All good points, all worth considering. Rather than considering all factors named, I will take the path of least resistance and skip the 3rd party option but as I said, to each his own. I too have heard all the absolutes you mentioned Rick. I have a lot of minerals in 14 counties, all in the active SE OK. I prefer to just sit tight on mine. It is difficult for me to sit in my chair and determine a FMV of a lease with the nominal info at hand.
Messrs McDonald/ M BarnesāThis is just one case of so, so many you read about here on Mineral Rights Forum. When you lease your rights to a 3rd Party, mostly what you get is just another party to a transaction that just complicates matters. I was advised many years ago, NEVER contract with a leasing company [3rd Pty]. It is best to just wait until the production company has the lease in hand and makes the final offer or Force Pool. If you are force pooled, by law/ reg, you get an amount no less than the highest price/ bonus offered. You retain total control of your interest w/o the messy entanglements of a 3rd party. Although patience is required, and you donāt get the āinterim cashā associated with an interim lease arrangement, you will always come out better by being force pooled. I have never seen it otherwise and the horror stories, as noted below, are at a minimum. It is a pain in the butt, time involved, recording fees, etc. with getting a release of lease and recording it. I just would not be caught in that trap.
The only problem I see with waiting on Force Pooling is that if they donāt force pool and drill you will have lost out on the bonus money you might have gotten. We leased a piece of ours out to CR for 3 years at 3/16 when the last boom started. After the 3 years with no activity on it they leased it again from us at a higher bonus and at 1/5. Just before that lease ran out Newfield drilled on a tiny bit of it and now hold it with production. If they had waited another few months before drilling we could have leased it out again. Wish that had happened! But Iām saying if we had waited to be force pooled we would have missed out on at lease those first two bonuses which were pretty nice!
My complements to Rickās superb response. I own Minerals in 9 sections in Grady and been through many leasing cycles so have experience with both majors and non ops. In my opinion, non ops are the sole reason why leases are now getting valued properly through competition. I much prefer leasing with non ops over majors as bonus, royalty and Exhibit A are superior to anything offered by majors. I have a long memory about the past arrogance and abuse when leased by majors.
Yes Linda, in our case weāve been fortunate enough to have gotten four bonus checks over the years and our land remains undeveloped. And youāre also right Mr. Matthews, the last lease we had ended up being much less than what the Section pooled for in 2014, before the bottom fell out and Continental walked away. Had we waited that time we likely would have recouped the small amounts of bonus we received on the three earlier leases. As geological data is secret and proprietary, there is really no way of knowing the value of what we own, so as mineral owners we remain at the mercy of the sweet talkinā landmen. My sister worked for many years as a paralegal in Texas and is energized to explore any basis for legal action we may have. No contract without consideration? That sure sounds right to me Ms Barnes.
Over the past 13 years, I have had offers to lease by 3rd Parties. I do review them carefully and usually respond as a courtesy. When I outline my reason[s] for not accepting the lease, as written, I have yet to hear a counter offer. If I receive a real offer or counter offer, I will take it seriously. Otherwise, these offers are filed in my file cabinet as archives. It has been my experience that the proceeds offered in bonuses and lease for the net acreage would barely pay my recording fees. I have leases operating in 4 counties and 4 operators presently: Bravo Arkoma, Charter Oak, Continental and CVR. I have 9 more Simple Probates to complete and file in the same number of counties. I will be receiving offers on those fairly soon, considering the ongoing leasing in those counties/ sections. Maybe I will get lucky and see a serious lease offer.
So do most non-ops just buy minerals in hopes of passively participating in royalties such as we (hope to) do? Or do most of the offers come from speculators wanting to financially participate in a well? I have always assumed the latter, but it seems to me like courthouse filed leases generate offer letters. Wouldnāt the land be more valuable to an such an operator if unencumbered by an existent lease?
Yes Kenneth. I think you are correct in both cases. Companies often want to participate to have access to well logs and other data. Normally offers are higher for unleased minerals. Minerals are a big business. Companies buy and hold or divest a portion at auction to help cover the cost. Sellers could look at auction sites as a way to get true retail value.
I own minerals scattered in Oklahoma and have always waited to elect from the pooling order as opposed to leasing. The terms just seem more favorable and less time on the phone. Also I donāt have to sign wormy leases.
Larry, you are so right, wish I didnāt know now what I didnāt know then.
Just for grins, I went back 20 years in Stephens County. 35 leases, only 1 lease was drilled. It looks like another will be drilled in the next few months and there are a few with a couple of years left in them.
That is a LOT of money in lease bonuses to pass up waiting on a pooling order that may never come.
(There were a few other locations where we did wait on a pooling order to make an election)
Rick, I did a similar look back 30 years when I acquired Minerals from family and took over leasing. I had several properties that went through 8 leasing cycles from $125 bonus at 5/32 to $5500 bonus at 22%. A couple properties leased for a total of $8000+ bonus in just last 3 leasing cycles. Most have been drilled in last 6 months so happy with my tough Exhibit A negotiated with non ops.
This supports your point that lots of money can be lost waiting for Pooling.
My son recently received an offer to by his leased minerals (3/16ths) in Section 4, 1N-R5W at $7000 per acre. Can someone please shed some light on what is going on in that section or what the going rate should be for an interest like this? We live out of state. Thank you
Kevin,
Generally, unsolicited offers are quite low to actual value. There is quite a bit of horizontal drilling in the area. He is probably in an older unit that may be appearing to be dying. Several operators in the area are coming into the units like this and drilling the shales. Some of my best properties are in areas like that. We are in section 3 next to him and are not going to sell.
Thanks so much for the Info M Barnes. Do you happen to know the typical size of the units if they are drilling the shales? It would also be helpful to know the kind of production comes from this formation and what production levels would be considered a good well. Thanks once again
P.S. Didnāt copy read. Of course I mean āpendingā in district court.
Does anyone know anything about a class action suit against Continental for wrongfully charging for expenses? All my contracts specifically prohibit that, and everything was fine at first, on the wells in Sec 20, 2N-4-W. I had been checking carefully for months, then got careless, and finally discovered I was being charged expenses on subsequent wells. When I phoned Cont. I got a letter from someone accounting saying they canāt talk about it because of āa proposed class action legal proceeding sending in District Court of Blaine Countyā¦ā It was filed by Billy J. Strack and others. Iām wondering if Iāve missed discussion of this on the forum, since I havenāt been reading as regularly as in the past. And incidentally, Al Crabtree who ran Mineral Owners Support Group in Duncan, died recently. He was the nice man who reviewed all my contracts, and always included an Exhibit A disallowing expenses. I donāt have any more minerals to lease now, but wonder if I need a lawyer for the class action suit. ???
Kathlyn, the case was settled just a few days ago, as a Continental royalty owner I believe you are automatically a member of the class. Details of the settlement are sketchy right now but around $60 mil will be distributed. It will take most of the year to get it all sorted out. Brief article: http://www.4-traders.com/CONTINENTAL-RESOURCES-IN-50470/news/CONTINā¦
Amazing. Thanks Michael.
Thanks for the information, Michael.