Top lease / McClain County OK

Oklahoma Mineral Rights McClain County, OK
1

I posted something earlier ,but can’t find it so maybe I did something wrong…I received a Top Lease today from B&B Energy Interests LLC. It is an unsolicited lease as my current lease ends 8/20/19,though cover letter thanks me in agreeing to the lease. I have discovered that a Top Lease is a lease which would begin at the end of my current lease. My mineral rights are in Sec. 30 8N 4W McClain Co. OK. I have ,also, searched McClain Co. Records and find that B&B has done many leases in Sec.30 8N 4W since the beginning of 2019. I have not compared this lease with my current one , but will over the W/E. I also pulled some recent leases to compare the language, theirs to this Top Lease. In my current lease I followed all the advice and suggestions from previous comments from this site and have a good lease.

  1. Does anyone have any comments about B&B?
  2. Is this unsolicited lease something unusual?
  3. Is the offer competitive ($5300.00 w/3/16th royalty per acre)?
  4. Any reason not to just wait for current lease to run out? (I guess offer could be less 2 months from now…maybe more?) Any help would be ,greatly,appreciated. Thanks, Rick Buscemi
2

  1. I do not know anything about B&B Energy.

  2. Unsolicited offers are common these days when there is activity surrounding the prospective property. EOG has quite a few pending cases near you. Personally, 3/16ths is a low end for me. I prefer leases at 1/5th or 1/4th. The bonus is usually quite small compared to the royalties over time, so I would rather have higher royalties.

  3. That bonus offer is in the ballpark of the area. Section 28 pooled last year for $5000 3/16ths, $4500 1/5th, $500 1/4. I would have taken the $500 and 1/4th.

  4. I do not care for top leases. I am attaching an article about the possible negative consequences of them. I prefer to let a lease run its course and expire on its terms. Too much can change in a few months. Quite often you do not get paid the full bonus for the top lease, only part until the first lease expires. An Overview of Recurring and Related Issues Involving Top Leasing.pdf (210.2 KB)

3

Make sure it’s not a “royalty lease” posing as a top lease.

4

What is the difference between a royalty lease and a top lease please?

5

A scam that looks like a lease but you are really selling 75% of your royalty stream for as long as the lease is in effect.

6

Thank you for your insight. I will read over the info on Top Leases. Since my lease is to expire in about 2 month ,it might make sense to just wait on a new lease. Maybe ,I could “shop” my mineral rights with other Companies? Looks like B&B has leased a lot of Mineral Rights in Sec.30 8N 4W over the past several months ,that’s probably a good thing?

7

Rick–does your existing lease contain a “right of first refusal?”
If you are unfamiliar with that concept, you really need to talk to an experienced attorney before you sign a top lease.

8

Thank you for the comment. As my current lease reads…I see nothing worded as current Lessee would have any rights at term end of lease unless there was a pooling or production of oil or gas. Clause states: " It is agreed that this lease shall remain in force for a term of Three (3) years from date (herein called primary term) and so long thereafter as oil or gas ,or either of them, is produced from said land or lands pooled therewith". There is another clause that states " If, at expiration of primary term ,there is no production in paying quantities,on the leased land or on lease nevertheless shall continue as long as such operations are prosecuted or additional operations are commenced and prosecuted (where on the same or successive wells) with no cessation of more than ninety (90) days,and if production is discovered ,this lease shall continue as long thereafter as oil or gas are produced,for any cause (other than an event of force majeure),this lease shall not terminate if Lessee commences or resumes any drilling ,reworking or remedial operations or restores production within ninety (90) days after such cessation. Drilling operations or mining operations shall be deemed to be commenced when the first material is placed on the lease premises or lands pooled therewith or when the first work other than surveying or staking the location is done thereon which is necessary for such operations." I read this clause as some things ( drilling, equipment placement,etc) needs to have begun or placed prior term of lease. Would I be correct? I have no knowledge to any “operation” commencing on Sec.30 8N 4W McClain County ,OK. Appreciate anyone’s thoughts concerning my presented issue(s). Thanks, Rick Buscemi

9

If it were me, I would let the lease expire on its own terms. I would also change the clause pertaining to drilling operations. You need much tighter language which would include a drilling rig actually drilling-not materials on site. (in my opinion.)

10

Letting the lease end is probably the best. It’s about 50 days until the end date. Also, a good suggestion on cleaning up language to actual state drilling not just “storage” of equipment on land. Thank you for taking the time to respond.

11

Also make sure that you have no post production charges.

12

In the interest of getting as much info as I can… Does Section 30 8N 4W contain a complete 640 acres. I saw this come up in a past post and just wonder if this might be something good to know. Thanks in advance Rick Buscemi

13

https://glorecords.blm.gov/details/lsr/default.aspx?dm_id=44223&sid=3zvccazc.j3g

This is the BLM maps back to patent. Zoom into section 30 and you will see the lots. It is not a pure 640.

14

I know about them. Let me know if you would like details.

15

Great topic! As I get into mineral rules I see where a person could get less than good terms. The higher the royalty expense the sooner the well becomes marginal would this be correct?

16

The royalty expenses always add up to 100% between the working interest partners and the royalty interest owners. The better the operator, the more efficient they are at keeping drilling costs down and operating costs down extending the life of the well and putting off the time when the revenue earned is less than the operating expenses. Royalties are paid until the well is plugged.

17

Good afternoon m_ Barnes and thank u. I am in progress reading the article u posted about top leasing I have surface only who would be most interested in top leasing my 5 acres right next door to charter oak Tigris 1
I’m thinking charter oak would be natural.
Can another operator come in on my surface and produce?

18

A “top lease” in its general usage is not a surface lease. A “top lease” is a lease that attempts to take over for a current mineral lease, the second it expires, so it is a time unit. It can have some complicated legal problems.

If you have surface acreage, then you are talking about a surface use lease. I suppose you could have a “surface top lease” if the wording was more about the time frame, but I have not heard of one.

19

Yep I understand. First is definitions. Ok surface lease. Darn it. I have to get it right

20

I think the article said Devon likes surface leasing there has to be something good about them. Especially if it give the operator an option to lease to a friendly surface owner