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Mineral rights search in Colorado?
Q:

I would like to know who owns the mineral rights on a property I am interested in buying in Colorado. In the property is the Lake Fork Ranch in Conjoes county. It is located on 653 250 Forest Service Road in Antonito. Asked 01/13/2018

 

A:

You could find out who currently owns the mineral rights under the property by searching the land records at the county clerk’s office, or online. In lieu of that you could contact a local abstract office and have them do the search for you. The county clerk’s records can be searched for free however so I’d try that first. We’ve written an article about how to do the search yourself. You can read it on our “Articles” page…

Hope this helps you out!
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub

Royalty reservation from 1900?
Q:
My 50 A. has a royalty reservation for 1/2 , reserved from 1900. If I sell 1/2 the mineral rights, does that royalty reservation continue with the new owner of the minerals as well as the current owner. Thanks!

 

A:

If you sell 1/2 your mineral rights, you should include something to the effect of “subject to prior reservations” on the conveyance, in order to put the buyer on notice that your minerals are subject to a previous reservation and thus you don’t own 100% of the minerals under the tract being conveyed.

If you do not do that, the buyer could assume you are selling 50% of the entire tract, not 50% of your 50%. Without notice of the previous reservation, new buyer could claim your entire 50%, being 50% of the entire tract, even if you only intended to sell him 1/4 of the entire tract (50% of your 50%. Make sure it’s clear. Have an attorney draft the conveyance for you if needed. Google “Duhig Rule” for more info, or check out our “Articles” page as there is a good explanation of that Rule I’ve posted there…and it would apply to your situation.

Hope this helps you out!
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub

First Choice Land Exchange LLC Info?
Q:
First Choice was the successful bidder in a number of parcels in the State of Wyoming on-line auction held by Energynet on 11/8/2017. I need contact information including address, phone numbers and principals of the business.

 

A:

After an arduous search I was able to find the following information for you. Hope this helps you in your quest for info on this company. If the link doesn’t work directly, please copy and paste into your browser window.

http://lmgtfy.com/?q=First+Choice+Land+Exchange+LLC

The Mineral Hub

Multi Unit Lease Expiration
Q:
What happens in oklahoma on a 1280 acre multi unit when the lease expires in the second unit before the drill bit enters it?

 

A:

Not sure I understand your question entirely as to “second unit”, but if the primary term of a lease covering 1280 acres expires before a well is commencenced (“commenced” as defined in your lease, if applicable), then the lease (in both sections/units) would be over and they’d need to lease you again in order to drill a well.

I often will define “commencement” (see below) with a clause in my lease in order to clarify that actual drilling is required on or before expiration of the primary term in order to extend the lease past its primary term. Without such a clause, a lessee could argue (perhaps successfully) that “moving some dirt around” or staking the outline of a drilling pad on the day the lease was to expire was “commencement” and thus the primary term should be extended at least until they can get a rig on there and drill a well to its casing point (at which point they’d decide whether to spend additional funds complete it as a producing well…thus extending the lease into its “secondary term”, or plug it as a dry hole without setting production casing (thus ending the lease as well).

COMMENCEMENT: Commencement of a well within the primary term of this lease is required in order to extend this lease past its primary term. Commencement of a well means that a drilling rig capable of drilling to total depth be on location and actually drilling on or before expiration of the primary term, and that the drilling of said well be continued with due diligence until completion. Construction of a well location without actual drilling as detailed above will not be deemed commencement of a well.

Note that if a well is “commenced” anywhere on the 1280 acres prior to lease expiration, it will extend the lease on the entire 1280-acre spacing unit, not just part of it.

If it turned out to be a dry hole, the primary term would expire at that point. If it was deemed to be capable of production in paying quantities, they’d go ahead and set production casing and produce it, thus extending your lease into its secondary term (which would last as long as there was production from the leased premises).

Hope this helps you out!
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub

Offer to Participate in the Drilling of a Well...
Q:
I’m an out of state gas mineral owner and was sent an AFE. I’m new to all of this and have no idea what my risks are should I decide to agree to share the cost. I was also asked if I want to participate in the Well Control Insurance. I can’t afford to hire a oil and gas attorney just yet. I just started receiving royalty checks and I have a savings of $4,000 which I’m living off of and a disability check of $280 monthly. I can’t afford to lose my income should I agree to participate in my share of cost in this AFE and something goes wrong. Can you give me some advice on whether it would be in my best interest to participate in this AFE.

 

A:

Short answer is “no”, I wouldn’t advise participating in a well. Why not just LEASE your mineral rights to them and be paid a no-risk royalty instead? Yes, the royalty payment will likely be much less than the payment you’d receive for participating in a well, but royalty is cost-free, meaning you won’t have to put up any money in advance of the drilling either, you’ll just share in the proceeds of any successful wells that are drilled.

The fact that you’re even asking me whether you should participate or not further convinces me that you should not. Participating in the drilling of a well (by paying your proportionate share of the estimated drilling costs…in ADVANCE) is not for the faint-of-heart, or budget.

You stated you can’t afford to lose your income if something goes wrong. Something USUALLY goes wrong, and it’s not uncommon for the AFE figures to DOUBLE prior to the well actually being completed…and YOU would be responsible for paying those costs as well. If you didn’t pay you wouldn’t be paid any of the production proceeds until your debt was settled, and likely until TWICE your debt was settled (a 100% penalty).

I’d definitely stick with a lease (which was likely also an option on the paperwork they sent you) but if you want more info on participating anyway you should consult someone who has actually done it a lot, or an attorney who knows what it entails. AFEs are often sent along WITH an offer to lease, but participating, while doable, is NOT the same thing as signing a lease. Leases are SAFER and you are not on the hook for any of the drilling costs. You will be paid a royalty on any future production (cost and risk free) and receive a signing bonus up-front in most cases as well.

If you are confused about leasing vs. participating please consult an oil and gas attorney prior to signing a lease, as even a lease, while less risky, can affect your rights for literally decades if a successful well is drilled within the primary term of the lease.

Hope this helps you out.
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub

Mineral Rights Mistakenly Sold to Estranged Sibling...
Q:
What instrument would be needed for my sibling to correct mineral rights . In my parents trust settlement the following occurred, She wanted the farm so she was to pay me for half the appraised value of the acreage. I was then to sign a trustee deed which I did. Unfortunately, there was no “surface only” clause stated. One month later the Mineral Trust which included this particular acreage was signed and filed. All of this was done by the lawyers of my parents Trust. The appraisal on which I was paid for states “this appraisal is for “surface only.” My intent was to sell the land only . The huge problem with all of this is my sister and I have not spoken in 15 years. If she would agree to rectify this problem what would need to be done? If she doesn’t agree what type lawsuit could be filed? Thank You

 

A:

If she paid you for half the value of the land, but got all the minerals too, then you could argue that she should either return the minerals to you, or pay you some value for the minerals if in fact her understanding was that she was just paying for your half of the LAND.

To answer your question, she could simply execute a “quit-claim-mineral-deed” listing you as grantee and including the legal description of the land. At attorney could draw that up for you/her at a nominal cost I expect ($200?).

For future reference, a deed describing a tract of land that doesn’t specifically reserve the mineral rights or state “surface only” or some such, will convey any mineral rights the seller owns under the land as well as the land. Be careful.

In order to be successful in a lawsuit you’d likely have to prove that your sister’s intent was to keep only the land and not the minerals. More than “he said, she said” proof would be needed likely, but please consult with an attorney for a proper legal opinion on this. Hopefully it will not come to a lawsuit and your sister will just agree with you that her intent was only to purchase the land, and thus be fine with deeding you back the minerals (or paying you a fair price for them if she intends to keep them) since they were apparently not included in the “surface only” appraisal of the property.

Hope this helps you out.
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub

Abandoned gas wellbore in Garfield County
Q:
There is an old well from the 70’s on our land. We leased it in 2010 for 3 years. The company assigned the wellbore to the company that had the old well. There was a small amount of gas sold after that but there has been no production since April of 2015. We contacted the Corporation Commission and they sent letter to plug or produce. We don’t want them to produce. Just plug and get off land. We contacted an attorney and he sent a demand letter. Today we receive a check for $80 for shut in royalty. Original lease is released. What do we do?

 

A:

The company, with the $80 payment, apparently is arguing that the the lack of production since April of 2015 was a “reasonable” lapse and thus lease is still valid. Depending on what your lease says (were shut-in payments made on time as called for in lease etc?) they may be right but I’d run it by an attorney if you really want a definitive answer. The company will produce the well rather than abandon the lease if there is money to be made so it appears they want to produce it rather than abandon or they wouldn’t have paid the shut in royalty (except perhaps to buy them a little time to decide for sure whether to plug or produce).

You could argue that the lease expired once production ceased and thus is NOT still valid but you’d probably have to take them to court to argue that, and you might lose that argument. Get an oil and gas attorney’s advice before spending a bunch of money or time on this.

Hope this helps you out.
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub

Buyer's Deed has Confusing/Unfavorable Terms
Q:
I received a contract for a few acres I am selling and there is a sentence that seems confusing in what it grants to the buyer.It reads: “Grantee shall have, receive….bonuses, rents, royalties, production payments, or monies of any nature, which may accrue in the past or future under the terms of said lease insofar as it covers the above described land, precisely as if the Grantee herein had been at the date of making of said lease…”Does the “which may accrue in the past or future” require that any bonuses or royalty payments I received previously will be made payable to the buyer? I looked up a few example forms and none had that wording. They usually stated “from here and in the future” or something similar.

 

A:

It’s a badly-written paragraph, and in favor of the buyer. The word “past” would entitle the buyer to any past royalties (or bonus amounts) that were not paid, but should have been, but would not force you to give money back that was already received.

They put that “past” language in there in an effort to collect any royalty payments that were not made in the past due to some title issue, or a bad address for the royalty owner etc. Companies will deposit unpaid royalties in a “suspense account” until they can figure out who it goes to. Buyers who put this “past royalty” language into their deeds would be entitled to any suspended funds. You don’t want that of course.

While it may be common language in a lot of deeds these days, I would strike such language from any deed presented to me unless I was SURE there were no unpaid royalties or bonus payments lurking about. If we ever see that language in a deed that is presented to one of our clients (people who sell their mineral rights through our site) we will explain this to them and suggest they strike that offending language.

We try to protect our sellers from unscrupulous buyers the best we can, which is why many choose to list their mineral rights for sale with us instead of going it on their own and possibly being taken advantage of.

Hope this helps you out!
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub

Want to sell working interest in NM
Q:
Have many small working interests in San Juan county NM. They are under the management of several companys. Would love to sell asap. Looking to find someone to help with the listing on this site.

 

A:

We generally don’t handle working interests on the Mineral Hub so won’t be able actually list them. However, if you want to email or fax us a couple of your most recent JIBs (income and billing statements) I’ll take a look and see if I can find someone interested as long as your expectations are reasonable. Working interests in most cases are not going to bring as much as producing mineral rights due to their limited life and costs associated with the production. mineralhub@outlook.com

Hope this helps you out!
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub

"Use or lose" mineral rights in North Dakota?
Q:
I have inherited some mineral rights in ND. Can you tell me if they need to be maintained or renewed in anyway to retain ownership? They have previously been leased, but the leases expired in 2014 and were never drilled on. We did have the rights transferred so all are now properly deeded.

 

A:

ND does have a statute stating that a severed mineral owner can lose their mineral rights after 20 years if they do not take steps to retain them when it is not obvious (i.e. royalty checks or lease bonus within past 20 years) that they are “using” them.

The law only applies to SEVERED mineral interests. If you own the surface AND all the minerals under it, then you don’t have to worry about abandonment because they will vest to the current surface owner (you) anyway in the event they become subject to “abandonment”.

N.D.C.C. § 38-18.1-04. See N.D.C.C. § 38-18.1-02. “Title to the abandoned mineral interest vests in the owner or owners of the surface estate in the land in or under which the mineral interest is located on the date of abandonment.”

Hope this helps you out!
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub

Oil and gas lease payment division
Q:
My brother and I are joint tenants and have received a check from the oil company. The check is made out to both of us and we both must sign to cash. My brother has the check and will not split the proceeds because he is mad at me. How can I get my portion?

 

A:

If check is made out to both of you as JTIC, then brother would be REQUIRED to split the proceeds with you, and most banks would not cash the check unless both of you endorsed it so unlikely he could cash it without your signature. If you’re already endorsed and given the check to him then hopefully he will have to deposit the proceeds into a joint account where you can withdraw your share.

If he is simply refusing to cash the check you might have to sue him to make him go to the bank with you to cash it. If the check isn’t very big it’s probably not worth getting an attorney involved.

