Strange lease offer from Magnolia Resources in OKC

Oil and Gas Leasing Help
1

Hello:

Wondered if anyone could offer some insight:

Received a lease offer from Magnolia Resources on behalf of Landseer Exploration LLC, for property in Okfuskee County, Section 13-12N-11E.

I don’t own mineral interest in that exact Township and Range; I own M.I. in Section 13-10N-8E.

Called the landman to report the inaccurate land description, and during the conversation I mentioned I own several M.I. properties in Okfuskee and Okmulgee (adjoining counties). He asked me to send the list of properties I own in Okfuskee and Okmulgee and they could offer more in the lease.

I told him that finding what we own, and accurately describing it, is the job of title analyst and/or landman.

The inaccuracies in the letter put me on guard, plus the fact that they want to lease for 4 or 5 years in the primary term AND want 3 year options. I wouldn’t go for anything more than 3-year primary term, and no extension. And, their bonuses are nothing great: $100/acre for a 4-year primary term, and $125/acre for a 5-year term.

Anyone else heard from or about Magnolia? The sense I got is the landman isn’t “on his game”–he couldn’t even give me his email address quickly when I asked for it–he had to look it up.

And, is sending a list of properties owned in any given county to a landman considered a “normal” practice? I thought that was their job.

Angela

2

No, not really, as to the last question. Their job is limited to whatever area they are assigned to search. It is unlikely that their assignment was to determine everything that Angela Havel owned in those two counties. Their prospective area or assigned mineral title work was obviously a lot more limited, or limited to a specific area where the mistake was made.

Even if you did furnish them a list of everything that you own, it doesn’t mean an offer on all of it would be forthcoming. That final decision wouldn’t be left to the landman. Should you have decided to furnish a list that covered everything you own, the principal might have reviewed it, and decided that some was outside of or too far from the area that they were interested, but you don’t really know. Since you elected not to furnish such a list, it is now possible that they may not be inclined to research it on their own. They may want to focus their efforts in an original, specific area. If you indicated that you were put off by the terms, they may not think it worth it to do county wide searches on what you own, unless you acquired it in the same instrument.

3

Angela, I can’t help with most of your questions. The last one, I can share my experience, although probably not normal. Might not work for anyone else.

Last spring, I received a letter about a section in Cleveland County. I called the landman and asked who he was buying for and told him we would need terms such as no warranty, no post-production deducts, depth clause, pugh clause, etc. He first said could do some but not all. Then I told him we (my brother, aunt, and two cousins) had minerals in 4 additional sections and I gave him the legals and total # of acres, he said he would check with their client. Within an hour he called back. After negotiations, they paid 1/3 more bonus, granted the terms, and some more “picky” ones I included.

I asked why he did not know about the other tracts and he said his company had several landmen working their assigned areas and that another staff person was doing the “courthouse work”. When they did get down to preparing the leases, the deed for one of the sections prepared by a probate attorney had a typo (SW4 where it should have been NW4) so we had to file a correction.

I know the landmen I deal with are not looking out for my interest, but if I can provide information to help them do their work, they will at least ask their boss, whereas they could be hard to deal with if I am not pleasant with them. Seems to me that is how human nature works.

4

Thanks for the info. The landman did say several times the company he represents, Landseer Exploration, is “looking at developing” areas in Okfusgee and Okmulgee counties, and I realize giving him a list of all my M.I. ownership doesn’t mean I’d get offers on all of it. I haven’t officially indicated to the landman I wouldn’t give more info about what I own. He also asked about my required terms for a lease, and I still have some time to respond. Just thought I’d check here first.

5

Wes:

Thank you, this is good info. I get your point about being helpful to a landman, and I usually am, but sometimes I don’t know how wary to be, as the more I learn here at the M.I. board, the more pitfalls I hear about, like brokers who want to “buy” a lease from an unsuspecting M.I. owner, and then re-lease at a higher bonus and royalty to an oil company. (Just read about this the other day).

The other thing that makes me wary is the landman seemed very new to his work, and besides the incorrect land description, there were several other factual typos in the offer letter. I’m an English teacher and look for those details to be correct in writing! Scam-type operations can often be identified by sloppy writing and/or proofreading.

I’ll see what other responses I may get here, and then proceed.

Angela

Wesley Skinner said:

Angela, I can’t help with most of your questions. The last one, I can share my experience, although probably not normal. Might not work for anyone else.

