Replies to This Discussion

Permalink Reply by Buddy Cotten on May 23, 2011 at 5:07

Dear DO Analyst,

 

I agree on what you say.  There are cases, like the carried interest, where almost any royalty, like the infamous 75% royalty I accepted, was to the benefit of the company.

 

From a landowner standpoint, if I want a 1/4 royalty and the company says that they cannot do it because of geologist and incentive overrides, then my response is that "I am not responsible for paying your people."

 

Best,

Buddy Cotten

 

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Permalink Reply by Charles L. Evans on May 31, 2011 at 10:23

Lee Raymond with Exxon-Mobil in 1980 did the same thing with my family, well still producing and the oil well shut-in.

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Permalink Reply by adubu on May 23, 2011 at 5:11

DO--- I have no problem with 25% r in general leases  and as I stated today most new leases  are back in the 1/8-3/16-1/5% range offer with NG at $4 I don't think that can drill at even 70% net revenue and make profit but I agree with Buddy the mineral owner should not pay for their overriding deals and people.

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Permalink Reply by DO Analyst on May 23, 2011 at 5:35

you guys are correct that the royalty owner shouldn't have to pay for those and they don't.  typical override assignments are written to where the assigning company only assigns the override if they maintain a certain net.  That 70% figure more of a marketability issue.  If a broker comes out to lease you, he knows that he will not be keeping that lease and when he assigns it he wants an override in most situations.  so it is always in the back of his mind as to what companies are willing to pay for.  I have seen (very limited) 30% leases, but I will have to say the 25% is very good in most cases, where you get the companies is on the front end in the bonus.  As you know, royalty needs production, bonuses need land.  you can tell a company i want XX% royalty or $XX/acre bonus, if they want your lease bad enough you will get one or the other, as it has been mentioned, NG is not as profitable as it once was so many companies are backing off, but NG will be the wave of the future and companies still want to be in a position to ride that wave when it comes.

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Permalink Reply by adubu on May 23, 2011 at 5:55

DO-- I agree and that the reason I do not desire to sign a lease with a broker or flipper and give up any of my r to middle man. It's in any mineral owner best interest to know what O/G operator will be in control of their minerals and if they have financial - expertise to drill type well needed to produce the minerals--in case of Shale that means Horizontal well.

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Permalink Reply by Mike Jackson on May 23, 2011 at 17:37

U guys are Great Advisors... I started this discussion because I don't want to be had out of my interest in the Haynesville.  DO-- If my interest is in other sections, that I don't have leased but has a producing well how will I receive Division Order, will it be one DO or Multiple from the Operators.

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Permalink Reply by The_Baron on May 24, 2011 at 3:06

Each operator will send you a DO.

 

 

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Permalink Reply by DO Analyst on June 1, 2011 at 2:49

You should only get one DO, but it will depend on the internal agreements between the company that took your lease and the operator of the section.  If, for example, Petrohawk took your lease and Chesapeake is the operator, it would depend on the agreement between Petrohawk and Chesapeake as to who would pay the burden.  Either way, you should get one DO.  With that being said, title work is always an on going issue and unit acreages may be revised, your mineral interest may be revised so while you should receive DO's from only one company, you may receive multiple, especially in the first few months to a year of production.  You would be amazed at some of the stuff we see for title work.  the main problem is that there is so much going on that it can take a very long time to get title work.  That is why it is always good to have a 90 day to receive payment clause written in to your lease and keep in mind, one of the good things for Louisiana (not so much on my end) but for the mineral owners is the demand letter. 

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