You could also ask the oil company to issue you a check for just your share, but I doubt they will do that if you are in fact JTIC. Maybe time to dissolve the JTIC if it’s causing you problems. If the lease ends up producing, the royalty checks will come in BOTH your names just like this check did and you may have the same problem again.

You can search Google easily enough for what is required to terminate a joint tenancy.

Hope this helps you out!
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub

Net Mineral Acre Definition?
Q:
I own mineral rights in several OK counties. I have two hundred acres of mineral rights located in Dewey county OK and have received 8 purchase offers from several different companies in the past two months. The best offer was for $7500 per “NET” acre, what is meant by the term “NET” acre in a purchase offer?

 

A:

The answer to your question can be found here:

http://bfy.tw/Dr1e (copy and paste link into your browser)

Who pays my royalty?
Q:
If minerals are leased to x company for 1/4 royalty, and x company decides to participate using the leased minerals, when y company drills the well who pays the mineral owner the 1/4 royalty & how can the mineral owner track the progress of the well?

 

A:

Potentially both could pay the mineral owner, but likely would be the operator paying all royalty due (company x would pay the operator what they owe you and operator would forward to you and include on your check for their share).

You can track the progress/production of the well by going to the state website having to do with minerals (most states have them) and view the monthly production there as reported by the operator. Alternatively you could require in your lease that you be allowed to go on the lease and gauge tanks and read gas meters.

The Mineral Hub

Best way to go about getting leased?
Q:
We have some Mineral rights in Alfalfa County and Woodward County in Oklahoma. Woodward is leased but we were thinking about leasing the Alfalfa mineral rights. What is the best way to go about getting it leased? We don’t know where to start. We did work with a lawyer, who charged us a flat fee for a overview of what we owned, but is now refusing to answer any more questions unless we pay her hourly rate of $375 per hour.

 

A:

Can’t blame the attorney for wanting to be paid frankly. Law school is expensive. The good news is, you usually don’t have to do much at all in order to “get leased”, nor do you have to hire an attorney in order to get an offer, though a good attorney (at a reasonable rate) could potentially help negotiate the lease terms so they are more to your advantage before you sign. Alternatively you could join an organization such as NARO (National Association of Royalty Owners) for only $150/year or so and learn how to manage your minerals on your own though their conventions and educational materials.

The oil companies will usually find and contact you in the event they want to lease, and your main job in the event you are contacted is to negotiate the best lease deal you can with them, or perhaps decide to let them force pool you in the event they do want to drill a well and you can’t reach a good lease agreement with them.

Since you haven’t been contacted it’s likely there is little or no leasing in your area currently and thus probably not the best time to lease anyway (no activity means lower lease bonus etc.)

You could technically contact companies that may be leasing in the area on your own by searching the county clerk’s records for your township and range to see which companies, if any, have filed leases in your area recently, but in most cases it’s better to wait until they contact you as that puts you in a better bargaining position in most cases (you have something you know they want because they contacted you first).

If you’re not sure your contact info can be found in the county clerk’s records (from an old lease or deed or other document already filed there) you might consider filing a “notice of address” or similar document that contains your current contact information, but in most cases the oil companies are pretty good at finding and contacting mineral owners in areas they are interested in leasing.

Hope this helps you out!
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub

Inherited mineral deeds North Dakota
Q:
I am the representative for my husbands Mothers will. She left mineral deeds to her three children. Do I need to contact an attorney to transfer these deeds? What is the process? Thank you

 

A:

If you aren’t sure what to do with the deeds, then yes, hire an attorney for advice. She may have executed what’s commonly known as a “transfer on death” deed to each of her three children, in which case all they’d need to do is file them of record since ND recognizes such deeds. If you’re not sure of the type of deeds they are have an attorney advise you.

Hope this helps you out!
Frederick M. Scott
The Mineral Hub

Lease extension re-negotiation options?
Q:
We signed a lease agreement 3 yrs ago with a two year option in Frio county Texas. They are wanting to cut the bonus money in half because they say can’t afford it. But promise to drill on this 770 acres. We are in the Eagle Ford Shale. Should I just cut the deal in hopes of more wells or find another company in this depressed market. Also what would be an average bonus money in these times

 

A:

If you agree to less bonus, you might ask for more royalty, or more royalty “after payout” (after they’ve recovered the cost of drilling the new well). Have an attorney draw it up if you go for the “after payout” option.

You could also just tell them “no deal” and have them file a release of your lease with the county clerk then hopefully find someone else to lease from you for a better price. If you like/trust the company and want to work with them that’s fine too of course, but I would try to get something in return for agreeing to 1/2 the promised bonus rather than just letting them have the extra two years for half price.

For instance, you might tell them you’ll agree to lease for one additional year for half price, but not two. This might entice them to drill faster but would still mean you’d get less bonus, which is why I’d see about getting more royalty instead in the event you want to work with them.

Finally, you might be able to negotiate an “overriding royalty interest” from them, which would basically give you a share of THEIR income from the well (assuming they drill a producing well), in addition to your royalty. This is also something you’d want to have an attorney draw up for you if you’re not sure what an ORRI is.

Hope this helps you out.
Frederick M. “Mick” Scott CMM, RPL

Determining actual acres covered by a lease.
Q:
Four parties inherited equal interests in mineral rights for a 160 acre parcel in Custer County, OK. Royalties are being paid under a lease made years ago now (1980s) on some part of 160 acres, None of us has a copy of the original lease, only the name of the current company. Can a company drill without having a copy of the lease available for review? How can we obtain copies of all leases to ensure the original terms are in effect? Will any lease have to specify which of the 160 acres is under the lease and the term of the lease? And, then may we determine which may still be offered for lease?

 

A:

Likely the entire 160 acres are included in the drilling and spacing unit for the currently-producing well(s), thus, unless there is a depth clause or other restriction limiting drilling in the 1980s lease there is nothing stopping the company from drilling additional wells after getting permission from the state to do so. The 1980s lease will continue to be in force for as long as there is continuous production from the leased premises.

The current lease should be filed of record in the county clerk’s office of Custer County. The company is not required to provide you a copy prior to drilling, but may if you ask them nicely. Otherwise you are free to make your own copy from the clerk’s records.

Hope this helps you out.
Frederick M. “Mick” Scott CMM, RPL

Average percentage payable to mineral rights broker?
Q:
Hello, I’m simply trying to determine what the average broker commission is, for broker firms that represent sellers of mineral rights. Trying to sell mineral rights in northern Colorado, and am currently negotiating with a broker to represent our family (“Sellers”). Thank you! Matt

 

A:

Why pay a broker at all when you could list them for sale on our “Sell Mineral Rights” page at the Mineral Hub for free? If we find a buyer for you, we would charge the BUYER a small commission on top of what you would receive. We don’t charge our sellers anything, or reduce their sales price to cover the buyer fees.

As for what the “average” broker commission is, there really isn’t one. Some will charge as much as they think they can get away with, and you may never be the wiser because they will make sure you never see it directly.

Some unscrupulous brokers will tell you they found someone to buy your minerals for $1000/acre (as an example) but will charge the buyer $2000/acre, keeping the extra $1000 for themselves without even telling you.

We don’t play those kind of games, and are always willing to share the (very reasonable) fees our buyers pay us if our sellers are curious. This way everyone knows what’s what and there are no secrets.

That’s how ANY broker you’re working with should behave frankly, and if they’re not, then you are certainly taking a risk that they are making as much as you on the sale, which benefits neither you OR the buyer frankly.

Hope this helps you out.
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub

Selling Mineral Rights in Northwest Oklahoma
Q:
I have less than 10 acres in a section where there is a lot of drilling activity right now. I have been offered $2,200 per acre for my minerals. It looks like they are going to put 3 horizontal wells on one location. I don’t know how many will be in  my section since I know they sometimes cross under the road and go into a different section. Even if the wells are really  good, since I have such a small amount of minerals – wouldn’t be ahead to sell my minerals ? It’s going to take a long time to make $20,000 in royalties on 10 acres.

 

A:

If there’s “a lot of drilling” in your section right now, and you’d like to sell these, then I’d suggest listing them for sale on our “Sell Mineral Rights” page. Whoever it was that contacted you out of the blue with an (I assume) unsolicited offer is likely trying to buy them for less than market value.

If you want to email me the legal description or a copy of your lease I can look it up and tell you what I think they’re worth. If you are already getting royalty checks then please include a copy of your most recent royalty check stub. I’d be happy to check it out. No obligation. My email is mineralhub@outlook.com.

Hope this helps you out!
Frederick M. “Mick” Scott CMM, RPL
Manager
The Mineral Hub

Rushed to accept lease offer in Hughes County OK?
Q:
I received an offer from a company called Calyx Energy for a lease on two tracts of land in Hughes county. They are wanting to do 3 wells total 2 in section 25 and 1 in section 24. The offer is for $400 nma with 1/16 royalty or take less money up front on lease and get more percentage on royalty the last offer on the page is for $150.00 nma and 1/5 royalty. This is all inherited mineral rights that we know really nothing about. So I called the company and asked how many acres do we have interest in and they said they don’t know that. It would take them 6-8 weeks to get that information, but gave me only 10days to decide. The person I spoke to suggested I take the offer with the highest royalty, which makes since to me but I think I could make a much better more informed decision if I knew the total acres and how much the going rate is in the area. The lady said to make my option and send it in or it would be forced pooled. There is a hearing on Monday before the commission to get approval to drill the well. Should I be at that hearing? Is the offer I’m getting reasonable? Should I ask to see a contract before I make the selection? Also is it normal for the energy company to not know the amount of acres I have an interest in when making an offer?

 

A:

Calyx appears to be leasing in the northern part of Hughes County (i.e. 8N and 9N). They are also doing a lot of forced-poolings in that part of the county, and all I’ve seen recently are for $200/acre and 3/16 or less, indicating that the $400 and 3/16 (1/8 + 1/16 = 3/16) offer you received is probably not a bad offer assuming the other terms of the lease are good (i.e. no deduction clause, depth clause etc.).

I expect they are not bluffing (this time) when they say you will be pooled if you don’t agree to a lease. Companies will Lord that over people’s heads in Oklahoma unfortunately, especially when they are in a hurry, and they are in a hurry because there are other companies moving into the area as well (with similar lease offers though…none I’ve seen that are substantially higher).

6-8 weeks is a long time to get paid for a lease, and yes, it’s fairly common for a company not know for sure what you own until they actually run the title. For now they have simply discovered that you own “something” here, and if you agree to lease they will spend the time and money to figure out exactly what you own so they can pay you correctly for your lease (assuming you make a deal that includes a bonus).

Since they claim they need 6-8 weeks to close, I’d suggest sending them only a copy (and mark it “Copy” in bold letters) of your signed lease, and keep the original at your home or attorney’s office until they pay you the bonus. This gives them an incentive to pay you quickly since you could always lease to someone else if the opportunity arose after they passed their self-imposed limit of 6-8 weeks. I’m currently in that exact situation with another company I’m dealing with in Hughes County, and will soon be searching for others to lease my interest to if I don’t get paid soon!

Hope this helps you out!
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub

$3000/acre good OGL offer in Grady County, OK?
Q:
Is $3000 per net mineral acre (Paid Up) & 3/16th a good offer when leasing mineral rights in Grady County, Oklahoma? This is my 2nd offer in two weeks from two different companies and it is much higher than the first of $950.00 per acre. Wondering if there is a catch somewhere! Thank you for your help, Joni Macrory

 

A:

It’s not a bad offer probably, but depending on where in the county your minerals are you might do better than that. I would suggest checking with your neighboring mineral owners if possible, or visit the OCC website (www.occeweb.com) and check forced-pooling orders for your township and the surrounding townships. If you find any recent orders (a year or less ago), the bonus amounts offered in the orders usually reflect the average bonus being paid for leases in the same area at the time of the pooling.

Hope this helps you out!
Frederick M. “Mick” Scott CMM, RPL
Manager
The Mineral Hub

Lease Bonus Payout not received
Q:
I was contacted by a landman leasing for a large energy company in Olahoma who wanted to lease my minerals in 2 sections in Dewey County. I sent both leases, and received 1 bonus check on the smaller tract, but have yet to see payment on the larger tract. It has been more than 90 days now, and when I contacted the landman he apologized, but said he would look into it…..still no check. Is there a time limit in which they have to pay when they have my signed lease?

 

A:

Next time you lease just send them a copy of your signed lease (marked “do not file, original will be sent once payment is received”), and work out a time for them to pay you. Once you are paid, send them the original. Doing it this way instead of sending the original will provide a much greater incentive for them to get you paid in a timely manner.

In your current case you are kind of at their mercy unfortunately (because they already have your original lease). You will probably just have to wait them out. I’d keep bugging them though at least once a week. 90 days is too long to wait, and if they are so far behind that it’s taking longer than that to pay people then they should hire more help. Period.

