For several months I have been communicating via email with the Land Administration area of EOG Resources trying to ascertain when Division Orders will be sent to the various mineral interest owners in the Pruski 1H and the Barkley 1H units in Wilson/Karnes County. Both wells have been producing since late July 2013. Just received an email that EOG is still awaiting receipt of Division Order Title Opinions. One of the units has approx. 80 different tracts and the other approx. 60. I just assumed that EOG already had the issue of legal ownership of mineral interests resolved when the units were formed prior to drilling. Is this unusual or now the norm considering the amount of activity in the Eagle Ford?
You one think that before you drill a well and spend millions on it you would want to have everything in a production unit under lease! But that's not the way they do it anymore. There could be a lot of reasons why this hasn't been done. Most likely I would say that the lease broker's landmen made a lot of mistakes. This seems to be the norm in these times.
From what I know about drilling rules in Texas, I thought that if a horizontal well is drilled all the mineral owners and their percent of ownership had to be filed for public record before the Texas Railroad Commission could issue a drilling permit.
What do you professional landmen want to comment of this?
This is why operators focused first on large tracts with fewer owners/ fewer ownership research issues. Issues like the above will now be more commonplace now that they are running-out of 'open-country' and now dealing with units formed of scores of smaller tracts where heirship will have drifted undocumented from ancestor to ancestor for many many decades, without probated wills, making 'proof of mineral ownership' difficult, at best, making sure 'Uncle Harry' doesn't run off with all the royalties that should have gone to all of grandpa's grandchildren, etc. only to have the grandchildren sue to get what should have been theirs. Will likely be the norm for old-small-town residential areas, and nearby.
I have seen a particular company put the payments on "escrow" with the local counties and not make an honest effort to find the people. In Texas some of the local judges just rubber stamp this kind of action and hope the county can claim it or the State with say a 5 year period! Also some local tax districts will try to foreclose the mineral interest because the property tax on the production has not been paid. This is real dirty in my opinion. The county and state tax districts are just a bad as the companies.
Also, don't forget, there is a difference between mineral ownership and royalty ownership. The operators normally have two Title Opinions done, one a drill site opinion which is interested in setting out the owners of the minerals who have the executive rights of the tracts under examination and the other, a Division Order opinion which sets out the ownership of the production from the well, i.e. royalty owners, overriding royalty owners and working interest owners. Technically, for example, there could be one mineral owner with all the executive rights but 80 tracts in the lease or unit because of different royalty owners in each tract. They could have drilled the well by getting one lease but the Division Order Title Opinion could be much more of a head-ache.
Wanted to thank everyone for their comments. Just received on April 19th the Division Order for Barkley 1H. Now just waiting for the D.O. for Pruski 1H.