Beware of Paloma Resources! Don't make the same mistake I did!

I need some help from the experts about a Paloma Partners agent stating Paloma will not pay us royalties! My familly members and myself signed and executed an oil and gas lease with Paloma Partners IV, LLC. I was told that their parent company is Paloma Resources based in Houston, TX. Paloma Partners leased some acreage from my rfamily and myself in Amite County, MS that is contained in the Encana Ash unit, which is now drilling. At the time that we leased to Paloma, we had already received a forced pooling letter from Encana stating that any unleased minerals in the Ash unit would be petitioned to the Oil and Gas board to be forced pooled. We received the letter in February of this year. I made Paloma's agent, named Mike Tompkins, of T-O Land and Minerals out of San Antonio, TX aware of this forced pooling letter during our negotiations. Mike Tompkins said he was not concerned with the forced pooling letter, that he had delt with these type of issues before, and Paloma would go ahead and lease our unleased minerals in the Ash unit, which they did. I included a clause in the lease that addressed royalties being paid to us, the Lessor, from any production in the Ash unit. The clause reads that "Lessor shall be paid by Lessee, its successors or assigns or the Operator of any pooled unit which includes all or part of the leased premises, the royalty rate stated in paragraph 3, of Exhibit "B" of the Additional Lease Provisions, on any oil and/or gas extracted and produced by any operator on the leased lands pooled with said lands, to include the propsed Encana Ash unit located in Sections 4,5,13, and 20, T1N, R2E, Amite County, MS. Royalty shall be paid to Lessor in a timely manner, time being of the essence.

One of Paloma's agent, named C.W. (Bill) Walker, III, a MS attorney, initialed each page of the addendum and signed the last page agreeing to the terms of the lease. We were paid a bonus and the checks cleared in July. The lease was binding. Now, fast forward to September 4, 2014. I received a phone call from another one of the agents of Paloma, Larry Abernathy, a MS attorney, who helped handled our lease transaction. Larry asked me if my family and I would release Paloma from the lease. He said Paloma would not be able to pay us a royalty on the Ash unit. He said Encana would not enter into a working partnerhip agreement with Paloma because our minerals were already forced pooled and therefore Paloma would not pay us any royalties on production from the Ash unit. Larry suggested that I call Mike Tompkins, of T-O Land Minerals, which I did. Mike told me that Paloma would not receive any money from the Ash unit so Paloma would not pay us any royalties. He said the lease is now considered "Null and Void". I told him Paloma put in writting that they would make sure we were paid royalties on the Ash unit and I said we would end up in court over this. His response was do whatever the F_ _ _ you want and then he hung up the phone. I have called and tried to talk directly with Paloma about this matter and no official will take my call and will not return my calls. I have emailed them with no response. This is one of the worst companies that I have ever encountered.

I advise anyone considering to lease their minerals in MS or LA to also hang up the phone on anyone representing Paloma Partners or Paloma Resources out of Houston, TX. If they're stating that they will not pay us royalties, then how many other people will they also do this to and how many other lease will they call "null and void"? In my opinion, Mike Tompkins with T-O Land Minerals out of San Antonio, is a very small man, from a standpoint of character and very unprofessional.

My question to the experts, "Can Paloma refuse to pay royalties and consider the lease "Null and Void"?

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Permalink Reply by Skip Peel - Mineral Consultant on September 5, 2014 at 11:07

Suggest that those who find themselves in the same position Waharold contact the Oil And Gas Board Attorney to determine their legal options.

Howard O. Leach (601) 576-4921 hleach@ogb.state.ms.us

1kw6x71km1v37Permalink Reply by 1kw6x71km1v37 on September 5, 2014 at 16:57

Being force pooled just means you are in a unit with an operator, whether you are leased or not. It's not a one-or-the-other situation.

It appears you have a valid lease. It should be enforceable at the present time, unless the operator abandons the lease. They can probably do that, but you probably can't under MS law unless the operator agrees to it.

As I've said before, this is a nasty little business on the downstream side. Full of snakey crooks and crooked snakes. Side step one type, and you step on the other.

Get a good lawyer if you can. And good luck.

Permalink Reply by Keith Mauck (Site Publisher) on September 6, 2014 at 3:13

These were responses from the duplicate post - Waharold - please do not post the same discussion in multiple locations.

Replies to This Discussion

Permalink Reply by tc 17 hours ago
Delete

I also broached this subject in my discussion "Units", where I asked what incentive in MS does an operator have to take a "flippers" lease.  It would seem to be in EnCana's interest to charge you a 400%  penalty for your unleased minerals.  This way they get you acreage for almost royalty free as most TMS wells will not produce net revenue 4 times the total cost of the well.

This could be a cautionary tale to anyone in MS, that if you don't take the operators terms, you could find your minerals used up and never receive a royalty check.

Permalink Reply by Skip Peel - Independent Landman 15 hours ago
Delete

At some point Waharold will have to decide which of his multiple discussions threads we should post in.  It's a shame that it is a Friday and everyone with an executed lease to Paloma will have to wait until Monday to do something or know something.  As I understand it Paloma has pulled the plug on leasing in LA also.  LA has already addressed this situation through legislation.  For those in MS, I don't know what your legal options are but I do know the contact information for the MS Oil & Gas Board attorney.

Howard O. Leach (601) 576-4921 hleach@ogb.state.ms.us

Permalink Reply by Keith Mauck (Site Publisher) on September 6, 2014 at 3:16

Yet another response from a duplicate

Permalink Reply by rasputin 35 minutes agoDelete

I would suggest you talk to an attorney with the Mississippi Oil and Gas board. It should be a straight forward question,"Does forced integration preclude subsequent leasing of minerals?"

I am confident you will get royalties and the rate may be equal to the highest paid by the operator in the unit.

I would like to know the outcome. By PM if you prefer.

1kw6x71km1v37Permalink Reply by 1kw6x71km1v37 on September 6, 2014 at 5:26

This is confusing. So which board is going to carry this thread forward?

Permalink Reply by Skip Peel - Mineral Consultant on September 6, 2014 at 6:20

Duplicate discussions in multiple groups always cause problems for those attempting to Follow or to Reply.  Site protocol does allow for multiple discussions if the subject properly fits.  In this case the category would be Tuscaloosa Marine Shale.  There are two main TMS groups, one for Louisiana members that has 521 members, http://www.gohaynesvilleshale.com/group/tuscaloosamarineshale and one for Mississippi members that has 160,   http://www.gohaynesvilleshale.com/group/mississippi

Those two groups should cover the vast majority of members whose interest is the TMS.  Posting to those two groups sends email notices for the new discussion thread to 681 members.  The fact that the implications of the allegations contained in the discussion have very different consequences and thus ranges of possible action depending on whether minerals are located in LA or MS is a good reason to have two separate discussions.  We have enough trouble trying to remind members that answers given and opinions expressed are only applicable to one state or the other, very seldom both.

 

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