There is a company out there with the initials “P.M.” that is currently taking a long time to pay ME for a lease. I wonder if that’s the same company you’re dealing with?

Hope this helps you out!
Frederick M. “Mick” Scott CMM, RPL
Manager
The Mineral Hub

Activity on inherited oil property in OK?
Q:
My sister Jane and I inherited, through our uncle Dooney and our father, a couple of small sites in Coal County a few years back. We had some dealings with Newfield back in 2011-2012, some hearings were held, etc.Is there a chance we should checkin and see if anything has changed with the new Trump rules??? I their exact locations, but don’t know who to ask. Thanks.

 

A:

If you want to check activity in the area you can find drilling permits, pooling applications/orders and other documents pertaining to your area on the Oklahoma Corporation Commission website (www.occeweb.com). There are also pay sites like www.pangaeadata.com and www.drillinginfo.com that will provide that info, and more. www.mineralrightsforum.com is another good site to visit to find out what other mineral owners in Coal County are saying is happening in the area.

Most of the activity in Coal County has been in either the central or northeast portion of the county.

Hope this helps you out!
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub

HORIZONTAL WELL RELIEF BY MULTIPLE COMPANIES
Q:
We are the owners of mineral rights in McClain Country OK, we have been receiving documents pertaining to Horizontal Well and Multiunit Horizontal Well relief from 3 different operations for the same sections. Can all three be drill in the same area and how does that affect us as mineral rights owners? Our rights are leased already by a different company than the ones that are applying for relief.

 

A:

You can look up these permits on the Oklahoma Corporation Commission website (occeweb.com). It’s certainly possible that all three could drill, but I expect only one will end up being the operator at a time, and they will likely decide among themselves who that will be. The people who leased you were likely leasing for one of these companies.

The Mineral Hub

Transfer of inherited/devised mineral rights?
Q:
Mother passed away in 1997. I probated her will, as Independent Executor, in Mc Lennan County, TX, with myself and my brother, now deceased, as sole heirs. Through contact from landman, I have recently found that mother held undivided ½ interest in all minerals under two tracts in Henderson County, TX. What should I do to transfer title to these interests to myself and my sister-in-law (my brothers’ sole heir)?

 

A:

Since her will was probated, then the minerals would be transferred according to her will, or is not specifically mentioned in the will they would be transferred as part of the remainder of the estate using a clause to that effect that is common in most wills. If you were the executor I imagine you could have the minerals officially transferred to each of you by having an attorney draft up a deed from the executor to each of you.

Hope this helps you out!
The Mineral Hub

Mineral Rights in Blaine County, Montana
Q:
I own mineral rights in three tracts of Blaine County, Montana, situated in Townships 31 and 32, that have never produced. Worth hanging onto for future generations or consider selling due to current financial needs? Thanks.

 

A:

If no activity for years (i.e. never produced) then the mineral rights are probably not worth much currently anyway, especially if they’ve never been leased either. I’d hang on to them unless you really need the money. No telling what new technology might allow to happen in the future.

The Mineral Hub

When will drilling pick up in Reeves Co, TX?
Q:
I recognize that if you could give me an exact answer you’d be extremely wealthy. That being said I’ve currently got 7.5 net acres under lease @ 1/4 royalty if they drill. I’ve received 12 offers to buy minerals since January 2017 – each higher than the last. I don’t want to sell right before someone drills but I’d like to understand more about what’s going on to evaluate future lease and sell offers price and timing. How can I get a better sense of what’s actually happening on/in the ground? Will the company that’s currently leasing share their intentions to drill during my lease period? Lease bonuses are great but I’d rather have pricey royalty checks!

 

A:

There’s really nothing “wrong” with selling right before a well is drilled. In some cases you’ll actually get more BEFORE the well is completed than after, especially in cases where the new well is not the “barn burner” that was anticipated.

You can find the drilling permits for proposed wells on the Texas Railroad Commission’s website (the regulatory body for oil and gas in Texas). Most will have a contact phone number you can call to find out if the well has been “spud” yet, or if they actually plan to drill it before the permit expires.

You could also possibly contact the landman who leased from you and ask him/her if they can tell you anything.

Reeves County is a very active county currently as you know. If you’d like to sell them I have a guy who would probably be interested in making you a good offer on them. He’s worked with us before and is an actual honest buyer and will give you a fair shake and close quickly if he’s interested and you accept an offer from him. You can contact me from our Sell Mineral Rights listing page or our Contact Us form if you are interested in getting an offer.

Hope this helps you out.
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub

Am I bound by first signed lease?
Q:
In September 2016, a leasing company presented an offer (section 35, McLain county, OK, for $800 for 3/16 to lease our mineral rights. Now, April, 2017, we are getting offers from oil companies for much more like $3500 for 1/5 and $1000 for 1/4. Is there any way out of the first signed lease?n

 

A:

Assuming you already signed and sent the 2016 lease back then there’s no way out of 2016 lease unless the lessee lets you out of it (very unlikely); and why would they? If you haven’t signed the 2016 lease, but accepted their offer, then you should keep your word with them even in the face of higher offers.

Hope this helps you out.
The Mineral Hub

Oklahoma intestate succession of mineral rights
Q:
My father inherited several Oklahoma mineral leases from his mother. He died in 2014 with no will. He had remarried after divorcing my mother but had no children with the new wife. The new wife agreed to split the leases with my father’s 3 children. She got 1/2 and us kids split the other 1/2 3 ways. The new wife died in 2016 with no will. My question is since the leases are “ancestoral” on my father’s side, can us 3 children claim back her 1/2 of the leases? As blood heirs, can we claim the leases as ancestoral property? Is there an Oklahoma statue to support ancestoral property?

 

A:

Since the new wife also died intestate, her minerals, assuming she owned them at her death, would be distributed to her heirs-at-law as per Oklahoma’s intestacy laws, which you can easily search for online.

Hope this helps you out.
The Mineral Hub

Mineral Reservations and Partition Deed?
Q:
I seen a document where one set of family conveyed all interest in multiple tracts of land. Then another document a couple years later do a Partition Deed that supersedes the first document states they are partitioning the surface estate to different family members. Do they have to mention mineral reservations, this happened in the 1995 & 1995

 

A:

Without seeing the papers it’s hard to answer this one. Show them to an attorney and see what he/she has to say about it. Sounds like they may have made a mistake on the first deed and the partition deed was meant to correct that but can’t be sure without seeing.

Hope this helps you out!
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub

Company wants lease check returned
Q:
We signed a lease for some mineral rights in Wetzel County WV. We received our check the other day and deposited it in the bank. Today we received a call saying that we needed to return the check because we didn’t own the mineral rights due to a quick deed that was done back in 1903. Do we need to return this check and if so, should they give us the notarized lease back? We signed the lease back in December of 2016 but just received the check this past Monday. We made a trip to the Wetzel County courthouse, but they really couldn’t tell us who owned the mineral rights because there were several people.

 

A:

They should have verified your ownership BEFORE they paid you. Since they apparently didn’t, they can ask you for the check back if you “warranted” your title on the lease, which you likely did (read the lease). “Warrant” means you swear you own it basically. You could argue with them and take them to court to fight giving the money back but you’d likely lose if you in fact warranted that you owned the minerals they paid you on, even if they made a mistake in paying you. It was sloppy of them to not verify your ownership prior to paying you though. Doesn’t happen too often and I’m sorry it may have happened to you. If you have an attorney you might check with him/her as to whether to fight this or not. In any case, YES, they should give you the lease back, but if you really don’t own anything there it’s not the end of the world if they don’t return it (but they should be willing to anyway…for one thing they could be wrong in which case you don’t want a lease out there that you haven’t been paid on).

Hope this helps you out!
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub

How to check a leasing company out?
Q:
My wife was contacted by a landman regarding leasing her mineral rights. How/where can I check the company’s bona fides?

 

A:

I would “Google” their name online if you want to know more about them. You could also check with neighbors who may have also been leased. You should probably also read our leasing tips article, which can be found on the Mineral Hub Articles page of our website.

Hope this helps you out!
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub

What is Form P -17
Q:
Why a mineral rights owner should sign a form- p-17 Who pays the filing fees?

 

A:

You can find your answer at the following link. You can copy and paste into your browser.

http://bfy.tw/Ap1i

The Mineral Hub

Will lease expire on a shut-in well?
Q:
If formerly productive gas wells are shut down and now non-productive, does the lease expire after a certain amount of time or do you always have to go to court to get the lease released? I should say that I am the owner of the mineral rights that were leased to an oil and gas company with producing wells. The oil and gas company sold the wells and the lease to the land owner and the wells have been non-producing for 3 months.

 

A:

Three months is nothing. Three years and you might have a good argument, but yes, you’d likely still have to go to court (or threaten to) in order to get them to “produce or release” the lease. The sale to a new owner would not have any bearing most likely. It’s the time that’s important, and any operator can shut in a well if it’s “reasonable” to do so. If you took them to court they’d have to show WHY it’s reasonable to keep the well shut in, and you would want to show why it’s NOT reasonable. The judge would decide.

That said, I have personally convinced a company to release my lease for not producing in “paying quantities” simply by threatening to take them to court (and having my attorney send them a letter stating as much). My argument was that they were not recovering enough from the barely-producing well to justify continued operations. It was not actually a “shut-in” well, just a well that was barely producing anything each month.

Hope this helps you out!
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub

Sold TX Mineral Rights - State Tax?
Q:
We (a family Trust) sold mineral rights we held in Martin Co. Texas in 2016. We’re properly reporting the income on the Fed Tax return, but unsure about State. I’m the Trustee and live in Hawaii. Every year royalties were produced I completed both a Fed and HI State tax return for the Trust. But Turbo Tax indicated this year that a Texas return is necessary. Is it correct that there’s no income tax in TX, and therefore I don’t need to fill out a TX State tax return for the sale?

 

A:

If you sold the minerals last year, and there was no production or income from them last year, then you wouldn’t owe any state tax on the sale proceeds, nor would you need to file a Texas tax return simply for the mineral rights that were sold. You might contact a Texas accountant for a professional opinion on this however.

Hope this helps you out!
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub

Realistic price for TX mineral rights?
Q:
3/9/17 – We bought mineral rights in Spraberry/Permian Basin, Howard/Martin Counties, TX from our son in Nov 2015 for $50K. After a year of royalty checks of only a few hundred each month, we concluded that we paid far too much (although we were happy to help our son). During that time we received many offers well below what we paid. In Dec. 2016 we entered into a Production Sharing Agreement with an adjacent well and amazingly the checks have been $11K, $6K, and $5K. We’ve received at least 20 offers and recently we got an offer of $58K and are now considering selling. We read your article, “What are my mineral rights worth?” We did all the math using your guide and determined the value of our mineral rights: Avg $3,858 x 36 = $138K; Avg $3,858 x 52 = $200K; Avg $3,858 x 72 = $277K. Is it realistic to respond to these offers by asking the mid-range value of $200K? We were going to ask for $75K but after reading your article, maybe we should ask for more? Your guidance is greatly appreciated!

 

A:

If the average income over the past six months or so has been $3858 then yes, asking for a 36 to 60-month multiple would not be unreasonable in my opinion. If there are more wells planned/permitted currently, then an even higher multiple might be justified.

If you are planning to sell them you can list them on the Mineral Hub for free and we will market them for you and if we find you a suitable buyer we will help ensure the transaction goes as smoothly as possible and that the price is (in our opinion) fair. You can visit our “Sell Mineral Rights” page and post your listing there if you like, or can simply call us if you prefer and we’d be happy to speak with you about the sale.

The Mineral Hub

Oil and Gas reporting taxes
Q:
I inherited oil royalties that accumulated over a period of 10 years. The owner of these royalties died several year ago and for 10 years the royalty payments accumulated. After discovering that I inherited the royalties, I received one check for 10 years of royalties. Can I spread out this 10 year lump sum payment by reporting 1/3 of the income to the IRS, on amended returns, over my last three tax returns.

 

A:

I am not an accountant unfortunately.I would suggest you ask an accountant that question to be sure, but I expect it would be taxed in the year received, not the year earned.

The Mineral Hub

1991 mineral rights value?
Q:
tax client sold mineral rights in Dewey County, OK and she needs to know what the value was in 1991? Can you help?

 

A:

If the amount of money involved justifies the cost I would recommend Terrel Shields, Certified General Appraiser, or a local landman who is familiar with or could research 1991 valuations in Dewey County, OK.

Mr. Shields is reputable, and can be contacted from his website: www.roxnoil.com, and it’s possible someone at the Dewey County Clerk’s office could recommend a local landman to help you.

One other alternative, though probably more expensive than either of the above, would be to contact an oil and gas attorney in Dewey County who is familiar with that area.

