Replies to This Discussion

Permalink Reply by RONNY on May 16, 2018 at 1:35

Scan and post the lease.  There is no way to answer your questions without more information.

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Permalink Reply by Skip Peel - Mineral Consultant on May 16, 2018 at 2:25

Joy, do you mean "TMS" (as in Tuscaloosa Marine Shale) instead of "TSM"?  When referring to the "current price per acre", it appears that you are referencing the bonus payment. That is a one time payment for executing the lease.  Royalty is a fractional interest in production, if any.  Royalty payments are generally made on a monthly basis by a check in the mail or direct deposit to a bank account.  All O&G companies have a minimum amount required for cutting a check so if royalty owed is below that payment may be quarterly, semi-annually or annually.

You'll have to supply some detail if you want more input.  What company is making the lease offer?  What is the location of your minerals?  What are the terms being offered especially the royalty?

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Permalink Reply by Joy S Buehler on May 16, 2018 at 5:37

HELLO  SKIP.......  Thank  you  for  your  reply.  I  really need your expertise and expert opinion.

I  hope the following information provides the information you need to answer my questions.

Other Parties request privacy (so names NOT provided ) therefore first paragraph is excluded.

Location of acreage.

TMS (Tuscaloosa Marine Shell ): 

eleven (11) acres Located in Section 36, T.2, S., R. 1. W  and

six and three-fourth (6-3/4 ) acres Located in Section 36, T2S RIW  East Feliciana Parish Louisiana.

Then following  info. is E-Cut / E-Pasted Paragraphs 2 --- 5  from the OGMLease proposed by Conoco Oil.

1 Lessor in consideration of One Hundred and No/100 Dollars ($100.00) and other valuable considerations, of the royalties herein provided, and of the agreement of Lessee herein contained, hereby grants, leases and lets exclusively unto Lessee for the purposes of investigating, prospecting, drilling, mining and exploring (including the exclusive right to conduct geophysical/seismic operations and other related activities) for and producing oil, gas and all other minerals, laying pipe lines, building a drill site, access road, tanks, power stations, telephone lines, and other structures thereon to produce, save, take care of, treat, transport and own said products and for dredging and maintaining canals, constructing roads and bridges, locating temporary living quarters on the leased premises during drilling operations, and, in general, for all appliances, structures, equipment, servitudes and privileges which may be necessary, useful or convenient to or in connection with any such operations conducted by Lessee thereon, or on any lands pooled therewith, the following described land in East Feliciana Parish, Louisiana, to-wit:

PROPERTY DESCRIBED IN EXHIBIT “A” ATTACHED HERETO AND MADE A PART HEREOF.
SEE EXHIBIT “A” ATTACHED HERETO AND MADE A PART HEREOF FOR ADDITIONAL PROVISIONS
This lease is granted as a “paid-up” lease during its primary term herein described, and it shall also extend and apply to any interest in the lands described herein which Lessor may hereafter acquire, including, but not limited to, outstanding mineral rights acquired by reversion, prescription or otherwise.
This lease also covers and includes any other land owned by the Lessor in the above mentioned Section or Sections, all property acquired by prescription and all accretion or alluvion attaching to or forming a part of said land; as well as any interest in any streets, alleys, lanes, roads, streams, water bottoms, bayous, railroads, ditches, canals, servitudes, or other rights-of-way, public, private or abandoned, adjoining or traversing the lands described herein, whether or not specifically described or not. Whether or not any reduction in payment shall have previously been made, this lease, without further evidence thereof, shall immediately attach to and affect any and all rights, titles, and interest in the above described land, including reversionary mineral rights, hereafter acquired by or inuring to Lessor and Lessor's successors and assigns.

For the purposes hereof, the land described herein is estimated to comprise 17.75 acres, whether it actually comprises more or less.

