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Permalink Reply by Love Horizontals on March 19, 2010 at 17:17

If in TX, the first step is to have an atty who specializes in wills and estate law to determine what rights, the life estate holder may have to execute documents to effectively produce and sell off the minerals, depleting the property during her life such that it diminishes the remaindermen's asset.

This is one of the most complicated scenarios. Both the life tenant and remaindermen need to legally understand what obligations and rights they have. As far as the operator, unless they get the lease ratified or get a separate lease from them it could be problematic.

This is one of those situations were all the parties need to have legal counsel from someone who specialize in this aspect of the law. Here is a link that offers some insight as to the various issues which each of the parties should investigate.

Hope this helps!
http://www.mosburgoil-gas.com/html/body_mosburg_primer_mte3_3_97_2a...

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Permalink Reply by adubu on March 20, 2010 at 2:18

Love Horizontals----THANKS this is info needed--this is complicated issue--thanks goodness they had a will and it was probated--this involved a cousin of mine--I am sending them the link--they will see their estate attorney next week--beleive they have the position to make Leesee to sweat alittle before they agree to ratify at market price/acre--again thanks for your time and reply

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Permalink Reply by adubu on March 20, 2010 at 6:52

Love Horizontals--I have found more infomation from estate attorney--In Texas if no production or lease on minerals at time of death and minerals placed in life estate for the tenant then all bonus money and royalties that occur during the holder remaining life are placed in trust for "remainerman" but holder may spend the interest income off principal royalty and bonus money then on holder death all money goes to heirs per will of grandfather. If lease is not ratified then lease terminates on holder death which does cause problems to operator so lessee must have lease ratified. Thanks again for your help

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Permalink Reply by Love Horizontals on March 20, 2010 at 15:30

You are welcome and yes I had read all of that also. The remaindermen are in a good position.

If they have any significant acreage WHY ratifiy ANYTHING the life estate holder signed? If they have significant acreage, they should have THEIR OWN lease drawn up by their OWN board certified O&G attorney for the company sign. The remaindermen can do a much better job negotiating terms for their minerals than the life estate holder.....that is why the O&G co went to her first :-)......hoping the remaindermen would be clueless and just ratify what she had done. One of the typical strategies that works 99% and results in a lucrative lease for the O&G co.

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Permalink Reply by JHH on March 20, 2010 at 15:43

If you live in Texas and an O/G company comes to you asking to ratify a lease... what do you do? Why would the company ask for this? Our family asked why and have yet to get an answer from the company. thanks, jhh

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Permalink Reply by Love Horizontals on March 20, 2010 at 16:11

Even if the co gave your family an answer, not prudent for them to rely on any co information anyway.

I have been involved in leasing my family property for over 25 years. Dont get me wrong, I am very pro O&G, but the company is there to say and do whatever it takes get the minerals from you at the most favorable lease terms. It all a negotiation strategy....that's what they are paid to do. Its a very unfair negotiation because it what they do for a living and a mineral owner typically has limited knowledge at best.

The key to making the most money from a lease is not just about bonus and royalty rate. When they drill 1 well, they can hold your property under the lease as long as that well produces without drilling any more wells. They get to count your minerals in the ground in their reserves as assets while you sit there witht the one well. After they have captured you, they have many other leases/places they need to drill to capture more acreage as opposed to drilling out your property.

Permalink Reply by adubu on March 20, 2010 at 16:15

Love Horizontals --total nets minerals acres 21.5. The lease is for 3 years with 2 year option (basically 5 year lease) the step-mom has dementia with life expection of about 2-5 years. If they drawn there own lease would it supercede the lease the step-mom life estate tenant sign at her death with present lease inforce until she dies? Could they simple add exhibits to letter of ratifcation for better terms and % royalty which would basically be new lease

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Permalink Reply by Love Horizontals on March 20, 2010 at 16:32

First of all, if she has dementia, her competency, O&G expertise and negotiation ability has to be in question.

Dementia issue aside, IMO, the better stategy would be for the remaindermen to negotiate their own lease and get HER to ratifiy theirs (She and O&G co can mutually agree to a modified amended and restated lease....which would be the remaindermen's lease). The key is for the remainderment not to let the O&G pressure them to do anything because of what she signed...and they will.

When there is an option like that, it means the person is agreeing to accept no drills for 3 years and to release again for 2 years without a bonus. Obviously she is not motivated for the long term. Not good to give someone an Option for free. Either the lease terminates and you relase to them or another company at the going rate in 3 years or you negotiate up front the what they will pay to extend the Primary Term 2 more years.

Permalink Reply by JHH on March 21, 2010 at 4:29

I still don't understand. Why would an O/G company ask a mineral owner to ratify a lease? Did the lease expire and their drilled some wells they shouldn't have? again... from Texas. thanks, jhh

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Permalink Reply by Love Horizontals on March 21, 2010 at 5:19

Are you saying they drilled wells and put your acreage in the units and are NOW asking owner to "ratify" the terms of a lease someone else signed?

Permalink Reply by JHH on March 21, 2010 at 14:23

yes, we have a lease (old lease) the O/G company asked us to ratify it. we asked why they needed it to be ratified and we got no answer. now they are drilling. since we've heard nothing, talking to a lawyer might be our next step.

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Permalink Reply by adubu on March 21, 2010 at 14:37

If they have no lease let them drill and after completion done and placed on line then let your attorney send them thank you letter for the well because you would owe 100% minerals.

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