Hope this helps you out.
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub

Deductions concerning royalty ownership taxes?
Q:
I currently own 60 acres with a gas well on it. What if any deductions are available when I file federal & Michigan state taxes? The gas well covers about 6 acres. Are production costs & taxes deductible? Thanks

 

A:

Your accountant will likely tell you that you will be allowed a tax concession against your royalty income known as a “depletion allowance” on at least your federal tax return. For oil and gas royalty owners a “percentage depletion allowance” is most common, and is calculated using a rate of (I believe) 15% of the gross income received over a given tax year. Check with an accountant for the exact details as there may be other factors involved in calculating this deduction that I am missing.

The depletion allowance is available due to the fact that mineral rights are considered a depleting asset by the IRS (wells start out strong, then deplete as they age).

If you participated in actually drilling the well by paying your proportionate share of the drilling costs, then many of those costs would be deductible, but for most people this would not be applicable since most simply own the mineral rights and collect royalty payments rather than sharing in the costs of drilling and thus use the “percentage depletion allowance” deduction instead of a “cost percentage”.

Hope this helps you out.
The Mineral Hub

Historical Record of Mineral Rights Value?
Q:
Inherited oil/gas rights in Williston County, ND, is 1992. For tax purposes, need to find value when inherited. Any historic references, or must I dig out myself by going to the Williston county courthouse to explore records? Thanks

 

A:

You could search for 1990-1995 sales in the county clerk’s records but unless the Clerk require “tax stamps” on the deeds (which you could use to arrive at an estimated sales price) it’s unlikely your search would be useful because in most cases the actual prices paid are not stated on mineral deeds.

You could use a 2X multiple of the going lease bonus rates per acre in 1992 for that immediate area to arrive at a rough 1992 per acre valuation if sales data are not available; and 3X if the area was considered “hot” back then. If the cost is justified you could also hire a local attorney or (probably cheaper) landman to research this for you or give you his/her thoughts if they were working in the area back then.

My feeling is they’d be worth quite a bit less in 1992 than they are now, so you may have a “capital gain” of some kind. Your attorney or accountant may tell you however, that a valuation is not even needed because they were inherited rather than purchased outright.

Hope this helps you out!
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub

How to find out what we own?
Q:
We had a title search done to determine if we own the mineral and or gas rights to our property in Tioga County, Pennsylvania. From what that reads we do not own them, however it is rumored that the coal company that owned them is no longer in existence. All of the neighbors in our area “have” their rights and have signed leases with the gas companies over the last numerous years. Our question is who do we talk to about finding out what we actually do or do not own?

 

A:

County Clerk’s office in Tioga County would be your best bet. That’s where all the land (and mineral) deeds are filed of record. You could go there (or online if they are online) and search your mineral rights history to determine who the coal company sold them to prior to their dissolution.

Even if the coal company owned them at one time and is now no longer in existence that wouldn’t mean they would revert to you automatically. They were probably sold at some point before the company’s dissolution and that party would own them now.

Finally, if you have not been approached about a lease while many other owners have been, you probably don’t own them.

Hope this helps you out.
The Mineral Hub

Can I keep minerals acquired by deed mistake?
Q:
We purchased a house on 2.5 acres. I requested to have gas/mineral rights included, the seller decline. The closing company made a mistake and filed a deed that gave me the gas/mineral rights. Do I have any rights, or do I have to agree to the corrective deed? Can the closing company be held liable in any way since they were paid professional and made a mistake?

 

A:

You could fight it out in court if you wanted to but there’s no guarantee you’d “win” and get to keep the mineral rights due to the professional closing company’s mistake. The seller’s would likely argue that since you were well aware they intended to keep the mineral rights before closing, the mistake should be corrected with another deed so that the intent of the parties is reflected properly.

The Mineral Hub

Can I change remainder beneficiary in deed?
Q:
My uncle built a mineral deed stating that his minerals was to go to his sister and her husbands trust after he (uncle) and his wife’s (aunt) death. Uncle and his wife would have a life estate of the minerals during their lifetime- his sister and her husband have already passed-Uncle wants to change the mineral deed to go to his nephew as he is surface owner of the land. Is this a move that Uncle can revoke the mineral deed and send to the Nephew and he will be owner after Uncle and his Wife pass?

 

A:

If uncle is still living then he can file a new deed stating his nephew is to get the minerals after uncle and uncle’s wife are deceased. This would replace the initial deed. He could also simply record a “cancellation” of the first deed, or could just sell the mineral rights to the nephew, or anyone else, while still living. This would also have the effect of nullifying the first deed since there would be nothing to transfer if sold prior to their deaths.

Hope this helps you out!
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub

Inheriting mineral rights as a foreigner
Q:
Hello, I’m a German citizen and will be receiving mineral rights in an inheritance from family in the USA. Is it possible for a foreigner to inherit mineral rights? How would it work with taxes? Thanks for your help!

 

A:

I believe you can inherit mineral rights here without being a citizen. There is plenty of foreign ownership of our mineral rights already and I expect it’s much like if you purchased a house here since mineral rights are considered “property” here.

As for the taxes that would be something to check with your accountant on. Our federal government only taxes actual INCOME made from the mineral rights (i.e. royalty payments, lease bonus, sales proceeds if you sell them later etc.), not just ownership. Some STATES here however will tax the property whether it is producing oil and gas income currently or not. Some STATES here such as Texas do not charge INCOME tax, but do have a property tax and I believe mineral rights are considered property for tax purposes in Texas, whether currently producing income or not. For the specifics, and whether these taxes would apply to you or not, you’d probably want to contact an accountant in the state where the mineral rights are located or perhaps one where you live in Germany.

If you happen to decide to sell them at some point please keep us in mind for that as that’s what we do here mainly (help sellers find suitable buyers for their mineral rights). Mineral ownership is a rather exclusive club worldwide however, so you might want to hold onto them for a while to see how ownership suits you, and of course you’d want to learn about what is going on in the area where they are located as that could definitely affect their value. Lots of oil and gas activity in your area means more value.

Since you are apparently in Germany we may be able to give you an idea of what’s going on in the area where these mineral rights are located. Feel free to contact me directly at mineralhub@outlook.com if you have any more questions.

Hope this helps you out!
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub

Should I consider a top lease?
Q:
I have been offered a top lease by a third party with a 10% advancement. My original lease expires in 18 months. Is this a good percentage?

 

A:

I’m not a fan of “top leasing”. When approached with these offers I usually tell them I’d prefer they just contact me again when my current lease expires and then we can talk. Reason is because it’s likely they think lease prices will rise over the next 18 months or they wouldn’t be offering to pay you 10% of the bonus now for you agreeing to lease to them at that rate 18 months later.

That said, you could also look at it as a “bird-in-the-hand” if in fact what they are offering OBLIGATES them (not gives them simply an option) to pay you the remaining bonus assuming your lease doesn’t get drilled by then by your current lessee. If lease prices go DOWN over the next 18 months this could benefit you, especially if no one else is leasing that area in 18 months.

Depending on how many acres you have to lease their may also be tax consequences to consider. Check with your accountant before doing anything if the money involved is substantial.

Hope this helps you out!
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub

Mineral Valuation Canadian County, OK?
Q:
What is the going value of the offers in Canadian county. The nlocation of said well is 1 mile north of Calumet.

 

A:

If you’re looking to sell we’d be happy to help find you a suitable buyer if you list them for sale with us. Unfortunately however, we do not have the resources to do free mineral evaluations for everyone who asks. If you would like an evaluation without listing them for sale with us we’d need to charge you for that. Contact us for rates and availability.

Hope this helps you out!
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub

Sharing of oil/gas royalties - tax question
Q:
My brother and I received some producing mineral interests that were owned by my mother in a revocable trust. We are transferring the mineral interests into our own names to get them out of the Trust. We have a gentleman’s agreement with my stepdad (because mom wanted him taken care of but he is not a beneficiary of the trust) that he will receive the first cumulative $5K of oil and gas royalties each year. Let’s say that my brother and I each receive $7500 of 1099s in 2017 from oil and gas royalties. Can we both cut him a check in 2017 for $2500 and then 1099 this $2500 (each) portion of our “revenue sharing agreement” on a 1099 from us to him so that he pays the taxes on the oil and gas revenues that he gets, even though he does not actually have any ownership interest? (And we deduct the $2500 we paid to him as an expense on schedule E, so we only pay tax on the royalty income we actually received)? Does this work? Is there a better way to handle this? We need a legit way for him to get the $5K and be responsible for the income taxes on the royalties that we are passing thru to him. Thanks in advance.

 

A:

Not sure about this, but I expect it would be treated more as a “gift” for tax purposes, barring any documentation stating he is to share in the income each year. I would suggest contacting a accountant about this.

Hope this helps you out!
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub

1099 required on income received from oil company?
Q:
Our oil company is telling me that I don’t need a 1099 from his company for checks given to me for royalties, is that correct? Also how can I find out if the lease has expired and when it did?

 

A:

Even if they don’t send you a 1099 you will still be liable for any taxes on the income you received. Check with your accountant. It’s possible that if the amount is very small no 1099 would be required but I’m not an accountant so you should check with yours to be sure.

Hope this helps you out!
Frederick M. Scott
The Mineral Hub

Locating inherited land?
Q:
Trying to find the land I inherited from my mother Brooksie b kelly of Monroe , la

 

A:

Check the county clerk/recorder records in the county/parish where the land is located. You should be able to find where your mother got them there, and then transfer them to yourself (if needed). If you don’t know the legal description you can just search by name to find her as long as you at least know the county where the property is.

Hope this helps you out!
Frederick M. Scott
The Mineral Hub

Shut-in clause needed, and why?
Q:

Hello, I’m really new to all this. My first offer was $1500 an acre with 15% royalty primary term 5 years for a nonsurface. I acted that I want interested and right away came back with$1750 an acre. I said I would think about it. I did some deed searching and added several clauses I copied from other deeds I researched. They will agree to all but said they will not agree to a shut in clause as they are in the business to make money and are planning 4 Wells starting in March. Should I be concerned they won’t agree to the shut-in clause?

 

A:

Shut-in limitation would be nice to have, and I’ve had success with the one below in several of my leases. I’m fine with a company shutting in a well for maintenance etc. Sometimes that could be for a couple of months even. I’m fine with that. What I DON’T want is for the company to be able to shut in my gas well for years simply because they don’t like the prices being paid for gas currently, or simply to “hold” the lease until prices rise.

For this reason I like to LIMIT the amount of time a well can be shut-in to no more than 3 CUMULATIVE years. If they desire longer, they’ll need to get permission in writing from me or will lose the lease. I’d try to get some sort of limitation on the shut-in period if you can, but if they just won’t do it you could just ask them to throw some more money your way, or increase your royalty fraction etc. It’s ALL negotiable.

SAMPLE:
SHUT-IN ROYALTY: After the end of the primary term, this lease may not be maintained in force solely by reason of the shut-in royalty payments, as provided for in this lease, for any one shut-in period of more than one (1) year or for shorter periods which exceed three (3) cumulative years without the written consent of Lessor, whose consent shall not be unreasonably withheld.

Hope this helps you out!
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub

Do surface clauses in OGL transfer to new surface owner?
Q:

We have a lease on our farm that contains clauses that mention “Provided that Lessor is the current surface owner … ” . If we have reserved the Mineral Rights and are now selling the Surface rights in a Real Estate Transaction, does the O&G company have to enter into a new lease with the new Surface owner or are the new owners bound by the lease we signed? The entire leasehold being sold is currently serviced by 2 producing wells.

 

A:

New owners will be bound by the lease you signed until the lease expires. Kind of a tricky situation with the “provided that lessor…” language, but I think it would stick since you were the surface owner when it was executed. Check with your attorney to be sure though if it’s important to you.

Hope this helps you out!
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub

Mineral rights offer Hughes County, OK. Fair?
Q:

I own a small parcel of mineral rights in Hughes county Oklahoma 13-7N-10E and have received an offer for $5000 an acre. How do I know if this is a good offer?

 

A:

In response to your question,

If you don’t really need the money right now you might want to hold off selling. While $5000/acre would not normally be a bad offer in this area of Hughes County, I believe you only received it because Trinity Operating is currently drilling two new wells that will include your section (13), and in fact they already has a couple of decent wells in the NW/4 of the section that were drilled in 2015 (The “Clara” and “Willa” wells). I doubt the buyer told you about any of this when making the offer.

You may not be getting checks from the Clara and Willas wells, unless your minerals are in the NW/4 of Section 13 (wells are on small spacing of only 160 acres and so payout only to those who own minerals in the NW/4 of Section 13).

The two new wells they’ve started drilling are “multi-unit” wells however, that will include at least two full sections of land (a section of land being 640 acres). Your section 13 is one of those sections. I expect they are hoping for a lot from them as horizontal wells spread over more than one section of land are expensive to drill. You would share proportionately in the production, along with the other minerals owners within the sections included.

