Tracking down an old mineral lease

I recently purchased a house and property, the seller also transferred the mineral rights to me. the lease information that they gave me show s that the contract has expired, however they are still getting royalties from another company. I have contacted the current company the previous owner is getting royalties for and they told me they sold there leases to another company, so i contacted company # 3 and they told me they do not have a lease for our property. there is nothing on file with the county that show any leases from anyone. the question that i have is how can i find out who has the mineral lease on my property.

John,

There are a couple of ways you can research this online - through the Adams County Clerk and Recorder's office. If the previous owner is getting royalty checks from production attributable to the property you purchased, ask for a copy of one of their check stubs. This will have the well name which you can use to research location and production on the Colorado Oil and Gas Conservation Commission Website (do a facility search and select Well and type in the name of the well). You can also do a search via their online GIS (Map) system.

It is definitely useful to track down the lease to ensure your documentation is right and to make sure that you are getting paid what is owed per the royalty rate on the lease. That said, there are some things you can do in the meantime to ensure that you're getting the royalty payments now owed to you.

Once you know the well name, you can then approach the current operator (contact their owner relations department or land department) with a copy of the recorded deed requesting a transfer of ownership from the previous owner to you. You will also want to request that they place any payments in "suspense" pending transfer of ownership. This will suspend payments to the previous owner and put them in holding until they transfer the ownership to you, at which time you should start receiving the payments. You should receive a document called a Division Order which will show you as the new owner and confirm the Net Revenue Interest (NRI) which you will need to check against the check stub to make sure it is accurate.

You'll have to go back to the seller to try to recover any payments that were made to them for production after the effective date of the sale (so it is a good idea to start the process of transferring ownership with the operator as soon as possible to avoid this headache). FYI, Royalty checks typically lag the actual production month by 2 months (e.g. you'll get a royalty check in March for production from January), so there is a bit of a buffer but not much.

Here's a checklist that I use to help make sure I don't miss any steps:

  • Notify Operator(s), Gas Marketer(s), and Oil Marketer(s) for EACH purchased property of the change in ownership by providing a copy of the conveyance document (deed) by email or fax.
  • Request that revenue payable to the seller of the purchased property be suspended as of the effective date of the sale.
  • Request that division orders be sent for the properties and provide our (buyers) proper mailing address and Federal Tax Identification Number (EIN).

Good morning Matt, the information you provided has been very useful. i did track down raisa energy and they stated this, raisa owns the leasehold rights under your lease, but someone else owns a vertical well that is producing on your property. they did send a DO to me to sign, and the interest we should get shows .001632 and they also show production of Oil, Gas and "other", however i found the original lease that was transferred to them and it states oil and gas and it also starts we get 1/8 (.125) of production, they also show they own the lease on 3 wells but only put 2 on the lease. The other question is there are a lot of wells in my area, how far out do i go to contact companies that own the wells that might be producing from my property.

John,
The interest in the well described on the Divison Order is what is called a net revenue interest or NRI. It is calculated by dividing the net mineral acres that you own by the Drilling Spacing Unit size (acres) and then multiplying by the royalty (the 1/8th shown on the lease). For example if you had 0.5 net mineral acres and the DSU size is 40 acres, the NRI would be 0.5/40 x 0.125 = 0.0015625 (.15625% of the production). You can check the well spacing on the well drilling permit on the COGCC site (look for the well and click on “docs” link at the top of the page. The permit may also reference the spacing order (you can look this up on the COGCC site as well under “regulations” from the main page. The well spacing will be different for vertical vs. horizontal wells and may be changed over time.

To identify any other wells that you might have an interest in, you will need to look at the legal description of your property and compare against any spacing orders which will outline DSU’s in your Section. You will have an interest in any wells that fall in the DSU that your property overlaps.
Thanks,
Matt