What happens if we say no to a lease offer?

Oil and Gas Leasing Help
#1

Hi all,

We got an offer to lease in the mail a few days ago. The man says that his client is "actively drilling successful wells in Tyler County, Texas". He say that they have authorized him to purchase a 3 year paid up oil, gas and mineral lease, with a 1/5th royalty. He says that the XXXXXX family owns 1/2 the minerasl in the 33.1 and 159 acre tract, all the minerals in the 96 acre tract. They are paying a total flat fee of 100.00 to each lessor the the 3 leases where insufficient net acres exist to enable them to pay on a per acre basis.

I have never gotten such a small amount for a first lease (or for a renewal come to think of it). I know I said before that it's money we didn't have, but even I'm a bit put off by him stating they are drilling successful wells, yet only wanting to pay us 100.00.

My question is what happens if we don't go with this lease? I don't really understand how things work I guess. Do they just get to drill anyway and keep the money, in effect they keep our portion? Do the other lessors get to split our portion? I'm very confused at this point.

It's not a company we have ever gotten leases from in the past.

thanks for the help,

Shirley

#2

Dear Ms. Elkins,

Oil companies will pay a token amount of $100.00 when the net acres are so small that the bonus per acre offered everybody else does not total $100.00.

If you relayed the offer letter accurately, then it was a rookie, unprofessional letter. They should say something to the effect that you own XX net acres in the 33.1 and 159 acre tract (XX%) and XX net acres in the 99 acre tract (XX%).

Then if they are paying $300 per acre and you own less than 1/3 net acre total, you get $100.00.

Did he tell you how many net acres you own? If he did not, he has either not run title or trying to get you to sign for a song. Get some more information. In fact, if you have leased this land before, you have this information in your files, if you kept it. You should know how many mineral acres you own.

PS Be careful with whom you deal in Tyler County.

#3

From what I can tell there is no mention of net mineral acres. Also, he/they put the leases in my and my brothers names, not one for each of us, we both sign the same lease. That isn't going to fly regardless. And the checks while they might be business checks are in his and his wife's(I assume) name.

I'm not liking this one bit. As I said it's not someone I've dealt with before. There are 3 or 4 groups that we have consistently dealt with and I'm comfortable with them. These guys not so much.

I'd be interested to hear who to be careful of.

#4

Dear Ms. Elkins,

I can't open myself up to libel.

There are so many companies that are taking advantage of people it is unbelievable. Even Texas is not immune, I am sorry to say.

#5

I understand completely. Can you tell me what it means if we don't sign with them. Are the profits ( if there are any) split between the remaining lessors who do sign?

I am thinking we will be sending the leases and checks back and saying thanks but no thanks.

#6

Dear Ms. Elkins,

By not executing a lease, your mineral interest cannot be placed in a pool through normal methods. However, the upside, if they want to drill on your lands, you can end up being a partner in the well.

I suspect what will happen is that you will be contacted, sooner rather than later, to lease your property.

Give the people whom you have dealt with before and see if they know the potential lessee. Also mention that your lands are available to lease and (to use a Texas expression), you want to dance with who brung you.

#7

Thanks Buddy,

I appreciate the information.

#8

Ms. Elkins,

Looking at the previous leases will give you a good idea about the lease you were offered.

Mr. Cotten is right in saying be careful who you do business with, regardless of county or state.

It has been the norm lately for landmen to try to take advantage of mineral rights owners.
There are many good, honest landmen around. Usually you can tell by talking to them and their offers.
If after talking to them you still have doubts, ask people around you if they know this company.
The best of luck to you,

Wes Luke

#9

Thank you Wes. I do appreciate all the help from you both. It's hard when you're hundreds of miles away and these things just sort of began.....

I am going to tell this guy no thanks, something just doesn't feel right to me.

#10

I guess I'm still confused as to how to calculate net mineral acres. If our family group owns 100 percent of the 96 acre tract wouldn't that mean we have 100 percent of the royalties? I sent an email telling him we weren't interested and did he want the checks etc back or shredded. I got an email saying

"Please let me know why you have no interest in leasing with my client.
I find it puzzling that a mineral owner that has leased many, many times over the years refuses our offer."
It almost sounds like he just assumed we would take whatever he offered. I'm not quite sure how/what to ask him. I suppose I could just say we don't think it's enough money and see what he says.
#11

Well I sent an email asking if we had leased with his client before because the name didn't ring a bell. I also asked how he calculated a net mineral acre and said that we didn't think the money was enough.

Crickets..................not a single word from him since.

#12

Ms. Elkins, I don’t think you should worry about this. There are alot of companies out there right now, trying to get a fantastic deal on some minerals. I think many of them are small 1 or 2 man operations. I think you can reasonably expect to get more offers before anyone drills a well. I would be of good cheer to know that someone thinks the action is moving my way.

#13

Well, got another lease in the mail today. It's from a company I have never heard of and I'm sending it back as well.

There were so many mistakes in just the cover page and envelope that I don't want anything to do with them. It's not one of the usual ones either so that always makes me leery.

My name was incorrect on the envelope

My address was incorrect on the envelope

They addressed me as "Mr" on the cover letter

The description of the plot stated on county and the body of the cover letter stated a different county

The big thing that put me off them is that they started out the cover letter saying "per our telephone conversation..." Well, unless we talked 6 years ago and I've just forgotten I have never spoken to them. Number one rule, don't lie to me. I'm not stupid and I certainly won't do business with you if you think I am.

And they sent some sort of a bank draft form that neither of my banks will take. Also, the dollar amount was too small.

Interesting though. You would think people would be a little more professional.

#14

I had a similar situation with a small petro service company I will not identify. They sent me a lease without a cover letter that I ignored. A few days later, my neighbor told me he got a call asking if I lived at a given address and asked my neighbor to ask me to call them. I learned that I had inheritted an undivided interest in the mineral rights they were interested in leasing for a large oig exploration company then did a ton of research to learn about the process before I call the company. After learning as much as I could from research and from asking the petro company questions, I gave them a counter offer to present to the exploration company, which refused to negotiate and said it was closing its leasing efforts.

My question is, what happens to my interests, can exploration company still drill, and what happens to my share of the royalties if they drill and hit a gas well?

#15