If they come in nicely when completed, probably less than a year from now, it would likely result in a monthly check for you. Probably not a huge check with only 1.66 acres, but the payments could go on for years (until the wells deplete).

I own minerals in a township adjacent to yours in Hughes County (7N-11E) and am receiving checks of about $150/month from two wells Trinity operates there. I don’t have but a few acres there, but I expect your checks with two GOOD wells would be less than mine since you have less acreage and a larger (multi-section) unit, but could still be around $75/month or so, at least at first. At that rate it would take you nearly 10 years to equal the $8300 this guy is offering to buy them for now, but more wells could be drilled in the future, possibly increasing your monthly checks.

Another reason to (perhaps) wait a bit is that if the wells are drilled and come in good, you might be able to get even more than $5000/acre for the 1.66 acres, or maybe just ask for $10,000 total. The converse is true also as a bad well could drastically reduce the value of the minerals to a buyer.

Basically this guy is offering to pay you up front what it will probably take years to get on your own once the wells come in. I received an offer for mine of $4200/acre earlier this year. I didn’t sell but really didn’t need the money at the time either.

If you do decide to sell now you might consider the $5000/acre offer ($8300 total) as it’s not a horrible offer frankly, even with the potential for the new wells.

I expect anyone who buys these will want to have an Oklahoma probate done on the estate of the person you inherited them from before they’ll buy, in order for them to have “marketable title”. This is something the oil company may also require YOU to do before they’ll send you royalty checks if you keep them.

A probate is just a legal process (more formal than a simple “affidavit”) where the facts of the decedent are presented (usually by an attorney) to a judge who then decides who gets what and makes it official by issuing and filing a “final decree” or similar document of record with the county and/or court clerk so everyone can see who inherited what. That said, if the minerals were granted to you by someone prior to their death, then a probate would not be needed.

P.S. If you do decide to sell, I (The Mineral Hub) could help find a suitable buyer for you (no cost to you…they’d pay me), but they would likely need the probate to be done first if it hasn’t been done already (and is needed).

Your minerals are in the “hot” part of the county right now so I’m sure I could find some peeps interested in buying them. If you and/or your relatives decide to hang on to them that’s fine too though of course. Not trying to talk you into selling. No bad decisions here really.

Hope this helps you out!
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub
EMAIL: mineralhub@outlook.com

Mineral rights offer Hughes County, OK. Fair?
Q:

I own a small parcel of mineral rights in Hughes county Oklahoma 13-7N-10E and have received an offer for $5000 an acre. How do I know if this is a good offer?

 

A:

In response to your question,

If you don’t really need the money right now you might want to hold off selling. While $5000/acre would not normally be a bad offer in this area of Hughes County, I believe you only received it because Trinity Operating is currently drilling two new wells that will include your section (13), and in fact they already has a couple of decent wells in the NW/4 of the section that were drilled in 2015 (The “Clara” and “Willa” wells). I doubt the buyer told you about any of this when making the offer.

You may not be getting checks from the Clara and Willas wells, unless your minerals are in the NW/4 of Section 13 (wells are on small spacing of only 160 acres and so payout only to those who own minerals in the NW/4 of Section 13).

The two new wells they’ve started drilling are “multi-unit” wells however, that will include at least two full sections of land (a section of land being 640 acres). Your section 13 is one of those sections. I expect they are hoping for a lot from them as horizontal wells spread over more than one section of land are expensive to drill. You would share proportionately in the production, along with the other minerals owners within the sections included.

If they come in nicely when completed, probably less than a year from now, it would likely result in a monthly check for you. Probably not a huge check with only 1.66 acres, but the payments could go on for years (until the wells deplete).

I own minerals in a township adjacent to yours in Hughes County (7N-11E) and am receiving checks of about $150/month from two wells Trinity operates there. I don’t have but a few acres there, but I expect your checks with two GOOD wells would be less than mine since you have less acreage and a larger (multi-section) unit, but could still be around $75/month or so, at least at first. At that rate it would take you nearly 10 years to equal the $8300 this guy is offering to buy them for now, but more wells could be drilled in the future, possibly increasing your monthly checks.

Another reason to (perhaps) wait a bit is that if the wells are drilled and come in good, you might be able to get even more than $5000/acre for the 1.66 acres, or maybe just ask for $10,000 total. The converse is true also as a bad well could drastically reduce the value of the minerals to a buyer.

Basically this guy is offering to pay you up front what it will probably take years to get on your own once the wells come in. I received an offer for mine of $4200/acre earlier this year. I didn’t sell but really didn’t need the money at the time either.

If you do decide to sell now you might consider the $5000/acre offer ($8300 total) as it’s not a horrible offer frankly, even with the potential for the new wells.

I expect anyone who buys these will want to have an Oklahoma probate done on the estate of the person you inherited them from before they’ll buy, in order for them to have “marketable title”. This is something the oil company may also require YOU to do before they’ll send you royalty checks if you keep them.

A probate is just a legal process (more formal than a simple “affidavit”) where the facts of the decedent are presented (usually by an attorney) to a judge who then decides who gets what and makes it official by issuing and filing a “final decree” or similar document of record with the county and/or court clerk so everyone can see who inherited what. That said, if the minerals were granted to you by someone prior to their death, then a probate would not be needed.

P.S. If you do decide to sell, I (The Mineral Hub) could help find a suitable buyer for you (no cost to you…they’d pay me), but they would likely need the probate to be done first if it hasn’t been done already (and is needed).

Your minerals are in the “hot” part of the county right now so I’m sure I could find some peeps interested in buying them. If you and/or your relatives decide to hang on to them that’s fine too though of course. Not trying to talk you into selling. No bad decisions here really.

Hope this helps you out!
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub
EMAIL: mineralhub@outlook.com

Is there increased interest in Ochiltree Co, TX??
Q:

My wife has a small royalty interest in Ochiltree County. Lately we have been getting lots of offers to buy her out. Is there an increase of activity there or are people bargain hunting?

 

A:

Usually when you receive more than one unsolicited offer to purchase within a relatively short period of time it does indicate something is going on in the area that is attractive to buyers of mineral rights. Increased leasing, drilling, production etc. are some triggers for this and yes, Ochiltree County has been a fairly active county for some time now so I expect one of the above is happening on or near these mineral rights. Some companies are also starting to move OUT of the Permian Basin play to the south and so that might account for some of the increased interest in your area as well.

If you’re planning to sell, I’d suggest listing them for sale on this site (The Mineral Hub) as you’ll get a much more objective idea of their value than you will with those unsolicited offers, most of which are likely either “lowball” offers or “fishing expeditions” (high price to entice you to sign with them…but often lowered substantially before closing due to “market changes” etc). Link below takes you to our listing page.

List Your Mineral Rights

Hope this helps you out.
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub

Reversion clause in old deed cause problems?
Q:
We sold 25 acres and retained the mineral rights with the following wording. To revert to land owner in 15 years, providing there are no production or active leases on property. Can we legally sell the Mineral rights?

 

A:

Yes, you can sell them, though you probably won’t get as much as you would absent the reversionary clause since whoever buys them will only have use of them for 15 years from the date you sold them (unless leased or producing) before they return to the landowner. Probably also states that once production ceases would also revert to landowner.

Hope this helps you out.
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub

O&G Lease Offer asks me too "assign" my interest? Meaning?
Q:
I just received papers on one section in Jefferson co. Oklahoma they want to do a horizontal viola test and give cost of dry hole and well. I have 3 options n1-participate with my interest by paying my proportionate share of actual well cost n2-assign my interest for X amount bonus &1/8 royalty n3-assign my interest for X amount bonus 3/16. Not sure what assign means

 

A:

Assign simply means “lease”. They are asking you to “assign” your right to drill over to them by signing an oil and gas lease, and in return they give you a signing bonus as well as a share of the royalty (1/8, 3/16 etc.) of any wells that are drilled.

Participating in the well is not something you want to do. Royalty is cost-free (supposedly) while participating is not, and is certainly not something for novices to do.

Hope this helps you out!
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub

Do O&G Companies Steal Royalties?
Q:
How much do you think the oil and gas companies steal? It does take a long time to get the first check and we as owners have no way of knowing exactly what they take out…. And I imagine some companies are worse than others… What do you think?

 

A:

Generally, most states allow an oil company six months after first production (i.e. from a new well) before payment is due to the royalty owners. They do this because there is a lot that goes into making sure everyone is paid correctly when the first well is drilled on a lease, and six months is really needed if there are a lot of owners involved. Because of the delay, the first check received will often contain four or even five months of income and may be the biggest check the royalty owner ever receives from the well since on top of the multiple months, the first few months of a well’s life are often its best.

If they don’t start paying on a new well within six months, interest on late payments is usually due per state law, though many times you have to “remind” the company that it is actually due in the event you discover you were paid late.

Yes, some companies blatantly rip off their royalty owners and are fine with it. Their motto is “do it until they find out” then tell them to just sue, which most owners won’t do because it’s expensive. Enter the “Class Action Lawsuits” supposedly designed to help the lowly mineral owner recoup their money from the big-bad oil companies. I’m not a fan of class actions either though because in most cases the main beneficiaries are the attorneys, the oil company, and perhaps the lead plaintiff claiming to represent the mineral owners rather than the mineral owners themselves (who often get pennies-on-the-dollar compared to what they are actually owed).

You can read in more detail WHY I’m not a fan of class actions suits on our Mineral Hub Articles page (along with some other original articles we’ve published).

Moral of the story is, get as good a lease as you can up front (it can affect your rights for decades if a producing well is drilled) and then hope for the best. Not a pretty picture is it? Luckily MOST companies do not blatantly rip off their royalty owners, but there are certainly some that do so be vigilant.

Hope this helps you out!
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub

Reversionary Interest in Mississippi
Q:
I have a question about reversionary interests in MS. My grandparents purchased a piece of property in MS in 1940. Their warranty deed from the Federal Land Bank, New Orleans (FLB NO) reserves a 1/2 mineral interest for a period of 25 yrs beginning in 1940, unless production is established, then reservation will extend until production ceases. The remaining 1/2 mineral interest conveyed w/o warranty. (No production occurred between 1940 and 1965.) In 1941, they conveyed that land, with a deed that specifies “It is agreed and understood that only a one-half interest in the minerals in and under the above described land is hereby conveyed.”In 1944, the brother and his wife conveyed 13.5 acres to another relative (their son, we believe) with no mention of minerals. Less than a month later, the grantee conveyed the same 13.5 acres to yet another party, also with no mention of minerals. In 1947, that grantee conveyed the 13.5 acres to another party. Grantor reserved no minerals, but states 1/2 minerals reserved by FLB NO.In July 1971, Oil Co. came to my grandmother asking for an OGM lease on the property. She told him she didn’t own that property any longer. He said something like, I know, but you & your husband retained the minerals when you sold it.So the Oil Co. thought the 50% interest reserved by FLB NO reverted back to my grandmother in 1965. So she executed an OGM lease.In September 1971, the property was conveyed, stating, “undivided 1/4 of all minerals conveyed.”Several times since 1971, various Oil Cos. have executed leases w/heirs of my grandmother. Now another Oil Co. is wanting a lease. I asked for copies of previous deeds, so I could understand what happened before now. Landman wasn’t sure if minerals reverted to my grandmother or to the surface owners.I can’t find an answer online about reversionary interests in MS.What is your opinion? Did the 50% reserved by FLB NO revert back to my grandmother in 1965, or did it revert to the surface owner in 1965, who would be the 3rd grantee after my grandmother?

 

A:

Sounds to me like in 1941 your grandparents conveyed the land and 1/2 of the mineral rights under it.

The brother and his wife in 1944, owning the 1/2 of the minerals your grandparents sold them, sold 13.5 acres to their son and since no minerals were mentioned/reserved, the mineral rights went too. Same when the son sold. Unless expressly reserved, they go.

I think the other half of the minerals your grandparents kept were the FLB minerals, so that after 1965 they would revert back to FLB or its successors, leaving your grandmother with none.

Without seeing all these conveyances (and I don’t have time to on this free forum) it’s hard to say exactly who ended up with the minerals, but that’s my $.02. You might want to consult an attorney on this matter for an actual legal opinion.

Hope this helps you out!
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub

Leasing Tips Article?
Q:
We were contacted by McLinn Land Services to lease mineral rights. They offered $3900/acre plus 3/16 royalty. This morning, my brother was contacted by another company wanting to talk us about leasing. How can we verify we’re getting the best deal?

 

A:

Read my Leasing Tips article on The Mineral Hub “Articles” page…which will provide some good negotiating and other leasing tips as to how to get the “best deal”.

