Scenerio: I receive an oil & gas lease offer in the mail. It indicates terms and so forth. The offer then proceeds to say “please indicate below your acceptance or denial” of said lease. What is the proper protocol or “escrow” or closing procedure, if you will - including mandatory documents - that is triggered when I indicate my acceptance of the deal by signing the offer and mailing it back to the original sender? Are there any kind of identity certifications involved?? I know this sounds like a rookie question. And that would be because it is. Thanks you guys!!! Your the greatest…
What state and county are you in? It makes a difference for the answer. My first comment would be never sign a lease without negotiating it. First offers are usually low, first lease documents are usually totally in favor of the lessee and not the mineral owner. It is just a place to start talking. Never, ever send back a lease without having a certified cashier’s check in hand. Do not let them have a lease without you getting the money. Lots of things to consider.
M_Barnes,
Thank you for your reply. I/we are absentee owners. I/we live in California and our holdings are located in Grady County, OK.
I appreciate all of your advise and I’m sure I will be seeking even more. I would like to learn what mandatory documents there are in this process that must be completed or signed off on. I understand that there will be differences in the law between California and Oklahoma. You are correct about deals not being in favor of the mineral owner. It seems that they would just prefer an owner to just sign the offer and move on with out negotiating, anything, basically.
I am more interested in the required documents and what those documents are known as by name. Basically, a static list of required documents.
Also, in Oklahoma, if a land company(broker) is working on behalf of an oil operator, isn’t that land company required to disclose that relationship to those they are trying to establish a relationship with? Or, can a land company reach out to anyone whom they have/are doing due diligence on in order to find possible business?
Thanks in advance
Have you had a chance to review my latest response to the great info you provided me?
Dan,
I recommend you read through the posts here: Blogs - Mineral Rights Forum
There is a lot of helpful information for someone who is just trying to learn about mineral rights ownership and leasing basics. You ask some very loaded questions and while this is a great place to ask those questions and someone will give you a rundown, you should read through these posts and probably get answers for a lot of questions you already asked.
Best, Cam
Cam,
Thank you for your response.
Well, my assumption is that we all started someplace at some time or another. I appreciate your recommendations and I will check them out. Once I get better “acquainted” with how the forum software functions, I’m sure I will be able to drill down (no pun intended) and find my answers.
I must say, that I pretty much will continue to ask “in depth” questions. And, I’m counting on my fellow forum members with a lot of knowledge and experience for help, advise and their knowledge. You are familiar that the only bad question(s) is the one that you don’t ask. Thanks again…
Dan
Cam,
Thanks for your response.
Well, my assumption is that we all started someplace at some time or another. I appreciate your recommendations and I will check them out. Once I get better “acquainted” with how the forum software functions, I’m sure I will be able to drill down (no pun intended) and find my answers.
I must say, that I pretty much will continue to ask “in depth” questions. And, I’m counting on my fellow forum members with a lot of knowledge and experience for help, advise and their knowledge. You are familiar that the only bad question(s) is the one that you don’t ask. Thanks again…
Dan
Dan, For a lease, the only document that is required is a signed and notarized lease that is signed by the mineral owner (lessor). It must be filed in the county courthouse by the lessee. However, behind that document is the title opinion which may require proof of heirship, sales, etc. that prove you are the correct owner and can lease. That can get complicated depending upon the situation.
In OK, the land company is not required to tell you who they are leasing for. Many large operators hire leasing agents to “stealth” lease for them under the leasing agent name if they are trying to put together a large play without everyone else knowing about it. On the other hand, a leasing agent may be leasing for themselves and then make money by flipping the lease to another company and keeping a small piece for themselves. Or the operator can lease under their own name. Many variations.
If you choose not to lease, in OK, there is also the legal instrument called “forced pooling”. In order to keep the business of drilling moving ahead, an operator will try to lease in an area. After they have a reasonable amount of acres, have tried to contact the lessors in the area and either been rejected or cannot find them, they go to the Oklahoma Corporation Commission and file a Pooling. Then they will tell the judge the range of offers that they have given and the judge will use those offers and the ones from the adjacent eight sections to come up with the pooling set of bonus/royalty pairs. After the order comes out, the unleased folks/entities have 20 days in which to pick their option and respond. If they do not respond, they will be assigned the lowest royalty option. Then drilling can move ahead. Other states handle it differently.
In OK, the most important issue is really the clauses that are contained in the lease. The first lease that is sent to you is most likely not in your favor and will need negotiation to get it into a fair balance between you and the lessee. Most of us add very specific clauses to an Exhibit A which will override the lease and several of its onerous clauses. Most important one is the post production charges. You do not want to be charged for transportation, marketing, compression, etc.
Dan Williams is 100% correct. Since you are completely new to this, I would try to find a lawyer who has experience in Gas & Oil leases in the state where your lease is and have him look it over to see if you are signing away your rights. The first lease they send you is entirely in their favor. Never sign the first lease.
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I would, and do often, throw the offer in the trash. Most offers like this are designed to “screw you to the wall” and literally steal your mineral estate. Get a oil and gas lawyer immediately to review what is taking place. One hour of input can save a lifetime of grief.
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Hello M_Barns,
I’m responding to a message that you sent to me last Sept 15. So I hope I don’t confuse you. My apologies…here goes:
M_Barnes,
Since we last e-spoke, and being an absentee owner, I have learned by way of “clearing up” the title opinion with the oil producer that has been making royalty payments, that those payments are not the result of a lease arrangement. The payments are being created by virtue of the pooling arrangement. Can you offer any information on how royalties are generated in this manner?
If you do not respond to a leasing offer or a pooling offer in the time allotted, then one is Force Pooled (in OK) and assigned a royalty and bonus pair which is the lowest royalty and highest bonus determined at the time of the pooling. That can be just fine. The royalties for that tract are then assigned by the following equation: net acres/spacing acres x royalty x % perforations in your section (This is the OK formula-other states have their own rules).
You are treated just like you have a lease as far as royalties are concerned. However, a lease will hold more vertical section and a force pool will only hold the reservoirs pooled (again, Oklahoma rules).
Does that answer your question?
Thank you so much for the knowledge. I appreciate it. So, what does “vertical section” do for us?? Sorry for the lame questions.
A lease holds from the surface of the earth to the center of the earth unless you have a depth clause that limits it. Think of a cake with many layers. A pooling order only holds a small designated layer in that cake.
Also, there are times when a company may not promptly pay the lease bonus, they may hold or even file the lease before payment. A local attorney can hold the lease until payment is provided.