2. Subject to the other provisions herein contained, this lease shall be for a period of three (3) years from this date (called "primary term") and as long thereafter as (a) oil, gas, sulphur or other mineral is produced from said land hereunder or from land pooled therewith; or (b) it is maintained in force in any other manner herein provided. Notwithstanding anything to the contrary contained herein, Lessee is hereby granted two (2) exclusive options to extend the primary term: the first option to extend the primary term for an additional three (3) years to be exercised prior to the date on which this lease or any portion thereof would expire in accordance with its terms and provisions, and the second option to extend the primary term for an additional two (2) years to be exercised prior to the date of the of expiration of the first option period, if exercised, will have the effect of extending this lease for additional periods under each such option as to all of the acreage described herein that is expiring. The only action required by Lessee to exercise these options being payment to Lessor of additional considerations of: (i) the sum of $750 per net mineral acre as to the first option period to which this lease is so extended and, (ii) the sum of $900 per net mineral acre as to the second option period to which this lease is so extended, which such payments, if timely made, shall each cover the entire extended primary terms to which they relate. Such tenders shall be via check or sight draft mailed to or delivered to Lessor at the above address (or such other address as Lessor may hereinafter furnish Lessee via written notice). Should both of these options be exercised as herein provided it shall be considered for all purposes as though this lease originally provided for a primary term of eight (8) years; if only the first option should be exercised as herein provided, it shall be considered for all purposes as though this lease originally provided for a primary term of six (6) years. If this lease is extended as to only a portion of the acreage then covered hereby, Lessee shall designate such portion by a recordable instrument.

3. For the consideration herein above recited, this lease shall remain in full force and effect during the primary term, without any additional payment and without Lessee being required to conduct any operations on the land (either before or after the discovery of minerals), except to drill such wells as might be necessary to protect the land from drainage, as hereinafter provided
4. The royalties to be paid by Lessee are: (a) on oil, and other hydrocarbons which are produced at the well in liquid form by ordinary production methods, one-eighth (1/8th) of that produced and saved from said land, same to be delivered at the wells or to the credit of Lessor in the pipe line to which the wells may be connected; Lessor's interest in either case to bear its proportion of any expenses for treating the oil to make it marketable as crude; Lessee may from time to time purchase any royalty oil or other liquid hydrocarbons in its possession, paying the market price therefor prevailing for the field where produced on the date of purchase; (b) on gas, including casinghead gas, or other gaseous substance produced from said land and sold or used off the premises or for the extraction of gasoline or other products therefrom, the market value at the well of one-eighth (1/8th) of the gas so sold or used, provided that on gas sold at the wells the royalty shall be one-eighth (1/8th) of the amount realized from such sale, such gas, casinghead gas, residue gas, or gas of any other nature or description whatsoever, as may be disposed of for no consideration to Lessee, either through unavoidable waste or leakage, or in order to recover oil or other liquid hydrocarbons, or returned to the ground, shall not be deemed to have been sold or used either on or off the premises within the meaning of this paragraph; (c) on all other minerals mined and marketed, one-eighth (1/8th), either in kind or value at the well or mine, at Lessee's election, except that on sulphur the royalty shall be one dollar ($1.00) per long ton.
5. If Lessee during or after the primary term should drill or operate a well capable of producing oil, gas or some other mineral, on the lands described above or on lands pooled therewith and should Lessee be unable to produce said well and if all other wells are shut-in, then Lessee's rights may be maintained beyond or after the primary term without production of minerals or further drilling operations by paying Lessor as royalty One and No/100 Dollars ($1.00/acre) per net mineral acre per year, the first payment being due, if said well should be shut-in after the primary term, within ninety (90) days after the shut-in of such well or the cessation of production and such payment will extend Lessee's rights for one year from the date of such cessation or shut-in. If such a well should be completed and shut-in during the primary term, the first payment, if made by Lessee, shall be due on or before the expiration date of the primary term herein fixed. Thereafter, Lessee's rights may be continued from year to year by making annual payments in the amount stated on or before the anniversary date of the shut-in of said well (if shut-in after the primary term), or the end of the primary term (if shut-in prior thereto), as the case may be; each of such payments to extend Lessee's rights for one year. It is provided, however, that in no event shall Lessee's rights be so extended by annual payments herein fixed without drilling operations or the production of oil, gas or some other mineral for periods of more than five (5) consecutive years beyond the end of the primary term hereinabove fixed. The annual payments herein provided for may be deposited to Lessor's credit in the pay direct to Lessor at address above which bank shall be and remain Lessor's agent for such purpose regardless of any change or changes in the ownership of the land or mineral rights therein. The owners of the royalty as of the date of such payments shall be entitled thereto in proportion to their ownership of said royalty. Lessee’s failure to properly pay shut-in royalty shall render Lessee liable for the amount due, but shall not operate to terminate this Lease. The provisions of this paragraph shall be recurring at all times during the life of this lease. Should any well producing gas or gaseous substances be completed or shut-in on a drilling or operating unit which includes any part of the land herein leased, the provisions of this paragraph shall be subject to all other agreements herein contained allowing the pooling of the above described lands with other lands.