Hope this helps you out!
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub

Bought Home with Current Lease intact
Q:
I am closing on a home in Grayson Co texas in a couple of weeks. When the seller signed the contract for the home he did not “remember” he wanted to retain mineral rights. I informed him I would not give up mineral rights and he was expected to stick to the contract as written. A couple of weeks later his agent sent over a lease he signed a month before we went under contract for the property. In contacting the Oil and Gas company and the title company I understand the lease will transfer to me as the new owner. My question is if he signed a 4 year lease did he get the 4 years up front? If so wouldnt I be owed 3 years 10 months of that?

 

A:

He likely got paid a one-time signing bonus when he signed the lease, based on a certain dollar amount per net mineral acre owned under the tract of land he sold to you. You won’t be able to recover any of that since he signed it prior to the sale.

The lease will transfer to you, though you might want to notify the lessee that you are the current owner of the minerals if you haven’t already (they will want a copy of the signed conveyance into you as “proof” you now own the mineral rights).

If production occurs, you will receive any royalty benefits stated in the lease for as long as the lease produces and you own the minerals, and will continue to be bound by its terms until production from the leased premises ceases or until you sell the mineral rights.

Hope this helps you out!
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub

Too late for Lessee to extend OGL 2 more years?
Q:
I signed a 3 year OGL on 7/1/14 with an option to extend for 2 years. Now that the primary term has expired, I haven’t heard from the current lease owner if they want to extend or not. How long before I can sign a new OGL with someone else? If they don’t file an extension?

 

A:

Since your primary term has expired already and they haven’t notified you of any wish to exercise their extension option, nor filed anything of record, nor paid you the extension bonus, then I would say you are free to lease to anyone else who may be interested. You might also just ask the company to file a release of your lease in order to avoid confusion as to whether it was extended or not.

Most companies will notify you BEFORE the primary term expires if they plan to exercise any extension options, and should of course also pay you any extension bonus PRIOR to the initial primary term expiring in order to extend the lease another two years.

Hope this helps you out!
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub

How to get royalty inheritance "in pay"?
Q:
my husband past away in march of 2015 my sister in law sent me information about his BP royalties and said I needed to get a hold of B.P.to transfer everything into my name. Can you please tell me what I have to do to and what I may need to get this process started.

 

A:

You need to contact the “owner relations” or “division order” department at BP either by phone or email. You can probably find their contact info online and go from there.

You’ll need to provide them documentation showing you are an heir to your husband’s mineral rights. A probated will or decree of distribution from a court would do the trick.

If it’s a small interest they may accept simply an “affidavit of heirship” (which an attorney could prepare for you for a couple-hundred bucks probably) but in most states it’s best to have a decedent’s estate probated in order to properly transfer title to heirs.

A probate is basically just a court of law signing off on a will’s validity, or in the event there is no will, the court, during probate, will “officially” determine who the heirs are.

Hope this helps you out!
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub

Dewey County, OK competing lease offers?
Q:
Have minerals in 27-19-18 of Dewey Co. OK. My lease is expiring and current leaseholder (who say they’re leasing for the operator, Continental) want to extend lease one year for $250.00. Have a competing offer from Southwest Energy for a 3-year lease at 1,000.00. Which is the better deal? Current lease holder says operator is planning to drill. If I lease to Southwest, does that hurt my chances of well being drilled?

 

A:

No. Probably SW is offering more because they want a piece of the well (free look etc.) I doubt CR will fail to drill any well they were planning on anyway just because someone else leases you instead of them. I’d go with SW, or perhaps just tell CR you’ll go with them IF they match the SW offer if you really feel better about leasing to CR.

Hope this helps you out!
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub

County is going to tunnel under my property
Q:
A County agency is planning to build a tunnel beneath my property, and several of my neighbors, in order to convey water from one reservoir to another, two miles away. The tunnel will be 650 feet deep in places. I do not own the oil and gas mineral rights below the surface of my property; nor, I suspect, do my neighbors own theirs. Do we, or the county agency, have to notify the mineral rights holders of this impending project?

 

A:
I don’t believe you have to notify the mineral owners. Not sure whether the county would be required to or not, but I’m sure they will figure it out.
Put wife's inherited minerals into both our names?
Q:
What is the easiest/best way to add my name to my wife’s inherited mineral rights…so both of our names will be listed?? (Oil companies have not responded to the request via simple correspondence.)

 

A:

Have an attorney draft a deed from your wife as grantor, to your wife and you as grantees. Pretty simple process. You can specify “joint tenants”, or “tenants in common” etc. Have an attorney draft the deed and explain the granting options to you. Should only cost $100-$200 for an attorney to do that, and worth the cost to know it’s being done correctly.

Hope this helps you out.
Frederick M. “Mick” Scott CMM, RPL

Ensure every owner has to sign prior to leasing any?
Q:
Mineral rights on 160 acres in Washita County, OK are shared equally across four parties. What steps can be taken to ensure that all four parties signatures are required on any lease on any part of the 160 acres?

 

A:

You would all four have to own them “jointly” in order for it to (possibly) be a REQUIREMENT that all four of you must sign in order to lease any of the 160 acres. If you each own an undivided 40 acres under the 160 acres (probably the case) then any of you could lease your 40 acres without joinder of the others. Best thing to do is simply to agree that none of you will sign a lease unless all of you agree to its terms.

Hope this helps you out.

Confusing deed includes "term" wording...
Q:
I came across a joint tenancy warranty deed regarding the sell of my parents farm. The deed has this wording, “LESS AND EXCEPT all minerals, including oil and gas, previously reserved in third persons; it is the intent that all term mineral interests revert to Buyer; and it is the intent that such reservation and exception shall apply to all properties conveyed. The “Less and Except all minerals” tells me that my parents did not sell the minerals with this property. However, it then says, “It is the intent that all term mineral interests revert to Buyer.” I apologize for my ignorance, but if I don’t ask I won’t find out… I do not understand what that clause means. Any help would be greatly appreciated. Thanks so much!

 

A:

The “revert to buyer” language you mentioned initially confused me as it did you, as it seemed to go against the intent of your parents to keep the minerals and sell only the land.

The “reversion” language only confused me until I saw the word “term” however, at which point I realized you were probably dealing with a “term” (or time-limited) deed, which limited the amount of time your parents would retain ownership of the minerals.

Once the term (i.e. 20 years etc., and probably listed right there on the deed) ended the minerals would revert to the buyer who bought the land, or the heirs of same.

If you read the deed carefully I expect you’ll find the length of the “term” in there somewhere, said term being the amount of time your parents, or their heirs, would own the mineral rights before they went to the buyer or his/her heirs.

Hope this helps you out.
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub

Taxes on ND mineral rights sale?
Q:
I inherited mineral rights in North Dakota in 2000. I’m considering selling all or part of them but I want to estimate the tax liability before I do. Because the sale would be a long term capital gain, the beginning value and sale price figure in to the calculation of the tax. Should I use the value at the time I inherited them or should I use their most recent lease price as the beginning value?Also, how would I find the value of my mineral acres in 2000? Any ideas or people to contact are appreciated!

 

A:

This is really a question for your accountant, though it’s my belief that you will owe tax on any “gain” in the value between the time you acquired them and the time you sell, at the long-term capital gain tax rate of, I believe, 20%. For beginning value I think you probably want to use the inheritance date. A local landman or other oil and gas professional or perhaps an appraiser familiar with the area could estimate the value of the mineral rights in 2000 based on comparable sales (if any), lease prices at the time, activity in the area in 2000 etc.

Hope this helps you out!
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub

transfer of ownership
Q:
We bought a house in Tarrant County with the mineral rights in 2012 and got busy and forgot to transfer the ownership of the mineral rights with xto until 2014 the preivous owner was still collecting the checks even though we had bought the rights. Is there anything we can do about the payments from 2012-2014?

 

A:

Your only recourse would be to ask the previous owner to repay you for the royalty checks he was continuing to cash even after he sold the rights to you. It’s unlikely the oil company will do anything since you only recently notified them of the transfer. If the payments didn’t amount to much I wouldn’t worry about it too much, as it’s unlikely the previous owner will be anxious to repay you for anything and it may be more of a hassle than it’s worth to try and get it.

Hope this helps you out!
Frederick M. “Mick” Scott CMM, RPL
Manager
The Mineral Hub

Lessee says I "have to" extend lease with them?
Q:
I bought a forclosed property 2 1/2 yrs ago. I recently received a check and letter to extend an oil lease that the previous owner had signed. Since this was a forclosed property I new nothing about this lease. I requested? a copy of the lease and it does show the primary term being five years which was up this spring. No exploration? or drilling have been done. I do not want to extend the lease and the oil company is telling me it is not my option to extend or not! I can’t believe this is true. And think they are just bulling me into signing an extension.

 

A:

If you read the lease, there is probably an option-to-extend written in to it (likely near the bottom). I expect that is what they are referring to when they say it’s “not your option”. If there is such an extension clause in the lease, they will likely also owe you a “bonus consideration” (on a per-acre basis) equal to that they paid the previous owner when it was leased five years ago. Whether or not a bonus is payable would also be stated on the lease document.

The lease from the previous owner, and all its terms, carry over to you now that you are the owner of the minerals (I’m assuming the mineral rights were included in the foreclosure).

Did primary term expire?
Q:
This is what we are currently going through now. The lease agreed upon was for 3 years which was signed 4/23/13 term 4/23/16. There has been no drilling or producing well for an entire year after that contract was termed. They have recently started drilling again which was just last week therefore the primary term of the contract is over. As far as a secondary term, that wouldn’t apply because drilling stopped prior to the 4/23/16 term of the contract. Is this correct? Should they be sending another lease for us to review?

 

A:

I would agree that the primary term would have expired had then not commenced “operations” to drill during the primary term, and continued with “due diligence” until a well was completed.

If they drilled a well during the primary term (you didn’t specify) and then “abandoned” it until last week when they started drilling again (as you mentioned) then they will may claim the initial well was capable of production the entire time, but simply “shut in” and therefore DID extend the lease into a “secondary term”.

Even if they didn’t complete a well that was drilled during the primary term, they could argue that they have been trying to since then, and thus have been doing “continuous operations” that would extend the lease until the well is completed. While they may claim “moving dirt around once a week” qualifies as continuous operations, you may have a different opinion, in which case you might need to battle it out with them in court.

If you think they are playing games you’d need to get an attorney to hold their feet to the fire and “prove” they still have the lease and therefore can continue drilling without negotiating a new lease with you.

Hope this helps you out!
Frederick M. “Mick” Scott CMM, RPL
Manager
The Mineral Hub

Well pending. Offers to purchase received.
Q:
Continental is going to drill our lease, we have had many offers to buy our mineral interests since we signed our lease in July 2016. Does the fact that they are going to drill there make our interests more valuable?? We have received at least 7 offers to buy some or all of our interest there and I have countered all of them with no success…… just wondering if the fact that they are intending to drill gives us leverage???

 

A:

Depends on the buyer. I’d say it’s more common to be offered more BEFORE the well is actually completed, than after. There is more anticipation prior usually, and more often than not the end result is less fabulous than anticipated. An exception might be when there are multiple permits, since then the minerals would be in a semi-perpetual state of drilling a new well.

Bottom line, if you’ve received 7 offers from different companies, then you are obviously in an area that’s attractive to buyers. If you haven’t sold them by now (sorry for the delayed response) then you might consider putting a “time limit” on any counter offer you make. If you get no response before time runs out then it’s likely your counter is too high, in which case you may want to just accept the highest offer you’ve received.

Another option, of course, would be to list them for sale on this site (The Mineral Hub) and see if we can find you a buyer. You can use our Contact Us form or simply fill out a listing on our Sell Mineral Rights page if you want to go this route. There is no charge.

Hope this helps you out!
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub

Can we sign new lease for different depth?
Q:
We own 41nma in Sec. 25, 14N 14W in Custer County, OK. A new horizontal well drilled by Continental, the Edith Mae, is a decent well and should be about to start paying royalties. There is a lease in place (since the early 1980s I think) that is HBP by the Stubbs125 well, which was a horizontal well drilled back in 1982, I think. Is there a chance we can solicit new lease offers for this horizontal well if there was no depth clause on the original lease, or is it too late since the Edith Mae is already PDP?

 

A:

If the Stubbs 125, and/or other wells have been producing since 1982 then you are stuck with the old lease and will be paid on the new Edith Mae well according to its terms, unless perhaps a new unit size has been established by the new well.

Had there BEEN a depth clause in the original lease, and the NEW well was deeper, only THEN could you have negotiated a new lease for the “deep rights” below the original Stubbs well. Having a depth clause is a GOOD thing for the lessor (you), not a bad thing, as it forces the oil company to have to negotiate with you again if they want to go DEEPER than the initial well that was drilled.

