Replies to This Discussion

Permalink Reply by SBossierGuy on August 22, 2008 at 10:06

Of course you do, that's your job. Frankly, I'd hate it if all of these "civilians" came in to my "workplace" and started making my job harder, but you guys need to face reality; there is no arguement against the math.

With that said, I think only the people who meet all of the following criteria should consider being non leased mineral owners ("not signing a lease").

1. You don't have much land.

2. The vast majority of your section has leased.

3. Your section has been officially "unitized" or pooled.

4. You can afford to not make any revenue from this for a year or two.

If all of those are true, I would say you could consider becoming a non leased mineral owner. If any of the above are not true, sign a lease and be happy.

• ▶ Reply

Permalink Reply by SharonB T18N R15W S8 on August 22, 2008 at 10:17

SBossierGuy - I like your advice and agree with your criteria for considering not signing.

• ▶ Reply

Permalink Reply by SBossierGuy on August 22, 2008 at 10:32

I am sorry if I typed or implied working interest owner. I am talking about non leased mineral owners (non-consent). I would never advise a private individual with a small tract of land to buy into one of those ventures.

The way I look at it is once the well is profitable, the O&G company is going to eat up probably 25% of a non-consent's revenues with their overhead. That still leaves 75%. It may take 3 or 4 years to get to profitability. But once you get there, the math works, as the non-consenter is now getting 3x what the leaseholder is getting per month. That's what led to the above 4 criteria.

• ▶ Reply

Permalink Reply by Dion Warr, CPL on August 22, 2008 at 10:17

Ah... plummer:

This is land in LA? Then the answer as to penalty of 300% well cost is ah... NO.

You should post the name of the person (leasehound?! from TX, no doubt) and firm or brokerage that told you this one.

Strongly recommend that you read LA R.S. 30:10 2(b)(i), and then the exemption from "risk cost" called for in said article as to unleased mineral owners, which is contained in R. S. 30:10 2(e). Print it and show it to whoever told you this, and if it is your leasehound, point him in the general direction of Waskom and tell him to keep going.

I really get aggravated at "landmen" that misinform and/or deceive the mineral owner. (%$#@!)

• ▶ Reply

Permalink Reply by M. Mcwilliams on August 23, 2008 at 0:41

KB, I looked up Dr. Zink's case on Pacer, and it showed that the District Court proceeding lasted only from 1989 to 1994, with the 5th Circuit affirming the ruling in 1994. Did he attempt to negotiate with the company for the other years you refer to? (I also saw that his final judgment against the company was in the neighborhood of $4 million). I was interested in reading the opinion that you had quoted from, but it wasn't available; where did you get it?

Permalink Reply by M. Mcwilliams on August 22, 2008 at 14:08

You know, one factor in this decision that has not been discussed is the question of when drilling might take place. Everyone who is "doing the math" presumes that a well will be drilled, and that it will be drilled in the near future. You simply don't know if or when that will happen. Now, with a tiny piece of property it might not matter one way or another to forego a bonus, but even with 2 acres, a good bonus will make a difference right now.

There's been a lot of discussion here, too, about the fact that rigs aren't available, workers are not available, the acquisition of leases and leaseholds are outpacing the ability to produce right now. So those that are putting pencil to paper to calculate how much they'll get, leased or unleased, are also calculating that they'll get anything at all. There's all sorts of reasons that it might not happen, or that it might not happen very soon. That's a consideration that needs to be made.

• ▶ Reply

Permalink Reply by Bobi Carr ("parker") on August 22, 2008 at 15:11

Mr. Warr,

Aren't you a landman? If so I commend you for your statement.

I started a discussion a while back about misleading information and what constitutes fraud.

I was extremely surprised that the landmen on this board didn't jump right in with statements such as yours.

• ▶ Reply

Permalink Reply by Dion Warr, CPL on August 22, 2008 at 15:47

I am. But I've never looked at the job description as "get the lease, whatever you have to say, whatever you have to do, anyway you can."

Obviously, there is always going to be certain information that the landman cannot divulge as part of his responsibility to his client. At the field level, on many occasions, the landman is briefed on little more about the prospect area and economics the landowner, even if the landman is experienced and has a good track record with the client. In many cases, the field landman has a certain amount of latitude with his offer, certain pre-approved clauses that he knows that he can add to the lease. In many cases, entire riders are pre-approved with the knowledge that in certain areas, certain attorneys and landowners historically negotiate for predictable changes.

One of the cardinal rules that was given to me when I entered this business is that you never, ever lie to the landowner. If you don't know, say you don't know, or that you will check into it (or you will ask).

There is generally a sufficent leverage in the favor of the oil company which makes it compelling for a landowner to lease; lying or attempting to improve your leverage by misleading the landowner is extremely risky to the trust and the relationship. Getting caught in a lie is usually fatal to your negotiation (and not very good for your reputation, should you ever want to lease in the area again). Our national association (AAPL) states the following in our Code of Ethics, among other things:

"The Land Professional, in his dealings with landowners, industry parties, and others outside the industry, shall conduct himself in a manner consistent with fairness and honesty, such as to maintain the respect of the public."

I subscribe to these beliefs, and while I cannot speak for everyone leasing up in the HS Area that calls themselves a landman, I would hazard to say that those of us who have been doing this for a while either believes or has learned to believe that dealing with others in a sense of good faith and fair dealing is the best way to go.

• ▶ Reply

Permalink Reply by Bobi Carr ("parker") on August 22, 2008 at 17:03

Mr. Warr,

I appreciate your comments.

I have a question about landman ethics. Does the landman have a fiduciary relationship to the landowner.

In the past several years in Real Estate there has been more dual-agency agreements in place instead of the standard broker working for the Seller situation.

But even when the Broker works for the Seller, he has certain responsibilities to the buyer.

I completely understand that this is a completely different business, but I wonder if the responsibilities are similar.

I am going to pull the previous discussion up. I would appreciate your comments on it.

THANKS

• ▶ Reply

Permalink Reply by Jon, landowner on August 22, 2008 at 14:41

I am a unlease land owner in 14 -14 that has a produceing well that dates back to 1999 and I have not receive anything yet ---I think a landowner is better to lease I have 68 acre in that section, but by not leasing then its still open to be lease now

• ▶ Reply

Permalink Reply by Jon, landowner on August 23, 2008 at 1:08

Jim --I have owned the 68 acre since 1965 but I also have land in two other section same 14-14 that I did lease and have done quite well by leasing.The 68 acre was to be my ace in hole but to this day nothing---but also it is a weak well.I am in the CV and Hoss sands with interest in 30 wells with 11 more to be drilled.I have had no problems dealing with the oil companys are pipeline companys they have there job too do.I also three large pipelines a 36 -42&48 going through my pasture that they mow once a year--I am a retired farmer

• ▶ Reply

Permalink Reply by louisiana lady on August 22, 2008 at 15:40

It seems that the biggest obstacle to remaining an unleased mineral owner with producing wells in your section is the honesty/promptness in reporting from the O & G. I think with the size of this venture, percentage of mineral owners unleased and available information this obstacle will be less important than in the past with random oil wells.

• ▶ Reply