Top leasing offer section from Core Resources

Just received an ‘Top Leasing” offer from Core Resources for section 36 13N 24W in Roger Mills County. Offer was for $500 nma @ 1/5 royalty. Current operator is Dyco Petroleum Corp, well is “Thurmond.” If anyone has any information on the existing well it would be much appreciated? As a new mineral owner, I don’t have precise information on which check I’m getting from what company is linked to this well. Of all my information, Dyco is not listed as a company that I have a lease with. Which makes me think someone else pays me, and whomever that is, gets paid by Dyco. Not sure how all that can work, so if anyone can shed light on that, it would be helpful.

Does anyone else here have mineral ownership in these section coordinates?

Would love to hear more about “Top Leasing.” The Landwoman from Core explained it to me thoroughly. Essentially the existing well is producing next to nothing and just holding all the leases, and the operator she’s in bed with wants to force out the current operator, then either fix up or completely redrill to make profitable. Sounds like a win win for the mineral owner if the courts will allow whomever the aspiring new operator is to take it over. The landwoman would not tell me who the new operator would be, but claims her company only works with very reputable operators. Because it’s a “top leasing” situation, it seems like there might be very little competition for my mineral rights here. Is that an accurate statement? Or should I anticipate more offers from other landmen coming. The representative from Core stated this is kind of their niche and if they don’t get approximately 50% of the Lessor’s to sign new “top leases” they may just move on and my lease could stay stuck with a trickling well for years and years to come. Thanks in advance for any responses, this forum is already proven to be such a valuable source with regards to my recently inherited mineral rights.

Personally, I am not a fan of top leasing.
An Overview of Recurring and Related Issues Involving Top Leasing.pdf (210.2 KB)

Mewbourne has taken most of the recent leases in your township. Thurmond is almost at the end of its life. Maybe about two-five more years of economic life unless they extend it to hold the lease. I suspect someone is going to come in and drill a horizontal eventually. Crawley and Mewbourne are already filing spacing applications.

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I received the same offer. I understand current checks would be coming from Plainsmen.

Out of curiosity, can you give further thoughts on why youd tell us not to top lease? You state that the well is almost at the end of its life. Wouldnt it be beneficial to the mineral owner to sign the top lease, given that the lease bonus is competive in the area and let the “new” company deal with the all the loop holes to jump through? Hiring an attorney for an individual owner is quite expensive to get leases released when there is an existing well, paired with being an area where OGL’s are going for $500 an acre, not $5-15k an acre in other states?

I am curious about Bob’s thoughts as well. I know that the lawsuit would have all the mineral rights owners leased for that well, so it wouldn’t be lawyers representing an individual, but a group. But still, I have to thoroughly read your article you linked M_Barnes, but if you have any more insight I’m all ears. Thanks:)

Read the article which lists the legal entanglements that can happen. I will not top lease since it could put my minerals in limbo for a very long time while the parties sort it out in court.

Given where the tracts are located and that several companies that typically drill horizontal wells are leasing nearby, I suspect that there is more to the story than just a recompletion in an old well. You may get stuck with an old lease in an old well or an old lease in a new horizontal well or you can choose to take the risk for a top lease. Or just sit back and wait and see if the old well dies and new leases or pooling are available then.

I read that article you listed M_Barnes, very informative, thank you!

I spoke to another Landman about the “top lease” offer even though he called me in regards to my mineral properties in Roger Mills County section 26 13N 24W that is gaining more attention from landman.

He said that if the well were to be forced closed by the courts, then my existing lease would be expunged and I would be free to negotiate a new lease with the proposed operator or anyone wanting to lease. Is that correct?

You mentioned “You may get stuck with an old lease in an old well or an old lease in a new horizontal well or you can choose to take the risk for a top lease.” What scenario(s) could I end up stuck in an old lease with a new horizontal well? Could the current lessee or operator sell my lease then close the well instead of it getting expunged? Not sure the possibility of getting stuck with my previous lease in a new well, but definitely want to avoid the terms and lack of clauses in that active lease.

The landman that is offering for my three properties in section 26 also said if I negotiated a top lease it should be at or very close to the same price I get for section 36. Is that true based on location or nearness to other leasing activity?

He also said It is customary to get 10% of the top lease bonus up front, is that true? And like the article you sent said definitely negotiate terms very precisely, eliminating any perpetuity situation.

The operative word is “IF”.

IF the lawsuit does not go forward, you are bound by your old lease at the present horizon and any other horizons covered by the lease. If you did not have a depth clause on the earlier lease and the horizontal is in a deeper zone, then you are held by the old lease.

IF the lawsuit goes to court and fails, you are still bound by the old lease as above.

Your current leasee can sell your lease at any time.

The landman is working for his boss, not you, so any comments he/she makes may be leaning toward the bosses’ benefit.

Note the quite numerous legal issues in the article that I posted. For those reasons, I do not top lease as I do not want any cloud on the title.

(Not giving legal advice, just my own opinion.)