Last spring, I received a letter about a section in Cleveland County. I called the landman and asked who he was buying for and told him we would need terms such as no warranty, no post-production deducts, depth clause, pugh clause, etc. He first said could do some but not all. Then I told him we (my brother, aunt, and two cousins) had minerals in 4 additional sections and I gave him the legals and total # of acres, he said he would check with their client. Within an hour he called back. After negotiations, they paid 1/3 more bonus, granted the terms, and some more “picky” ones I included.

I asked why he did not know about the other tracts and he said his company had several landmen working their assigned areas and that another staff person was doing the “courthouse work”. When they did get down to preparing the leases, the deed for one of the sections prepared by a probate attorney had a typo (SW4 where it should have been NW4) so we had to file a correction.

I know the landmen I deal with are not looking out for my interest, but if I can provide information to help them do their work, they will at least ask their boss, whereas they could be hard to deal with if I am not pleasant with them. Seems to me that is how human nature works.

6

Angela,

I'm especially impressed (and much in agreement with) your comment of:

I'm an English teacher and look for those details to be correct in writing! Scam-type operations can often be identified by sloppy writing and/or proofreading.

That is an astute observation and will return dividends for you. Hooray for English teachers of the world. Good (and proper) writing skills are one of the first characteristics I look for in hiring people, and in doing business with other parties. In contracts and agreements, it's beyond nicety, it's often the language to which you'll be held account in our legal system.

Best of luck in your negotiation.

7

Thanks for the gracious comment, Kenny!

Kenny DuBose said:

Angela,

I’m especially impressed (and much in agreement with) your comment of:

I’m an English teacher and look for those details to be correct in writing! Scam-type operations can often be identified by sloppy writing and/or proofreading.

That is an astute observation and will return dividends for you. Hooray for English teachers of the world. Good (and proper) writing skills are one of the first characteristics I look for in hiring people, and in doing business with other parties. In contracts and agreements, it’s beyond nicety, it’s often the language to which you’ll be held account in our legal system.

Best of luck in your negotiation.

8

I am particularly perturbed by incomplete sentences. I made a quick count and found 4 incomplete sentences in this discussion alone. There might even be more than that number.

In my business, I am many times judged on the written word. I rarely meet a client in person and accurate speech and writing is often the litmus test.

9

Buddy:

I realize I wrote some incomplete sentences. I wanted to get the info across in my original message as succinctly as possible, and didn’t feel I needed to include “I” in a few of my sentences, hence I wrote “Received a lease offer…” and “Called the landman…”

I should have known that indicating I’m an English teacher sets me up for scrutiny. It’s too late to edit my post now, but I do recognize the errors.

Angela

10

I understood your original question. I thought that it was clear and concise.

The thing that stood out the most for me personally was that it seemed to be based on some misconceptions about the leasing business and the role of the landman.

You wrote that you wanted to entertain some more replies before you act. I don’t really know what anyone else can advise you.

The bottom line is that in a free society where individuals own property, and in a country where those rights are constitutionally protected, you do have alternatives.

To be honest with you though, the request for an inventory of what you own wasn’t that big of a deal. Many other mineral owners would not have thought twice about furnishing it if they had one handy. As previously stated, a landman’s assignment is most often limited to a certain area. If the mineral owner/lessor indicates that he or she owns additional acreage, the lessee may often agree to “take a look at it”. However, to expect them to go and take the time to research it, when the mineral owner can easily tell them how it is described, and where it is located, seems a little silly and unreasonable.

If you don’t feel comfortable with the professionalism, or lack thereof, of the person who contacted you, maybe you should not deal with him. You might also make a copy of the letter that contained the factual errors, etc., and send it to his broker and client company. You might tell them of your background, and how the sloppy letter and wrong legal description turned you off.

11

The bottom line is: This mineral rights forum site is a very valuable tool with the very valuable input consistently from some of the best experts in the industry. We are blessed with their wisdom. I love it!

12

I love this forum also, Bob, and agree we are very blessed to have the experts that we have on it. My being a “novice” in all of this, I have learned so much from reading everyone’s questions and answers.

Thank you EVERYONE.

