Would there be any ulterior motive for a company that currently holds the lease to top lease it?
I wouldn’t call it an ulterior motive, but a co that topleases themselves makes certain that they do not lose your acres, and may avoid a bidding war by not letting your acres back on the open market, thus retaining them for less cost.
Amy,
It is common for an oil company to approach the mineral owner about six to nine months prior to expiration of the original lease. This is normal when they still like an area which they didn't drill yet. So I'd guess your top lease offer is on a lease due to expire this year. Mr. Kennedy explains why they would do this.
Amy:
This could become a common practice in the Bakken play especially in the undrilled areas of Montana where numerous acres have been temp. spaced but remain undrilled.
Yes,
They may want a better lease for them than they have now. Offer to extend their lease with provision changes good for you, the Lessor.
Gary L. Hutchinson
Amy -
I have been a Field Landman for more than 30 years and I have never heard of a company Top Leasing itself.
From my experience, a company that wants to keep your land under lease would offer to EXTEND YOUR PRESENT LEASE rather than Top Lease it, unless one of two circumstances exists:
1. They sold your present day lease and want to come back in to the area afterwards; or
2. They have assigned partial interests in your present day lease or overriding royalties in your present day lease and want to lease it again, cutting out these other interest owners.
The first scenario would be rare, because most Agreements involving the sales of leases prohibit the seller from further competing in the area for a number of years.
The second scenario would be at least slightly on the unethical side - possibly even illegal.
What company is trying to Top Lease itself? Have they approached your neighors about doing this as well?
Charles
Charles Emery Tooke III
Certified Professional Landman
Mr. Tooke,
I've been offered a Dunn Co, ND top lease. I can only speculate why a top lease vs. an extension. There has been a fair amount of buy out / acquisitions over the past couple of years. My current lease is to Anschutz. While OXY acquired all of Anschutz's interests there, they may want to hold a lease with their name (OXY) as Lessee. There are more than just these two firms whose interests have sold/acquired/combined since the initial leasing push a few years back. This is the most likely answer.
It's also possible they want to change Lease terms. Some oil companies over there are now trying to get mineral owners to eat some of the costs with "treating, transporting, etc..." coming out of the royalty. If so, those changes may not stand out as much in a "new" top lease vs. an "extension" which included those changes. So it may be a little slight of hand going on with the mineral owner.
It’s a Woodstone lease (old - five years ago) assigned to Transcontinent who wants to Toplease… does that help… the new terms would be to our benefit, leasor…
Like I said in your other thread Amy; I would want a ratification of the new better terms on the original lease to become effective at the same time the top lease is entered into. Just to be safe.