Hello everyone, we have 200ish acres in Morris county that already has a pad constructed and permit issued but the operator is tied up in court. I received a call today regarding a top lease on it as it expires soon. I have been watching some of the court stuff going on and am worried that if we do sign a top lease that we could get set back if the bottom and the top lease were to dispute it. Is this something to worry about? How often do top leases fall through due to legal disputes?
I am very wary of top leases. Here is an article that might help explain the pitfalls. I make them lease me again so that everything is clear and tidy.
An Overview of Recurring and Related Issues Involving Top Leasing.pdf (210.2 KB)
I would also note that you’ll want to negotiate better terms in the lease, especially with 200 acres. As Morris County is in the Smackover region, you’ll want to have a lease that includes language to protect your lithium rights.
1 Like
After reading the article, I’m even less on board for a top lease. I don’t want to get tied up in legal drama. The pad has been constructed for over a year now, will the second company use the same pad or will they have to make another one?
My family and I have mineral rights in Morris County. One of my family members was approached about a top lease and we strongly advised her to turn it down (we collaborate as a single unit, and no other family member had received a top lease offer). I suspect we’re talking about the same 2 operators, as you mentioned one was in legal proceedings and the other offered the top lease. Ultimately, the other family members waited until the first party’s lease expired (the original company with whom we had leased was in legal proceedings at that time) and then we negotiated with the company that had offered the top lease.
The Mineral Rights Podcast has an excellent discussion about top leases in Episode 210, and I recommend listening to it. You can find it at mineralrightspodcast.com or in your favorite podcast app.
I would also avoid a top lease, especially with the complexities of that case, and as it appears that many/most of the assets will be going to auction. Consult with a good attorney in the area not affiliated with either party. We worked with one in Longview.
Checking the legal case and docket this morning, it appears that a winning bid for most of the assets was accepted on November 11th, under Docket number 911, for $60 million, and letters of notification were mailed at the end of last week to impacted parties. You’ll want to review this. The winning company is an LLC that was registered in Wyoming on 8/25/25, and in Texas on 10/26/25 - so very newly formed - and no indication of who the actual owners are and what experience they might have with O&G operations. Definitely engage a good O&G attorney to ensure your interests are protected.
It looks like the person on record for the LLC is a real estate person from Dallas. According to the person that contacted me the other person may or may not have done some federal time for embezzlement. I think we’re just going to wait it out until the original lease is up. Worst case scenario they don’t drill before the permit expires in May.
1 Like