We have been unleased mineral owners (not by choice) in a section where two wells have been producing for 2 years. The wells have reached payout.
Is the company liable to pay us for the last two years of production after their cost?
Can you still get in a lease after production has begun?
Thanks
You need to provide a little more information as to why you are unleased. You say “not by choice”. Can you explain exactly how that came to be? I’m assuming you were force-pooled in order for the wells to be drilled, but the reason for the force-pooling is important.
The aunts were willed the mineral rights and did a lease back in 2012 with Lumberjack. The lease expired. Two aunts became terminal and the remaining aunts did not get into a new lease since they were dealing with their sisters and the previous lease was for 700 an acre.
Since then the aunts have given their MRs to my wife and sister-in-law.
Parsley has contacted us after a year plus and have told us:
They are not responsible for back pay
No lease can be done since production has begun
The only option they have given us we can be unleased mineral owners and start receiving payments starting after we sign the paperwork.
My question is:
Are they correct giving us the one option.
Thanks
Since your aunts elected not to lease, and since you inherited the unleased interests, there really isn’t much you can do. Once the Company has recouped their drilling cost (plus any applicable risk penalty), you will then participate for your share of whatever is left of the well.
Try to look at it from the Company’s point of view. Letting you back into the well now would be akin to letting you bet on a horse after he race is over. I’m not saying that was your intent, but from the Company’s point of view, it just doesn’t make any sense.
The two remaining aunts are not sure they received and inquiry to lease. One of the aunts that passed handled the previous lease.
I understand not being able to get into a lease. Shouldn’t a company be required to pay royalties if they have reached payout to unleased owners?
In certain areas, there is a 200-300% payout penalty, then you get paid.
What paperwork have you been asked to sign? Texas? Do you own an undivided mineral interest in the mineral parcel from which others are receiving royalties? Rights and Responsibilities of Mineral Cotenants (excerpt) "Assume the oil company gets Harriet to sign an oil and gas lease. George absolutely refuses. Furthermore, it is economically infeasible for the oil company to have a 5/12 revenue interest after payout. (See table.) In this case, the oil company may wish to proceed under Section 23.001 of the Texas Property Code and partition 250 mineral acres for Harriet. This gives Harriet 100 percent of the minerals under 250 acres, and George owns 100 percent of the minerals under the remaining 250 acres. The oil company may then drill on Harriet’s 250 partitioned mineral acres. It would have a 5/6 revenue interest before and after payout. George would have no interest in a well drilled on Harriet’s partitioned acreage and vice versa. "
We own MRs in Texas, Reeves County, Section 14, C-5.
The aunts inherited to acres but have gifted them to my wife and sister-in-law. I have been told that over 400 barrels have been produced as of December 2018. No idea what has been produced since.
We contacted Parsley in the summer of 2018 but received no response.
They contacted us two weeks ago and offered to start paying August of 2019.
If we submit the W-9
Dear Steve,
Further information shows that he was not force pooled.
Buddy Cotten
There is more information needed. The additional needed information is a description of the unit and a description of your property in that unit and the wellbore path on the two wells drilled so far.
To all that are talking about a spacing unit and forced unit, please ignore their answer.
For review:
Best,
Buddy Cotten
It looks as though the two wells which have been drilled in/through Section 14, Block C5 Reeves county have produced more than 460,000 barrels of oil through April 2019. I believe it would be a very good thing for you to consult with an oil and gas attorney before signing any documents. This link will open a map centered on one of the Parsley Energy wells in your section.
The funny thing is we have contacted an attorney over a year ago. Their office has told us we are not entitled to back pay or able to get in a lease (I understand not being to get into a lease).
I was hoping to get the back pay especially since we contacted Parsley in 2018.
Only knowledge I receive is from this forum.
Someone from this site a year ago said a company would put money that is owed to unleased mineral owners in an escrow account in case they come later to claim their oil and gas.
That is not necessarily true. It all depends whether the lands in question were a drillsite tract.
Best,
Buddy Cotten
You are entitled to share in production as of the date that your mineral interest was pooled (unless you are a drill site tract).
If Parsley did not prepare their Declaration of Unit (Pooling Declaration) correctly, some courts have construed it to be an “offer to pool.” In that case, you would be paid as of the date of unit ratification. If they contacted you and offered to take you out of suspense, it might be a good idea to get out of suspense.
It could also mean that they are planning to drill a third well and you would be in the path of the wellbore.
Best,
Buddy Cotten
In Texas I do not believe an oil company has to offer anyone a lease. The good news may be that the well(s) have paid out and your royalty checks will be roughly four times more than the checks would be assuming you would have signed a lease with a 25% royalty. Since you already have a relationship with an attorney, it would likely behoove you to get him/her to guide your next moves. In April 2019 the two Parsley Energy wells’ production was around 11,765 barrels of oil. At $50/bbl oil, you can see that even a small interest is worth protecting. Just my two cents.
I appreciate the help from everyone. This is my first time dealing with mineral right issues.
Should we just sign now and start receiving payment and forgo the previous two years of production?
Get competent legal advice before signing anything if you own more than a few acres of minerals. A lot of money going forward could be at stake. If I understand your situation, you will not receive a penny of proceeds from the wells’ production up until payout. This is covered in the Rights and Responsibilities of Mineral Cotenants pdf I shared in an earlier post in this thread.
We only own 5 acres.
I understand the payout part. Both wells reached payout in November 2018.
We are frustrated with Parsley because we contacted them a year ago but they started contacting us now. So in our eyes we have lost 8 months of cash.