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Permalink Reply by Skip Peel - Mineral Consultant on May 16, 2018 at 5:48

Joy, I do not negotiate oil and gas leases which is the proper domain of attorneys that practice O&G law.  I do however make suggestions and point out terms that I think are important.  The lease text that you have pasted above is standard boiler plate language which is superseded by an Exhibit A.  In other words, the Exhibit A can nullify or modify any term in the stand lease contract.  Although you do not have a large mineral acreage, even a modest bonus per acre will more than cover the cost to have an attorney review the form lease and draft an Exhibit A page that will cover the things that are most important to you.  You might spend as much as 10 to 20% of your bonus but I think that is worth it for the peace of mind gained. 

If one or more productive wells are drilled, the most important term of your lease will be the royalty fraction.  An active O&G attorney in your general part of the state may know what others have signed for regarding royalty and bonus.  You may want to restrict surface use under the lease or require your permission for surface use with compensation.  An experienced attorney can help you consider the issues that are most important to you.

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Permalink Reply by Hale Yayuh on May 17, 2018 at 9:26

Joy, he is telling you right. You need to get a MISSISSIPPI oil and gas attorney. Joy, if you do not do this, you could end up very sorry because Mississippi has laws in effect that can mean you get nothing without playing ball in the right manner. Don't try to do this on your own, you need a pro that knows the law and knows the TMS play.

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Permalink Reply by Skip Peel - Mineral Consultant on May 17, 2018 at 9:46

Joy's minerals are in Louisiana.  East Feliciana to be exact.

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Permalink Reply by Dion Warr, CPL on May 17, 2018 at 10:36

Skip:

Why is it that landmen are precluded from engaging in the negotiation and acquisition of oil, gas and other mineral rights either for or from other parties?  These represent the traditional roles of landmen and where recognized are generally not considered unauthorized practice of law, unless otherwise proscribed or are regulated by the state in which the rights are situated.

An oil and gas lease represents little difference in impact upon the title as between, say, acquiring or selling a mineral or royalty interest.  Certainly in either case it would be wise advice to either retain or to have review done by legal counsel, particularly if the lessor / owner is not knowledgeable of certain aspects of the business.  One would think that a competent landman can communicate such things effectively as part of the profession is based upon being able to work with both unsophisticated and highly sophisticated parties.

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Permalink Reply by Skip Peel - Mineral Consultant on May 17, 2018 at 10:57

All independent landman are free to choose how they conduct their business.  I provide research data and suggestions for the purpose of lease negotiations but I chose not to negotiate leases as I think that should be left to experienced O&G attorneys.  I saw too many mistakes regarding lease terms in the early days of the Haynesville Shale by supposedly experienced landmen.  Of course a fair number of them were from Oklahoma and Texas.  I can still recall the one that popped up on GHS wanting to know who in the hell was Francois Grappe.  :-)

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Permalink Reply by Dion Warr, CPL on May 17, 2018 at 11:16

Skip:

Don't know that guy - but he received an interesting grant of land.  lol

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Permalink Reply by Skip Peel - Mineral Consultant on May 17, 2018 at 11:30

I'll see if I can get a member of the Caddo Tribe to provide you with an introduction. :-)  There are still Grappe descendants around these parts.

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Permalink Reply by Dion Warr, CPL on May 17, 2018 at 13:28

Hm - apparently the "greatest and best friend" of the Caddo.  Knew of the land grant but not of the "why"...  Interesting writeup on Grappe here:

Part I

Part II

Part III

also of interest was how the Indian agent ended up with all the property - complete with a SCOTUS ruling: US v. Jehiel Smith

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Permalink Reply by Skip Peel - Mineral Consultant on May 17, 2018 at 13:43

Thanks. Good read. 

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