Well in my area is producing but I haven't signed a lease. What to do?

Oil and Gas Leasing Help
#1

Hello,

I am looking for a little advice. I live in east Fort Worth, Tx (Tarrant County). Dale Resources has drilled a well and they are producing from it. I just never signed a lease. I have about 1/3 acre and just figured the few hundred dollars signing bonus and a few dollars in royalties every month wasn't really worth it to me. I was also under the assumption that if they began producing and I hadn't signed a lease, then they would pretty much have to pay me 100% minus the cost of production. I am likely way off base on that assumption but the following link is what led me to believe that something along those lines might be correct.

http://blogs.star-telegram.com/barnett_shale/leases_what_if_i_dont_sign/

Well, now they are contacting us a couple of times every week about signing a lease. I think the last time they talked to my wife, they offered $2K (I assume that was per acre) and 25% royalties. They also said something along the lines of "If that isn't good enough, just tell us what you want."

I really don't care about an extra $50/mo from royalties. I would probably rather keep my mineral rights if that's all they will pay for them.

What should I do here? Just sign and take whatever they are willing to give? Can I ask for more?Am I being unreasonable? They are my mineral rights and I don't feel like I should be forced to lease them, but they sure are being insistent. Any thoughts would be appreciated. Thanks.

Jay

#2

I would say you are "looking a gift horse in the mouth"! If you don't ask for it you won't get it. Ask huge price and 30% free royalty. Also ask if they will guarantee that you will be in the production unit. Don't let this get away from you. Ask for a no surface operations clause on your lease.

Good Luck!

#3

Dear Jay,

The short answer is that if you do not sign a lease, you cannot be pooled, other than a MIPA action started either by you or the operator. There is no such thing as equitable pooling in Texas. The recourse of the non pooled interest is either to muscle his way into an unit by the MIPA action, or to protect himself from drainage by drilling his own well. Actually, if the unpooled tract is too small to allow development, the unpooled tract works to the benefit of the Operator.

As to the Findley case that you are hanging your hat on, which came our about 3 years ago, I am not aware of this tact being used in any other well unit in Texas, other than one temporary order. It is my opinion that the RRC overstepped their bounds granting this method of forced pooling. Unleased interests in the Findley unit did not allow them to drill the well. Hence, the unprecedented MIPA action, opposite of the legislature's intention, IMHO.

If you have accurately stated the attitude of the Operator, I would think that they just might have a potential problem with the wellbore path being too close to your property (a Rule 37 violation). If, as your say, they have already drilled the well, they may be forced to plug the well, without a Rule 37 exception. To me, that is the only thing that makes sense.

They are your minerals and you are free to do with them as you wish, subject to an Operator instituted MIPA action. I would surmise that this is the only chance that you would get to commercialize the minerals under your property.

#4

Hi Jay,

If your minerals are in a residential area the 2K is for your lot, not per acre. They did say "If this is not good enough", so shoot them a price for your minerals as a bonus. 25% is probably the best you'll get in royalties. I hope you have a mineral manager to help with the lease, otherwise you could lose a lot of money in production, processing and shipping costs that very few people realize. The royalty could be a lot more than $50.00. With this said, Buddy Cotten is as good as they come. If he advised me to do something I would do it without hesitation. Ask him the right questions for the right answers.

I wish you the best of luck with it.

Yours,

Wes Luke

PS: I live in Ft. Worth also. : )

#5

i am in the same boat. got an low offer from a landman but, decided to do research and found i am in the Bobcat 1H area which is scheduled for drilling soon. i had recieved a check for $5,400 ish in the previous owners name just weeks ago...long story but, he had let the property go into forclosure, so i own the rights and this landman is now offering just over $1000 for a bonus. say what? can i hold out for that bigger check, my neighbors are getting them?

#6

A freind of mine on the east side of FW (Handley area) signed with CHK about 3 weeks ago for 4000 per acre, 25% royalty.

Patricia Stalion said:

i am in the same boat. got an low offer from a landman but, decided to do research and found i am in the Bobcat 1H area which is scheduled for drilling soon. i had recieved a check for $5,400 ish in the previous owners name just weeks ago...long story but, he had let the property go into forclosure, so i own the rights and this landman is now offering just over $1000 for a bonus. say what? can i hold out for that bigger check, my neighbors are getting them?

#7

Hi Patricia,

If you negotiate with the landman, tell him you want the $5400.00 offered the previous owner. Tell him you want a check in the bank before letting them have a signed lease. Getting a mineral manager or an oil and gas attorney to tweak your lease will save you thousands in processing, production and shipping fees. You also should have the "Warranty deed" clause removed. There are so many things the oil companies can and will charge unaware owners, all of it coming directly out of your royalty payments. Please have someone professional look at your lease and make it benefit you as well as the oil co.

Yours,

Wes Luke

#8

thank u very much for your reply. i do plan on taking my time with this. i have a lot to learn. i have so many questions but, i have to build a base of knowledge before i can start to understand things properly.

#9

Jay,

First off yes they are your minerals and yes you do have the right to do as you wish. However, if they have the majority of control of the minerals in your area, than there is a good chance that they can do what is called a force pool and basically still access your minerals and pay you a fair market value on those minerals.

In some ways it is better to go with the flo as they say, but that is not always the case and it would probably depend more on your specific situation. Some of the factors that may give you leverage on this is the amount of acres that you have available for leasing and what they are in need of as well as the production potential that your minerals could produce. Depending on those variables, may give one an better idea of what your minerals may really be worth and if they will give you the value or money that you are looking for.

#10

Luke is right on this Patricia and yes they will typically step up on the price. You can always ask for more, but you also need to find that balance of getting what its really worth value wise and leasing before it may no longer be at the price you are wanting due to force pooling. Also researching in your area to know what other competitors that may be leasing will also give you some additional leverage to receive the price per acre that you are looking for. This can be done and is usually worth the time or expense of doing so.

Patricia Stalion said:

thank u very much for your reply. i do plan on taking my time with this. i have a lot to learn. i have so many questions but, i have to build a base of knowledge before i can start to understand things properly.
#11