Replies to This Discussion

Permalink Reply by 5thGenTexan on May 17, 2010 at 3:19

Depends on the wording in the mineral leases.....

Permalink Reply by Chris on May 17, 2010 at 7:14

Read your lease. There should be a section titled, Time for Payment of Royalties. A typical time period would be starting 120 days from the first sale of oil and gas (note: not from the date it was drilled). So you have to factor in the time to drill then time to transport it to market and sell it then add 120 days (4 months). Also keep in mind there is currently a glut of oil and gas on the market with a lot sitting in storage. What you need to do is call and determine if they have sold any of the gas and if so what was the date. If they are over time (which I doubt) then your lease will say what you can do which would be something like, cancel the lease if 30 days have elapsed since they were supposed to pay you.

Permalink Reply by j garrett on May 17, 2010 at 12:20

I just got paid on a well that started producing in April 2009, 14 months ago. They will have to pay interest if it is more than 120 days, but you can't cancel the lease. 6-9 months is common.

Permalink Reply by 5thGenTexan on May 18, 2010 at 2:12

Sample:

PAYMENTS AND RECORDS. All sums due as royalty shall be secured by a lien on said Lease, all equipment thereon, and all unsold oil on the leased premises. If the Lessee shall fail to make or cause to be made the payment of any sum due by the provisions of this Lease for the payment of royalties within ninety (90) days from and after the end of the calendar month in which said oil, gas, or other mineral is produced, this Lease may be declared forfeited by the Lessor. Lessor may file an Affidavit in the public records of the County in which the leased premises are located stating the default and that this Lease will then be terminated. This provision shall not apply if such payment is being withheld because of title irregularities affecting the Lessor’s royalty interest. In the event of a partial assignment of this Lease and in the event there is a default as to a portion of the acreage and not as to other portions, then the rights of forfeiture shall apply only to the acreage upon which default occurs and shall not apply to the acreage upon which payments were duly and properly made.

Permalink Reply by etx44 on May 18, 2010 at 10:50

Kardell began producing in Oct 09.

Permalink Reply by j garrett on May 18, 2010 at 12:23

Most leases do not have wording that 5thGenTexan is using. Here is the Section of the Texas`Natural Resource Code that deals with Payments. Basically, it is supposed to be 120 days, but Operators usually claim they are still working on the Title Opinion, thereby extending the payment date. Often times, the Operator really is still working on title:

Texas Natural Resource Code-

Sec. 91.402. TIME FOR PAYMENT OF PROCEEDS. (a) The proceeds derived from the sale of oil or gas production from an oil or gas well located in this state must be paid to each payee by payor on or before 120 days after the end of the month of first sale of production from the well. After that time, payments must be made to each payee on a timely basis according to the frequency of payment specified in a lease or other written agreement between payee and payor. If the lease or other agreement does not specify the time for payment, subsequent proceeds must be paid no later than:

(1) 60 days after the end of the calendar month in which subsequent oil production is sold; or

(2) 90 days after the end of the calendar month in which subsequent gas production is sold.

(b) Payments may be withheld without interest beyond the time limits set out in Subsection (a) of this section when there is:

(1) a dispute concerning title that would affect distribution of payments;

(2) a reasonable doubt that the payee:

(A) has sold or authorized the sale of its share of the oil or gas to the purchaser of such production; or

(B) has clear title to the interest in the proceeds of production;

(3) a requirement in a title opinion that places in issue the title, identity, or whereabouts of the payee and that has not been satisfied by the payee after a reasonable request for curative information has been made by the payor.

Permalink Reply by Bill R on June 3, 2010 at 8:55

Our lease(s) have had wording like that, but we have only had one out of seven wells pay within the 120 day window. Two took almost a year due to 'title issues' and most took almost six months prior to first royalty checks. We still have four more waiting as 'shut-in' that are over a year or more old waiting (non-perf'd completion). Seems to be alot of leeway in the books on this issue.