Sell or lease our mineral rights?

Hi there, We leased our mineral rights on 3.333 acres SE/4 of Section 136, Block 13, H&GN RR survey to Wheat Resources over 3 years ago, it was then almost immediately “assigned” to Raisa Energy, from what I understand Primexx is the well operator.
We’ve never received any correspondence or royalties from Raisa Energy or Primexx. I have got in touch with Raisa a couple of times but have been told that Primexx won’t pay anything until the well pays out.
Is this all normal? Our lease has been up now for about 6 months and I’m not sure what to do next. Sale out-right or lease and receive no royalties or correspondence? ugh!

if you have mineral rights the well does not have to pay out. Your should receive your royalty interest immediately.

Maybe someone did not lease and you are now a working interest owner. if that is true you should get the full amount of your interest not reduced by a lease. you should be mineral interest owners and not working interest owners.

That would be after the well pays out.

Based on the information that you have provided, it seems that your lease was assigned to Raisa and that Raisa did not participate as a non-operating working interest in the well.  This would mean that Raisa did not pay its share of the well costs.  Based on several legal cases, including Cimarex v, Anadarko, if your lease did not participate, then your lease has expired and so you are an unleased mineral owner in the well(s).  If so, then after payout of each separate well, you will receive 100% of the revenues associated with your minerals less operating costs.  This net revenue interest will be higher than your net royalty interest would be in the well.  You should contact Primexx about the payout status and to make sure that they have your contact and other information.  Also, Raisa should give you a release.  Do not consider selling until you know the payout status of the well and how closed you are to being paid.  Alternatively, Pirmexx may want to lease your interest and be willing to pay your royalties back to the date of first production.  You may need to consult your attorney to understand your rights and to help you maximize your income here.  See article below -

Seems very frustrating for you, others on this board could say if operator is behaving lawfully. Have you questioned the landman at Wheat who offered your lease three years ago? He/she might know what’s going on with Primexx. Did Primexx not set you up with Division Order when they drilled in 2017? Did Wheat or Raisa receive an Overriding Royalty Interest from Primexx, such that they are also not receiving any royalties?

Is this your well, API 38936295? I see one well drilled in your Section 136 (Abstract 4816), a long lateral completed 12/11/17, API 38936295, the wellpad is in your SE/4. Appears quite unprofitable well, only produced 953 bbl and 2,884 MCF in twelve months May 2020 thru April 2021… TVD 10,910’ and MD 19,945. You may know Primexx drilled a sister well on the west side section 136 (probably not your pooled unit if you are pooled) sister well is more productive than your 38936295.

If the lease was assigned to Raisa and Raisa did not participate in the well by paying its share of the drilling costs, then the minerals are treated as if they were unleased and the operator would not pay revenues to those minerals until after payout. If the lease expires due to lack of production, then the mineral owner will be paid all revenues less expenses after payout. Under recent case, production from a well in which your lessee does not participate does not count as production from your lease or keep the lease in effect. This can be a problem where a small mineral interest is leased to a company other than the operator. Mineral owners need to track the assignments in the deed records to see if all or a portion of their lease has been assigned. There is no legal requirement for a lessee to participate in wells. Best for mineral owner to contact the operator to find out (1) if Raisa participated and so mineral owner will be paid royalty or (2) if Raisa opted out and the lease has expired and how close well is to payout. Oil business is complicated and mineral owners need to watch form permits, assignments, and understand what they own in order to protect themselves.

Per [Devon Energy Prod. Co., L.P. v. Apache Corp., 550] S.W.3d 259 (Tex. App.–Eastland 2018, pet. denied), I believe Raisa still is obligated to pay you royalties, regardless if they were able to participate or not.

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To expand on my previous comment, Raisa may be liable to pay you royalties, but if you have a tiny interest in a poor well with limited production, the juice probably isn’t worth the squeeze to hire an attorney and enforce any collection. That’s just the nature of owning a small fragmented interest.

Attorney John McFarland in his blog points out that the court held that “Devon owed the Lessor Plaintiffs royalties, but only on revenues received by Devon after the wells had paid out.” This means that Raisa would not owe any royalties until after payout. The case leaves open the question as to whether Raisa would then only pay royalties for production after payout, or have to go back to first production. It seems possible that the mineral owner will receive nothing if the well never pays out. In Cimarex v. Anadarko (2019, Tex App - El Paso - pet. denied), Cimarex did not participate in an Anadarko well and the court held that the Cimarex lease expired at the end of the primary term because, in essence, Cimarex was not producing oil and gas as either an operator or participating working interest. So Anadarko took a new lease from the mineral owner after the Cimarex lease expired. This all creates a messy situation for the mineral owner who leases to a non-participating lessee. Maybe it can best be addressed by adding a lease provision that requires royalties even if the lessee does not participate in a well.