Replies to This Discussion

Permalink Reply by jim neely on August 16, 2008 at 16:31

if after signing the e & p company records your lease and doesn't pay the draft within the required time you have to sue the e & p company to get the lease of record vacated .

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Permalink Reply by The_Baron on August 20, 2008 at 9:04

Read your lease. Most leases have a waranty clause. If you don't have the minerals or you are HBP, then the new lease is invalid. Invalid lease = no money.

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Permalink Reply by smith1 on August 16, 2008 at 11:52

I don't know who you are asking this (still trying to navigate this site) but I live in Louisiana

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Permalink Reply by jkw3 on August 16, 2008 at 13:53

The bank draft system is a bit of an anachronism in the digital age. The way it was supposed to work was that the fully executed lease was deposited with the draft (a "collection" item, not a cash item) with the bank. The oil company did not get the actual lease until the money was paid to the lessor (landowner). Many banks do not know how to handle collection items. In a very competitive play such as the Haynesville Sahle, many field llandmen and lease brokers will buy leases off tax rolls and incomplete title work. The 10 to 15 (business) days on the draft, allowed them to go back and verify title. The only valid reason for a darft to be dishonored is failure of title. The practice of an independent broker buying leases with long periods (60 to 90 days) then trying to flip the leases befor ethe drafts became due, and not paying the drafts if they couldn't flip the leases is called "Cold drafting". It is a dishonrable and I believe unlawful practice that not legitimate operator will tolerate.

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Permalink Reply by smith1 on August 16, 2008 at 14:04

thanks, that explains alot to me

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Permalink Reply by ETOilman on August 16, 2008 at 15:59

I seriously doubt either petrohawk nor chesapeake will not honor a draft if the title is correct. As snake says, if you want to you can wait for a check. However if you agree to terms and the landman goes ahead and confirms the title and you receive a better offer and decide to take it, then he will have spent a considerable amount of time at the courthouse for nothing. In the competitive Haynesville play it is better to go ahead and make the trade before running the title. Why run the title first if the landman is not even sure if he can make a deal with the mineral owner? That is why the companies prefer the draft system.

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Permalink Reply by jim neely on August 16, 2008 at 16:33

wrong , the lease binds you but not the e& p .

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Permalink Reply by ETOilman on August 17, 2008 at 1:37

If the title proves out I believe it is binding to BOTH parties. I am not wrong.

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Permalink Reply by Jon on August 16, 2008 at 18:29

Move to England or build a moat around your place and wait for them.

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Permalink Reply by Skyfroging on August 17, 2008 at 0:28

We received a 15 day draft and we received our money before 15 days was up...they wired it directly into our account after making sure the title was clear...then they cancelled the draft... Ask for that if you take a draft...

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Permalink Reply by smith1 on August 20, 2008 at 2:59

was that petrohawk?

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Permalink Reply by HBP on August 17, 2008 at 1:46

Just to be clear. The reference to "cold drafting" earlier is for independent groups that are not agents of a specific client. Any draft given by agents of a specific company will have that companies banking info listed for collection. Also note that you count how ever many banking days from the time the collecting bank receives the draft, usually not from the time you deposit it. So you may want to be sure you are counting it correctly before you go to placing half page ads in the paper.

We can complain about the draft system all day long, but it is standard in a competitive play (for the most part). IF you want a check, hand your landman a copy of all your title from patent to present, a flow chart outlining the title, all tax deeds and corresponding redemptions from periods after the depression, a list of all mortgages and then corresponding cancellations, if the mortgage is active then also include a subordination from the entity holding that mortgage, also a mineral history for your section from the dept of conservation. Then warrant your title run to be accurate. I'm probably missing a few things, but that may get you a check quicker.

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