Hope this helps you out.
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub

Sale of mineral rights in Wyoming
Q:
My sister and I are about to inherit mineral rights in Campbell County, WY. A company appraised them for about $76,000 but oil and natural gas prices were a bit higher then so I imagine their value now is somewhat lower, if there is indeed a buyer interested. The gross acres involved is about 1600 and net mineral acres about 200. I know there are a few wells on the property producing but most of the activity there has been abandoned or shut in. Do you have thoughts about production in that area and whether selling these rights will be easy or not? Thanks

 

A:

There are several active areas in Wyoming where mineral rights could be worth several thousand dollars per acre. Other areas not so much. If you’re looking to sell them please fill out our Sell Mineral Rights page (linked to all our pages) and we will contact you if we think we can find a buyer for them at a fair price. If you don’t want to fill out the form you can just use the Contact Us link and provide a legal description and we’ll look them up and get back to you.

The Mineral Hub

Disposal Well?
Q:
can a surface owner sell the surface to an oil company who planed on using it for a disposal injection well location? My mineral deed says i have the right of ingress and egress at all times purpose of mining drilling exploring operating developing said lands for oil gas other minerals and for storing handling transporting and marketing the same therefrom with all rights to remove from

 

A:

Yes, he can. The mineral deed gives you the right to produce the minerals under the land but doesn’t give you the right to say what happens on the land (unless you own the land too). You could potentially argue (in court) that a disposal well on the property would devalue your mineral rights but that could get expensive.

The Mineral Hub

Fair counter to OGL offer in Canadian County, OK?
Q:
section 8-11 in canadian county Ok…offered 750.00 for 3/16 royalty or 500.00 1/5 royalty…what is a fair counter offer

 

A:

Hidden Mountain, LLC seems to be one of the few, if not the only, potential lessee in your township recently so you’ll not be able to contact competing companies to see what they might offer it seems. Hidden Mountain has been leasing here for at least a few months it seems so they may be wrapping it up. I’d counter with $1000 and 3/16 or $600 and 1/5 and see what they say. Since they may be the only game in town right now they may not be too eager to negotiate much but I’d give it a shot anyway. If you have just an acre or two here I’d even suggest a 1/4 royalty and no bonus since they may work out better for you in the long run in the event a producing well is drilled.

If you don’t want to lease to them right now you could simply wait for them to force-pool you, which they would do only once they’d actually decided to drill a well. The bonus amount you’d be entitled to in the event of forced-pooling would likely reflect the average price they paid everyone they leased for each respective royalty.

The Mineral Hub

New to mineral rights- is my first offer fair?
Q:
We received our first offer to lease our inherited 4 acres in Lea, New Mexico section 20. Company offered us $300 an acre for five years with 3/16 royalty. Does this seem fair for this area? Also do we really have any negotiating power with only 4 acres?

 

A:

Not much negotiating power with only four acres, but still possible. You might want to read our leasing tips article on the “Mineral Hub Articles” page prior to agreeing to anything.

Hope this helps you out.
The Mineral Hub

Mineral Rights leased, who gets royalty?
Q:
I have leased my mineral rights to Chisom Oil, Newfield and another company have requested Oklahoma pooling order. Assuming Newfield does drill, who gets the royalty? The company holding the lease or me, the owner of mineral rights? Thank you,C Spear

 

A:

You, assuming you have not previously sold your “royalty rights” to anyone else. It’s possible to own minerals and royalty separately, but in most cases yes, the mineral owner also receives any royalty payments that occur as a result of production from the mineral rights.

Hope this helps you out!
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub

Residential mineral rights
Q:
We are trying to sell a house we inherited. Are there mineral rights involved. How do you know and does seller or should seller hold on to them.

 

A:

Your real estate agent should be able to find out if you own any mineral rights or not. If you do, you can reserve them to yourself on the deed and sell just the house if you like, assuming the buyer as also agreeable and doesn’t care about the mineral rights (or is not willing to provide value for them along with the house price).

Hope this helps you out!
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub

Entitled to royalty on additional new well? Bonus?
Q:
We own mineral interest in Garvin County, Ok. We leased the interest in 1984 and have received royalty payment. Another company is drilling within the leased area. Are We titled to royalty pays and a bonus consideration? Could we participate in the well?

 

A:

Royalties, yes. Bonus, no (since current lease is still in effect as long as there is continuous production from the leased premises). You can’t participate as a working interest owner either since this is something you would have needed to decide prior to the first well being drilled.

Hope this helps you out!
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub

When does lease extension end?
Q:
We have been offered a dollar amount for an amendment to a lease and it also changes the company we are dealing with. I am assuming the dollar amount is what is called a bonus payment. The original lease, and this amendment, also pay us 1/5 royalty. My question is related to the following clause in the amendment, does it mean that if a well is producing, they would never have to pay us a bonus payment after the original one? “The Primary Term shall be extended by an additional period of two (2) years to November 1, 2019 and for so long thereafter oil, gas or other minerals covered hereby are producing in paying quantities from the leased premises, or from land pooled herewith, or the Lease is otherwise maintained in effect pursuant to the provisions hereof”

 

A:

I’m sure the same clause was in your original lease as well, and it’s very common. It means that once the primary term (or two year extension of in your case) ends, the lease will continue “until production ceases” IF they drill a producing well during the next two years. If they don’t, then the lease (extension) would end in two years and you would be free to lease again (and collect another bonus). The leases I get say the same thing and it’s very common language.

Hope this helps you out.

The Mineral Hub

Transferring inherited Oklahoma mineral interest to heirs?
Q:
My mother pre-deceased my grandmother, so at my grandmother’s decease, my father inherited my mother’s portion of her parents’ mineral rights in Oklahoma. A few years later, one of these in Seminole County was leased and developed. My father, who was a resident of Texas, made his will at about the same time and included in his will a division of the mineral rights between my brother and me. When he began to need more help, my father moved to North Dakota to live near me. He made no other will than that made in Texas. I am named executor of my father’s will which directs that I “share and share alike” with my brother (who is currently incarcerated, and for whom I hold power of attorney). In December of 2016, my father passed away. Because his estate, minus the mineral rights (which are of unknown value as only one parcel is in production and that is of less than $500 a year income), is of less than $4000 value, a local lawyer says that I am not required to probate at all here in ND. The lawyer is unsure of how things must be handled in OK, and advised me to find a lawyer there to probate the will in OK. He warned me that probate will likely be of an expense that far exceeds the current proceeds from the lease. However, several of my mother’s brothers who live in OK believe that there is another way to deal with the inheritance of the mineral rights that does not require probate. Some internet research turned up many references to and even a few forms for the “affidavit” method of transferring inherited mineral rights. As I have no desire to ever sell the mineral rights, would an affidavit indeed be a way to deal with this inheritance? If so, are the fill-in-the-blank forms available on the internet adequate examples of an affidavit? Thank you in advance for your help.

 

A:

In order for an heir to have “marketable title” to mineral rights in Oklahoma, the estate of the decedent must be probated (will or no will), OR the heirs must file an affidavit of death and heirship as you stated, though it would not officially transfer the title to the heirs until ten uncontested years had passed. After that time, the affidavit would suffice to transfer title assuming it has not been contested. This is per Oklahoma Statute 16 O.S. § 67, subsection C of which is below for your reference:

C. In order to establish marketable title pursuant to this section:
1. The affidavit or recital must state that the decedent died without a will, or if the decedent had a will, that the will was never probated in Oklahoma and a copy of the will is attached to the affidavit or recital, or if the will was probated that the severed mineral interest was omitted from the final decree of the decedent and a copy of the will and final decree is attached to the affidavit or recital;
2. The affidavit or recital must list the names of the decedent’s heirs and their relationship to the decedent;
3. The affidavit or recital must state that the maker is related to the decedent or otherwise has personal knowledge of the facts stated therein;
4. The affidavit or the title transaction that contains the recital must have been recorded for at least ten (10) years in the office of the county clerk in the county in which the real property is located; and
5. During the ten-year period following the recording of the affidavit or the title transaction that contains the recital, no instrument inconsistent with the heirship alleged in the affidavit or recital was filed in the office of the county clerk in the county in which the real property is located.

The entire Statute can be found here: http://www.oklegislature.gov/osstatuestitle.html

You might also keep in mind the following that was pointed out by the Oklahoma Bar Title Examination Standards Committee in 2013:

“Although not specifically required by 16 O.S. §
67, it is recommended that the affidavit contain
sufficient factual information to make a proper
determination of heirship. Such information includes
the date of death of the decedent, a copy of
the death certificate, marital history of the decedent,
names and dates of death of all spouses, a listing of
all children of the decedent including any adopted
children, identity of the other parent of all children
of the decedent, the date of death of any deceased
children and the identity of the deceased child’s
spouse and issue, if any. During the ten year period
of 16 O.S. §67, if an affidavit fails to include factual
information necessary to make a proper determination
of heirship, the examiner should call for a new
affidavit that contains the additional facts necessary
for a proper determination of heirship. If a new or
corrected affidavit is filed, the statutory ten year period
would run from the date of recordation of the
new or corrected affidavit.”

The full text of the Committee report can be found here:

http://www.okbar.org/Portals/15/PDF/2013/Title_Examination_Standards.pdf

Hope this helps you out.
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub

Lease bargaining with only 1 and 1/3 acres?
Q:
Just learned I own 1.33 mineral acres in Hughes County OK. Reading the FAQ’s I understand I shouldn’t accept the first offer. They are offering $700 per acre, which I understand is actually a bonus payment, and 3/16 royalty with a 3 year term and 2 year extension. Do I have any bargaining clout with just 1.33 acres? What does a ‘me-too’ clause language look like e.g. If my neighbors (other family) get better terms then I –then I would get the equivalent terms also?

 

A:

If it were me I would ask for 1/4 royalty and no bonus. If a good producing well is eventually drilled you’ll likely come out better with a higher royalty on your 1.33 acres in the long term. You really don’t have much bargaining clout with that small a parcel, but it’s worth trying anyway. Many companies will agree to a 1/4 royalty in Oklahoma as long as you don’t also ask for a bonus, though some might offer 1/4 royalty and a smaller bonus. You might start with 1/4 royalty and $350/acre and see what they say, then move down to 1/4 royalty and no bonus if they balk.

I would also NOT agree to the two-year extension if it were me. You don’t want to effectively lock in today’s price for five years. If they really “need” the extension I would perhaps agree to it IF they agreed to double the initial bonus upon exercise (i.e. another $1400/acre in three years if they decide to extend the lease another two years after that).

You also want to make sure you are not dealing with simply a “lease flipper” who is planning to buy your lease and then “flip” it to someone else for a profit. If you are in doubt I would simply ask the landman who he/she is working for, and whether his client plans to actually drill a well or at least participate in any well that is drilled. If the answer is no, then you’re likely dealing with a flipper.

Hope this helps you out!
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub

Reservation of Mineral Rights: Joint Tenants or TIC?
Q:
Must a conveyance with a mineral reservation specify that the mineral estate is to be in joint tenancy if the previously undivided estate in fee simple was in joint tenancy? Example: A & B own Colorado property as joint tenants, and execute a warranty deed conveying the property. In the deed, they reserve unto themselves as grantors the mineral estate. If the language says “unto the grantors”, do A & B own the resulting mineral estate in joint tenancy, as they did the previously undivided property? Or are they tenants in common on the newly-created mineral estate, since they didn’t reserve it with language such as “unto the grantors as joint tenants with rights of survivorship”?

 

A:

If A&B wish to preserve the joint tenancy as to the reserved mineral rights, I would suggest they include the language “unto the grantors as joint tenants with rights of survivorship” as you stated. It may not be necessary but just to make it clear I would include the language. I am not an attorney however, and would suggest you run this scenario by one if you would like an official legal opinion on this matter.

Hope this helps you out.
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub

Lease "option" with no royalty clause?
Q:
We just received a lease option on our acreage in North Dakota. The deal is for $900/acre with ‘100% consideration’ to the lessee. The agreement does not include a royalty clause. Should we be concerned?

 

A:

A lease “option”? If you mean lease “offer” then if it were me I’d want a royalty clause included rather than just an up-front bonus. If neither are present then it probably was not a lease offer at all. I’d have an oil and gas attorney look at that since I have not actually seen the offer you refer to.

The Mineral Hub

Tax on mineral rights sale?
Q:
 I have sold mineral rights for around 97,000 what amount of tax am i looking at

 

A:

If you owned the mineral rights for more than a year prior to selling, any “profit” you made on the sale would likely be taxed at the long-term capital gains rate, which I believe is around 20%. That’s federal. Not sure about state. Check with your accountant. If owned for less than a year then would be taxed at a higher rate unless you did a 10-31 exchange (purchased other similar property with the proceeds). Again, check with an accountant or financial adviser for a more in-depth answer.

The Mineral Hub

Interest debited then credited back on check stub?
Q:
My Oil Royalty Statement shows royalty interest debited and then immediately credited for 2 months, giving me a payment for total oil of (0.03). Why are there debits and credits for the exact same amount and no payment to me?

