract to stop the sale.

It would be much easier to make an educated decision if I knew the exact lot numbe,r so I can check the potential future of these oil properties. Unfortunately, there is no way I will be provided with that info by my uncle. I spoke with my sister earlier today and she doesn’t have any information either. Agreeing with my uncle’s opinion, she said “Why you want to spend time and money on hiring a lawyer and get more headaches for such a small amount of annual return?”

The whole transfer process will take about 3-4 months. As advised by Pat & Kennedy, I will hire a mineral manager to draw up the purchase contract and handle all documentation/transfer. The unknown cost will be the lawyer. Anyone know or has any experiences on how many hours it will take for a lawyer to review this kind of transaction? I am trying to gather more information cost wise, on how many thousands of dollars that I will risk here and is it a wise choice or not? I am making a lifetime decision within a very narrow time, not enough detailed information (sounds like gambling). I feel like I want to hold these oil properties, but the difficulty in the process is wearing me out. I don’t like to gamble and I wish I knew more about the details, or know how much money will I spend for an attorney during the transfering process (I am not going to sue anyone). If I am going to pursue further, it will be just an individual offer to match or a little bit above the current offer on the table.
35

It all sounds as bit fishy, so it looks to some like your Uncle has done something wrong,

But that may not be the case.

Still, were I in your shoes I think I'd email him back not to sign any papers on a sale yet.

36

Chris, 300 oil properties sounds very suspicious to me. Just think about it. It doesn't seem logical. Your Mother would have had to own a lot of land and minerals to have an interest in this many oil/gas wells. It would take many thousands of acres of land to get 300 producing properties.

I think your Uncle is blowing all of this way out of proportion and you need to hire a good oil and gas lawyer ASAP! As others have suggested, send your Uncle an email, if you haven't already, and tell him not to make any sale. Have the attorney call your Uncle immediately. As an executor or trustee, your Uncle is supposed to put you and your sister's interests ahead of his own!

37

Chris, a simple phone call to Mr. Cotten will either end this or put you on the road to "discovery." So, may I suggest that you assert yourself and go directly to the "professional" who will enable you to make a decision on what direction to pursue. It will be worth your time to talk to Mr. Cotten, and then you may decide it pursuing this issue will be worth your money.

We have all tried to point you in a good direction, and, I'm sure have also given you many directions to consider, but I think it's time you "take the ball" and go with it and consult with Mr. Cotten.

Let us know what you decided to do after you speak to Mr. Cotten.

Good luck.

Pat

...see below from Mr. Cotten's website ...

SERVICES

Oil and Gas Lease Forms for the Mineral Owner
(It's about time!)

All land related services to the oil and gas industry, including
leasing, 3-D permitting, surface damages, abstract
preparation, title curative, etc.

In addition, we provide the following negotiation and analysis
services to mineral interest owners:

1. Oil and Gas Lease negotiation and
preparation.

2. Surface Damage negotiation.

3. Revenue and Expense Monitoring

4. Acreage Inventory.

5. Verifying and preparation of Division Orders.

6. Marketing of oil and gas interests.

7. Estimation of future cash flow.

8. Title Curative

9. Monitoring Property Tax

10. Valuation of Assets

Cotten Oil Properties, P. O. Box 187, Orange, Texas 77631
409.233.0003

38

Chris, I also highly recommend Mr. Cotten. He is very knowledgeable and can help you. Time is of the essence!

39

Thank you very much for everyone’s support in this matter. I followed R.W.Kennedy, Pat Malone, and 6th Generation Texan’s advice. I had a few correspondents with Mr. Cotten and he has been very helpful to help me see a different perspective business wise. Using all the thoughtful information that everybody has put time into my case, I finally was able to persuade with all the logic, numbers, & facts in order to convince my uncle that his decision to sell these oil properties may not be the best decision at this time.

Amazingly, with the new approach showing all the related factors, numbers, etc, regarding these oil properties without cornering his position…. My uncle for the first time agreed with my request to hold on these properties and let me involve to take over all the headaches from him. It is a BIG VICTORY! It cannot be a better result than this, and my relationship with my uncle is also still in the good term with this new developing solution.

I will continue working with Mr. Cotten to pursue my interest to keep my share and take over my sister’s share respectively. Like what everybody has been saying, Mr. Cotten is very knowledgeable and I can see myself working with him and getting things done in a timely manner.

I cannot express enough appreciation for this forum and everybody who has been taking their time to comment and give me thoughtful input. It has been a roller coaster week for me, but I could not have bargained for a better result. Thanks again! I have learned a lot from you all within the past week.
40

Chris, that is wonderful news! I am so happy to hear that your Uncle listened to reason and that you sought Mr. Cotten's advice! It sounds like a win-win situation for you and your sister! I wish you the very best! Give us an update later on.