Title Examination


#1

Received a notice/app for drilling in an area I have some interest in.They are asking me to provide title, etc.to what I have. 30 days to sign. I have very little knowledge of how they figure this out. Past offers to sell seem to range from 20 to 40 nma. Where these figures come from is over my head. Maybe a pooled 640 acres, where long ago, my parents and grand parents had property. Is operator obligated to give me info on my interest, or do I just rely on their records to determine my royalties? Thanks a lot.


#2

Hi Ronald, Congrats - it sounds like there may be some activity on your minerals in the near future. In terms of how operators determine ownership amount - they perform a title search for the tracts of land covered by their Drilling Spacing Unit (DSU) to identify all mineral owners (and associated undivided interest %). If they are asking for you to provide documentation to prove your ownership, it is likely that the owner of record for your minerals still shows up as your parents or grandparents and in order for them to pay you a lease bonus or royalty, you need to prove that you have title to the property (e.g. a mineral deed, quit claim deed, warranty deed, or some other type of conveyance document).

If this is the case (and in general for cases like this), your interest would be placed in “suspense” and any monies owned to you would be held until you provide the necessary documentation. At that point, they would place your interest in “pay status” and begin paying you. You won’t be at risk of losing the money, it just would be held.

If there are any gaps in the chain of title or other title defects that need to be cured before you have marketable title, you would need to hire an attorney to help you (e.g. to go through probate process or determination of heirship to prove that you own the minerals).

In terms of how much information an operator will provide you on your interest, it never hurts to ask. In cases where I have questioned the Net Revenue Interest they show for my property, I have had division order analysts (with the oil & gas company) provide copies of deeds or other documentation to help show how they came up with the #.

I would always recommend double checking your Net Revenue Interest to make sure what the operator says matches what you think you own, especially since they can make mistakes. To figure out how to do this you can google “how to calculate your net revenue interest” and there are a lot of resources that will tell you how to do this very straight forward calculation. You will need to know a few things like your # of net mineral acres, legal description, royalty rate, size of the drilling unit, etc.

Please let me know if you have any questions and good luck!

Thanks, Matt Sands


#3

Thanks a lot, Matt. Exactly what I wanted to know! Apparently there is no Colo. reg that requires Operator to release that info, until the DO is finalized, I did speak to Kerr McGee landman. Very accommodating. I didn’t ask her about this question, but I may do so. I “think” I have most of the wills, deeds, etc. taken care of. In fact, I quit claimed my interest to our three children recently. I guess I am just an agent now, lol . Your response was very professional and helpful. Ron.