Replies to This Discussion

Permalink Reply by adubu on July 13, 2011 at 0:33

I would think Company A as Lessee controls your minerals and therefore operator company B cuts A and you out of unit therefore no royalty; unless you minerals are under drill site location or undivided in tract that is included in the plat of the unit then Lessee is responsible to pay you the Lessor your royalty.  Our good lawyer Ben will clarify the answer for us. My thinking maybe 180 degree off.

Permalink Reply by Neeky on July 13, 2011 at 4:24

Ahhh, but what if your mineral interest is less than 50% of the tract and Company B has the majority of the other interests in that track leased.  I believe they need just 50% of the tract to be leased to include it in a unit, is that right?  Then they can just indicate on the P-12 that there is an unleased interest (you) and don't have to pay you anything until the well is paid out.  Is this correct?

Permalink Reply by RSV2003 on July 13, 2011 at 13:41

Just to throw a few more kinks in the deal... Company B wants to top lease the minerals. Now what happens? Do you not receive any royalty until the lease expires with Company A? What if Company A has first right of refusal and doesn't release the minerals? Could Company B drill and produce the well and we get nothing? Also if there are other mineral owners in the same acreage as ours and Company B has the rights to those minerals do we just lose our royalty? I do have a lawyer looking at this, but I'm just trying to get whatever info I can to help our case.

Permalink Reply by Phillip Briggs on July 13, 2011 at 14:26

I haven't got a clue what the answer is.

I do believe the cure would be to only lease to recognized companies, with a history of drilling.  Leasing to a 'flipper' sometimes lands one in such positions...  If Anadarko has drilled a dozen wells in the area, and Oil Slick Leasing (didn't want to mention some of the obvious lease flippers in Panola or Shelby County) wants to lease my tracts, I'd contact Anadarko's landman or leasing agent first. 

Permalink Reply by RSV2003 on July 13, 2011 at 15:56

Company A and B are both quite large companies that have been drilling the shale from early on in the play. B has most of the acreage and A has ours stuck in the middle. Not that much but about 3-4% of the unit

Permalink Reply by adubu on July 13, 2011 at 15:03

RSV2003--- suggest get first question  answered before throwing more kinks in the deal---Just IMO for this thread.

Permalink Reply by RSV2003 on July 13, 2011 at 16:01

Yeah that is the real question. All of the rest is just to make the deal even more difficult to figure out, but is part of the total equation. Not sure where this is going to end up. Hope the lawyers and co reps can come to some kind of agreement so that we don't lose out completely.

Permalink Reply by adubu on July 13, 2011 at 16:18

RSV2003--- have you discus this with your oil & gas Lawyer?

Permalink Reply by Ben Elmore on July 14, 2011 at 3:09

If I understand you correctly, company B has asked company A to contribute your lease to the unit, and company A has refused.  Assuming you own 100% of the minerals in the acreage you leased to company A, you will be cut out unless you are a drillsite tract.  Company A has some serious thinking to do, because I'm not sure how it can get a permit to drill a well with just your acreage (doesn't sound like a lot of acreage).  Arguably a reasonably prudent operator in company A's position would contribute your lease to the unit, but I guess it depends on the deal company B was offering.  Still, it doesn't sound like company A has much choice.  I would contact company A and demand to know the particulars, including the reason they decided not to contribute.

 

If, on the other hand, the two companies already are parties to a Joint Operating Agreement (or some other similar agreement) under which they both contributed their respective acreage to the joint account for joint operations by company B, then what you are describing is a situation where a party to a JOA can elect to go "non-consent" on a well.  In that instance, the non-consenting owner (company A) does not share in the expenses and revenues in the well, but its leases and acreage are still committed.  If this is the situation then you would still receive royalty.

Permalink Reply by RSV2003 on July 14, 2011 at 4:12

Ben, thanks for the reply. We do not own 100% of the minerals in the acreage in question. The other mineral owner is leased by Company B. The documents we have seen indicate that Company A "elects to be a non-consent owner in the proposed well".  We don't understand what this means to us as far as our mineral rights. Would we receive any royalty for our minerals at any point? 

Permalink Reply by Ben Elmore on July 14, 2011 at 4:16

That language is similar to what would be used under a JOA, which suggests your lease is committed to the joint account with or without A's participation.  But I suggest you contact A and ask (1) if there is a Joint Operating Agreement between A and B; (2) if the reference you quote relates to A electing to go "non-consent" in the well under the JOA; and (3) confirm your mineral interest is still committed to the unit.