We’re currently working on a deal to sell 25% of our royalty interest. We’ve received a deed to sign and return but the new deed lists the price at $10 versus what are actually selling it for. I asked them about this and was told that it’s a common practice and that the Letter of Intent covers the actual price. But the Letter of Intent seems to indicate the offer price could change based on their title search, so that doesn’t seem as cut and dry as they’ve tried to make it seem.
Does anyone have any experience with this? Is it a normal practice?
Thx!
Deeds and oil & gas leases generally cite $10 and other valuable consideration....., rather than the full price paid, as evidence that there was adequate consideration for the transaction. Do not sign the letter of intent unless you fully understand its meaning and what your commitment is. Often there is an agreement of a price per net mineral acre. The buyer will conduct a title search to determine the exact number of acres that you own. For example, if you own 1/10 of 100 acres, then you own 10 net mineral acres. For the most part, the letter of intent is written to bind you to the deal and to give the buyer the ability to get out if he does not like your title, etc. What if the buyer decides you only own 2 acres and you had previously signed a lease based on owning 10 acres? You want to be able to reject that deal if you do not agree with the results of his title research. Also, what do you mean by selling your royalty interest? Do you own minerals or an NPRI? Is your acreage under lease and are you receiving royalties? Are there any new wells permitted? The wording of the deed is of utmost importance and you cannot take it back if you later decide that you misunderstood what was conveyed. You should consult an oil and gas title attorney to understand the legal meaning of both the letter of intent and the deed.
Take heed of this good advice and don't be so anxious to sign anything until you understand, EXACTLY, what you are signing and what it all means.
Good luck,
Pat
You need to get advice so you don't get paid $100 for a $100,000 value; so, do not fail to do your homework. Also, there is a rule to never sell your minerals; however, if your children are going to sell it at the drop of a hat, you can enjoy it now. Bob Malone, Malone Petroleum Consulting