 

A:

There are likely minor differences between the two entries. Most of the time these “duplicate” entries are adjustments made by the operator for volume, price, taxes, deductions, or some other issue that needed “adjusting”. They show both entries (the original and the corrected one) so that you will know they have made some sort of adjustment.

If you have specific questions regarding the entries (i.e. why no payment to you) then you might want to contact the owner relations department of the company that sent you the check. The phone number is likely on the check stub somewhere, or in other papers they have sent you.

Hope this helps you out!
The Mineral Hub

Proposed mineral lease, Washita County, Okla.
Q:
I own mineral rights to 60 acres in SE/4, SEC.7-10N-20W in Washita Co., Oklahoma. I recently received an offer to lease my mineral rights for $500 per acre and 3/16th royalty for five years. I know not to accept a five year lease. I will ask for three years. Does this sound like a ball park offer in my area? Have you heard of any proposed leasing or drilling activity there? The offer was from Plainview Oil Company, LLC and signed by a Jeffrey B. Perry. Have you heard of this company or this person? I do not believe he is a landman. We will use Depth, Horizontal, Shut-in, and Deduction Clauses. Are there any other clauses you recommend at this time? Thanks for helping, Carol

 

A:

Atalaya Resources (or a land company working for them) is the only company leasing this immediate area currently so they may not be open to much negotiation since there’s little if any competition for leases there right now.

That said, it’s possible the guy who contacted you is hoping to buy your lease in order to resell it to Atalaya for a profit so you might want to contact Atalaya directly if he was not actually hired by them to buy leases. Atalaya is headquartered in Tulsa, OK and I’m sure you can “Google” their contact information. Once you connect, explain that you are a mineral owner who would like to lease your minerals in Washita County, and have the legal description handy.

You might want to first ask the guy from Plainview who he is leasing for,and if not actually working for (being paid by) Atalaya to buy leases for them I’d ask whether he intends to resell your lease to them, or anyone else, down the line. That would tell you a lot.

Even if he is working for Atalaya, I would counter with something, especially if that was his initial offer. Try $750, 3 years, 3/16 and see what he says. If he really wants five years I’d ask for $1000/acre since prices could rise substantially over the next five years.

If he’s not actually working for Atalaya then I’d check with them to see what they are offering before even dealing much with this guy. I’ve had good experiences with Atalaya in the recent past with my own mineral rights.

That 10N-20W township has some of the best deep gas wells ever drilled in Oklahoma (they are quite old now however) and so I think it’s worth more than $500/acre to lease in any case, even if just for three years. I’d be interested to find out what you end up getting! Hope it works out in your favor.

Regards,
Frederick M. “Mick” Scott
The Mineral Hub

Do mineral rights expire?
Q:
In which states do mineral rights expire after time has passed

 

A:

You’d want to check the “dormant mineral” laws for the states you are curious about. I’d suggest Googling “Which states have dormant mineral acts?” You will get plenty of results that way. I’m sure you’ll find a lot of information by doing that, probably more than I have time to provide here on this free forum.

Hope this helps you out!
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub

Fast way to determine mineral ownership on 3 acres.
Q:
What is the easiest and fastest way to see if I have minerals on my 3.0 acre purchase? Reeves County, Texas and there are no reservations or conveyances on my Deed.

 

A:

If previous owner owned the mineral rights under the three acres, and didn’t reserve them in the deed to you, then you now own them. To determine whether they were owned by the seller you’d need to either ask them or go research the land records in the local county clerk’s or abstract office to determine if they came with the land when your seller bought the land.

Could be that the land didn’t come with minerals when your seller bought the land, or the minerals could have been sold after your seller purchased the land, in which case they wouldn’t need to be reserved on the deed into you.

The Mineral Hub

Who has my lease?
Q:
How can I find out who has the leasextra on my mineral rights in Wetzel county WV?

 

A:

All leases are filed of record in the county clerk’s or recorder’s office. Should be able to find a copy there and on it will be the name of the company who has your lease.

The Mineral Hub

Forgot to reserve minerals on deed...
Q:
we own a lot of property with mineral rights. we have broken up parcels and sold 5 acre tracts a lot but we ALWAYS state in the deed that we are selling surface only. well, we forgot to state that on one. can we get the minerals back? would a judge go by our past history and know that we had just made a mistake when the deed was prepared?? how do we fix this? thank you.

 

A:

If the grantee was aware at the time of the sale that you didn’t intend to include the mineral rights you could perhaps execute a “correction” deed or “deed in lieu of previous deed” etc. and have the grantee sign off on it.

This assume the first (“mistake”) deed has already been filed of record. If it hasn’t then just ask the grantee for the original back and replace it with a new one stating “surface only” as you usually do, and then the grantee can file it of record.

A judge isn’t going to fix your mistakes unfortunately, but a new deed could if the grantee you sold to is agreeable.

Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub

How to figure net acres from division order?
Q:
 I inherited mineral rights from my mother and stepfather upon their passing. I have the legal descriptions and the probate order that was filed declaring myself and my siblings the beneficiaries of the mineral rights. I also received transfer division order forms from Chesapeake. There are ten active wells in Woods County. Those orders show the gross acres, but not the net acres. Is there a way to find out the net acres without going to the courthouse in each county? I would think there is a database somewhere with that information for each mineral owner. I’d appreciate any information you can help me with. Vickie Y

 

A:

The division orders (and check stubs you will receive) will all contain your “decimal interest”, which can be used to determine your net mineral acres under a well.

Your decimal interest may look something like .00024785, and may be called “payment decimal”, “owner decimal” or similar on the check stubs and perhaps something else on the actual division order but it will be there somewhere. On the division order it could also be in “%” format, in which case you’d need to move the decimal point two places to the left before using it in the formula below (i.e. .123456% would change to .00123456.

Take the decimal interest and multiply it by the “unit size” of the well and then divide that by the decimal equivalent of the royalty fraction. The result will be the net acres they are paying you on for that particular well. I know it sounds confusing but the example below should help clarify:

Assume a decimal interest of .00123456, a drilling and spacing unit size of 640 acres (common for deep gas wells) and a lease royalty of 3/16 (.1875 in decimal form).

.00123456 times 640 divided by .1875 = 4.2139648, meaning they are paying you on 4.2139648 net acres within their 640 acre drilling and spacing unit, and that’s what they think you own. If your decimal was larger it would indicate you owned more acreage within the unit, if smaller, less acreage.

Easy enough to locate the decimal interest but perhaps not the rest. The drilling and spacing unit size would be listed on the most recent spacing order for the formation the well is producing from. These documents are always filed with the state’s oil and gas regulatory body and can often be found online. The Oklahoma Corporation Commission would be for Oklahoma (www.occeweb.com) and the Texas Railroad Commission would be the Texas equivalent.

As for lease royalty, that would be the royalty you, or whichever of your predecessors in interest agreed to when the current oil and gas lease was signed. All oil and gas leases are filed of record in the county clerk’s office and may even be posted online if they provide that service. 1/8 and 3/16 are the most common royalties, and either 160 or 640 acres are the most common drilling and spacing unit sizes but to get an accurate representation of the net acres you’d need to input the correct royalty and spacing unit sizes into your formula.

All that said, it’s also possible to just contact the operator’s “owner relations” department and ASK them to TELL you how many acres they are paying you on, how BIG their drilling and spacing unit is, and what the lease royalty stated on the current lease for the well or wells is. I would suggest emailing if possible as they will sometimes be able to respond more easily that way.

Hope this helps you out!
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub

Buying Acreage with producing well with 75% OGM
Q:
Hi I would like to take some suggestions (pros and cons) regarding the purchase of acreage with producing well in PA. Looks like the well is up and running from 2009. Also there is a water impoundment on the property. What are the things that one should know before buying this type of property. Please shed some light on this scenario and advise. Thanks much -deep

 

A:

Based on current production, and decline rate in same over the past six months, does it look like you’ll make your money (for the value of the mineral rights alone) back and begin seeing a profit in 3-5 years? As water amounts creep up production usually goes down. Does operator plan to rework the well to improve recovery of oil and gas?

Also, with just ONE well, you are taking on more risk than if there were several on the property. If that one well goes kaput, then so does your mineral investment unless you can lease the mineral rights again later (assuming that’s what you’re buying) or if another producing well is commenced before the current lease expires.

If I couldn’t make my money (mineral rights portion of the purchase) back in 3-5 years I wouldn’t buy unless perhaps I had good reason to believe drilling activity in the immediate area (and thus hopefully on my property) would increase significantly during that time.

I am certainly no investment adviser but that’s how I’d look at it as a mineral owner myself.

Hope this helps you out!
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub

Participate in well or just lease?
Q:
I received an offer to lease mineral rights. One of the proposals is to participate & prepay well cost. An estimate for the dry hole & completed well cost was sent along with the proposal. What are the pros/cons for this proposal?

 

A:

The fact that you even needed to ask me that questions tells me you should probably NOT participate in the well. There is a lot that could go wrong as well as a lot that could go right and because of that it’s very risky and you could potentially lay out a lot more money than you are planning to if the well costs exceed the estimates given in the AFE you received. Your “proportionate share” of the costs to drill the well would be figured based on how many acres you own in their proposed drilling and spacing unit. More acres means more money. Even participating with just one acre in 640 acre drilling and spacing unit could cost you over $10,000 (1/640 X 7,000,000) if the well cost $7,000,000 to drill and complete.

Pros: If everything works out just right and there are no problems with drilling, completing, or producing the well for several years, you MIGHT get back the money you invested and begin making a profit that could be substantial if the well(s) continues to produce for many years with no major setbacks. You are accepting a lot of risk by participating in the drilling of a well so it’s reasonable that you should receive a larger share of the profits if the endeavor is successful. Mineral owners who simply lease their right to drill to the oil company rather than actually participating in the drilling receive much less compensation (i.e. the 1/8 or 3/16 royalty) because they are not taking any financial risk up front.

Cons: If there are cost overruns in the drilling and completion of the well (fairly likely) or the well fails to produce as expected once completed (a definite possibility) then you’d probably never make your money back Additionally, even if it is a good well, you’d need to again pay your share of any additional wells that area drilled and assume THOSE risks as well. If the first well is a “barn burner” then it’s likely the majority of the working interest owners (of which you’d be one if you shared in the costs) would vote to drill another well, at which point everyone participating would need to “auntie up” for that well too. Could get expensive in the long run unless the wells are all real good.

You’d also be billed each month for equipment maintenance and other costs of maintaining production in any well or wells that are drilled. This would be a bill basically, and if your bills were more than the profit each month you’d actually be losing money each month but still be expected to pay those bills.

If it were me I wouldn’t even consider participating in a well unless I could easily afford to lose at least TWICE my initial investment. That way, if I lost all my money it wouldn’t hurt my standard of living and I would’ve learned from the experience. Barring that I’d much rather just lease my mineral rights and let the other guys take all the risk.

Hope this helps you out!
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub

How can I find out name on oil lease?
Q:
How can I find out who name the mineral rights/oil lease is in on property I own. My mother used to receive a check. She donated the property to her 4 children. She continued to receive the checks for some time. She has passed away some years ago. The checks stopped coming.

 

A:

If the wells are still producing, the company probably started putting the money they were sending your mom into what’s called a “suspense account” once it was determined she was deceased. They will likely continue doing that for several years unless someone shows they have a claim to the minerals, and if no one comes forward within a few years they will likely turn the money over to the State to hold until it is claimed by an heir.

If the wells have stopped producing that could also be why you are no longer receiving checks. You might contact the operator of the well (probably listed on the checks) and see what’s up. If they have no record of your mom “donating” these minerals to her kids, you may need to show them evidence of the transfer (probated will, deed, etc.).

To find out who the record holder of the mineral rights currently is you could visit that county clerk’s office either online or in person and search the records. If your mother is the last one in title there (i.e. her estate was never probated etc.) then you’d want to see an attorney about getting them placed into her heirs names if there is no conveyance filed of record showing she “donated” them to her 4 children.

Hope this helps you out!
Frederick M. “Mick” Scott CMM, RPL
The Mineral Hub

"Settlement" offered for mineral rights fair?
Q:
my mother just inherited mineral rights in West Virginia and she lives in Kansas, The Co named Natural Energy ownes the land, they have offered a settlement to her and 6 of her cousins , how do we find out how much it is actually worth and would it be better to keep it, the settlement was very low.

 

A:

Not sure what you mean by “settlement” but I assume it’s from a class action. You’d want to talk to the plaintiff attorneys in that case. Of course you can also hire your own attorney to help evaluate the settlement offer for you if you’re not sure how to proceed. That would be my advice.

Hope this helps you out!
Frederick M. Scott
The Mineral Hub

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