J. Michal Just a Mineral Owner

13

Dave:

Thanks for offering your ideas; they make sense. I’m my mother’s secretary for her mineral interest holdings, and she’s paranoid that a lawyer she used in the past may have stole some mineral interest property of hers. Her paranoia has somewhat transferred to me, but I also realize at some point you have to trust people before they give you reason not to. Then again, I’ve heard of stranger things than an unscrupulous landman deeding a property that isn’t his into his name…

Having this board to go to for advice helps alleviate somewhat the paranoia aspect, I’ve noticed!

Angela

Dave Quincy said:

I understood your original question. I thought that it was clear and concise.

The thing that stood out the most for me personally was that it seemed to be based on some misconceptions about the leasing business and the role of the landman.

You wrote that you wanted to entertain some more replies before you act. I don’t really know what anyone else can advise you.

The bottom line is that in a free society where individuals own property, and in a country where those rights are constitutionally protected, you do have alternatives.

To be honest with you though, the request for an inventory of what you own wasn’t that big of a deal. Many other mineral owners would not have thought twice about furnishing it if they had one handy. As previously stated, a landman’s assignment is most often limited to a certain area. If the mineral owner/lessor indicates that he or she owns additional acreage, the lessee may often agree to “take a look at it”. However, to expect them to go and take the time to research it, when the mineral owner can easily tell them how it is described, and where it is located, seems a little silly and unreasonable.

If you don’t feel comfortable with the professionalism, or lack thereof, of the person who contacted you, maybe you should not deal with him. You might also make a copy of the letter that contained the factual errors, etc., and send it to his broker and client company. You might tell them of your background, and how the sloppy letter and wrong legal description turned you off.

Angela Havel said:

Buddy:

I realize I wrote some incomplete sentences. I wanted to get the info across in my original message as succinctly as possible, and didn’t feel I needed to include “I” in a few of my sentences, hence I wrote "Received a lease offer… and “Called the landman…”

I should have known that indicating I’m an English teacher sets me up for scrutiny. It’s too late to edit my post now, but I do recognize the errors.

Angela

14

Angela - This may be too late to be useful but I am having similar experience with an offer in Okfuskee. Turns out Magnolia and Landseer have the same address but neither answered their phone. I found the Landman to be among the least professional I’ve encountered. He went silent twice and was slow when he finally got moving. As you know, lease terms are poor, so I agree, this is a strange one.

However, I held my nose, took the deal (kinda like voting) and cranked down my expectations figuring a “bird in the hand” or maybe “something is better than nothing.” We should compare outcomes. Good luck.

PS I’m new to this forum and hope my syntax and grammar are correct. Some of your readers don’t take prisoners.

15

Angela - This may be too late to be useful but I am having similar experience with an offer in Okfuskee. Turns out Magnolia and Landseer have the same address but neither answered their phone. I found the Landman to be among the least professional I’ve encountered. He went silent twice and was slow when he finally got moving. As you know, lease terms are poor, so I agree, this is a strange one.

However, I held my nose, took the deal (kinda like voting) and cranked down my expectations figuring a “bird in the hand” or maybe “something is better than nothing.” We should compare outcomes. Good luck.

PS I’m new to this forum and hope my syntax and grammar are correct. Some of your readers don’t take prisoners.

16

Rick:

I checked our files, and see we (I handle my mom’s mineral interest) leased six net acres in Okfuskee Township 15-12N-11E on 11/6/14 for a 3-year term, and yes, I’ll keep in touch about our “progress” with this one. I was in contact with Eddie Patterson from Magnolia/Landseer during the leasing process.

Your comment about the grammar thing made me chuckle… actually, it was another member who got on my tail for writing incomplete sentences a while back. I’m not that much of a pedant. And, the quality of writing here, including yours, is generally high, but in some cases poor grammar skills can get in the way of one’s meaning coming across clearly. Then it’s a problem!

17

I didn’t get a letter, just a phone call with a similar offer on the Okfuskee Section 1 12N 11E from an Aaron Tanner, representing Magnolia in November; then called again in December with an offer of 125 to 225 per mineral acre for our 10 mineral acres with a 3 to 4 year initial term and a one-year extension option. I got his email and told him I would think about it and get back to him. I have done nothing, just sitting on it. Really didn’t sound all that knowledgeable or professional and I like things in writing. We also have several mineral acres spread around in that county as well as some in Okmulgee. He actually never mentioned what royalty interest they were offering, only talked about the bonus. I am going to continue sitting on it and see what develops.