CINDY RINAUDO

EXCO wants our acreage for a well pad

EXCO wants to lease 6 acres of our family property on Bradshaw road in Desoto Parish. We already have leased 40 acres of this land for mineral rights but NO surface rights. Exco wants to put a pad on the 6 acres to drill 2 wells, one well for our property and one well to extract from the neighboring property. We would receive no royalties from the neighboring property. This 6 acres is  prime road frontage property. We have not decided if we want to lease our surface right. There are some trees on the 6 acres and a small storage building that would have to go. How much should we ask Exco to pay us for the 6 acres if we lease the surface rights??? Does anyone have any idea what we should negotiate for.

Tags: exco

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1kw6x71km1v37Permalink Reply by 1kw6x71km1v37 on February 14, 2014 at 9:59

Cindy,

Given all the confusion surrounding the property, I strongly advise you and your family heed Max's staid advice. I believe you will find your money well spent on a good O&G attorney. Best of luck to you and yours.

Permalink Reply by Joe Aldridge on March 22, 2014 at 1:58

Cindy,

I posted this before but here it is again.

You and your family are in the driver's seat. Go back and read some of the comments to this thread. I would go for damages, a commercial rental rate of the surface and an ORRI in any production from any of the wells that they make. Whatever you do find a good lawyer that knows both Real Estate law and Mineral law. 

My feeling is if you and the family can come to a consensus that is within reason then settle. If not then you are going to have to let a Judge settle it for you. Hope this works out for all involved.

Again, I hope this works out for all. I definitely would go for an Overrideing Royalty of 2 1/2 to 5% in any wells drilled from your site.

Permalink Reply by Krkyoldhag on March 22, 2014 at 2:39

First from my experience demand a firm commitment  to drill and the date by which it must be done.  I am stuck with two huge pits open on my land.  I think these pits are a danger to children and animals.  It has been sitting there with no wells drilled  since August 2011.

If they don't drill within a time line demand they fill the pits.  Wish I had done that.  I may have those two deep pits on my place forever with no well in sight.

1kw6x71km1v37Permalink Reply by 1kw6x71km1v37 on March 22, 2014 at 5:22

Cindy,

Was the judgement of possession recorded at the local courthouse before the executors signed the lease? If so, you should be home free and the lease void.

1kw6x71km1v37Permalink Reply by 1kw6x71km1v37 on March 23, 2014 at 7:35

Curious. The 2006 lease may bind those who signed it, but does not bind those who did not sign. Non-signers can be force pooled for a working interest, but not forced into the lease.

The landmen recognize this and are trying to cover their derrieres again.

The plea for reasonableness is laughable at this point. The landmen infer that by this "reasonable" oilpatch doctrine that ya'll unleased country bumpkins will do the right thing and sign off. This is a last-ditch effort on their part to bury this oversight before they get run off by the operator, whom it now appears may have a bunch of non-contributing WI interest owners in the well, if he drills it.

Optional at this point is to contract the operator and offer him a lease with a 60-75 per cent royalty clause. He has no choice but to take it, or abandon his leaseholds.

Personally, I'd shoot for 75 per cent just on account of those lying landmen.

Congrats, Cindy. You've almost won.

Permalink Reply by Skip Peel - Mineral Consultant on March 23, 2014 at 8:01

Unleased mineral interests in a producing well or unit are not Working Interests.  Under Louisiana law they are Unleased Mineral Interests.  The difference is significant.

Permalink Reply by Two Dogs, Pirate on March 23, 2014 at 7:24

Cindy are you sure that subsurface operations are excluded? That would be highly unusual. Many no surface operations will read "no surface operations without express written consent, that consent will not be unreasonably withheld".

Permalink Reply by Max on March 23, 2014 at 8:08

Cindy, you're playing with fire if you don't get a good O&G attorney to protect you. 

Given that EXCO has changed course, someone who talks their language will remove any advantages they think they have.

1kw6x71km1v37Permalink Reply by 1kw6x71km1v37 on March 23, 2014 at 9:11

Skip,

Well, you may have something there as there are some statutory provisions for unleased fee owners that do not apply to working interests. I always figured that by federal law, an unleased interest is a non-participating working interest for tax purposes and that federal law trumps state law under all circumstances. Perhaps I'm mistaken.

Permalink Reply by Skip Peel - Mineral Consultant on March 23, 2014 at 9:24

Under LA Mineral Code statutes  Working Interests must pay their proportional share of well costs or incur a risk penalty.  An Unleased Mineral Interest is not required to pay the operator a penny and would receive 100% of their proportional share after well payout subject to stipulated ongoing lease operating expenses.  In the core of the Haynesville Shale there are a number of UMI's that are satisfied with their position because their wells reached payout.  Outside of the core there are numerous UMI's who will never receive a penny for the wells drilled to date in their unit(s) because their well will not return its cost to drill.  It will be interesting to see how UMI's fair with the new CUL well designs.  No offense but a few of those UMI's who have not seen a penny from their wells are GHS members who acted on less than accurate advise posted here in the early days of the Haynesville Shale Play.   Specifics are important and it is wise to hire an experienced O&G attorney.

Permalink Reply by Max on March 24, 2014 at 3:40

Cindy, hiring an O&G attorney should settle the matter with EXCO. 

I would guess that EXCO has realized that a deal with the estate and heirs is not going to happen, so the next best thing for them to do is to revert back to the original lease and use the language there to obtain what they need.

The O&G attorney would know if the original lease had any language teeth that would give EXCO a chance to "take a bite".  If the language is there, your O&G attorney could then counter EXCO's advantage several ways.  While the countermeasures may only be postponements, the signal received by EXCO may be enough for them to settle the matter so they can get on with the well they want to drill. 

I think it's clear that the executors and EXCO have to share the blame concerning the six acre surface lease.  That may hurt you in EXCO's eye's, but a smart attorney will quickly point out that the estate was already being challenged by some of the heirs, therefore something was amiss.  EXCO knew this and instead of helping the matter, they complicated the matter further, and directly caused discourse between the heirs.  This discourse gave them an opportunity to "make a deal", thinking they only needed the signatures of the executors (remember the 80% rule). 

Another aspect of this matter is the time and how quick it's running out.  Last year EXCO had plenty of time and that gave them an advantage in negotiating a deal.  That time is running out and I think that's why the original lease was brought back in to take a short-cut around the controversial surface lease.  This time frame will put your O&G attorney in the advantage, giving you a louder voice to address your concerns and damages...Max   

Permalink Reply by Bacon on March 23, 2014 at 9:42

Curious if anyone has ever been successful getting anything other than a one time payment and any kind of time limit for a ROW or pad?  I see a lot of suggestions for getting yearly payments / lease for these things but not one attorney out of the four or five that we have been involved with has ever suggested that this arrangement would have a chance. Thanks.

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