Replies to This Discussion

Permalink Reply by Skip Peel - Mineral Consultant on November 9, 2015 at 17:28

You might want to read through my Mineral Fundamentals blog.  It should help you make an informed decision.  The expired lease will have a Section-Township-Range which is helpful in determining value by providing the specific location.  It would also be helpful to know the company that leased your mother's land and how many acres she owns. 

http://www.gohaynesvilleshale.com/profiles/blogs/fundamentals-of-mi...

You should also consider joining the Bienville and Lincoln parish groups and reading through those discussions.

http://www.gohaynesvilleshale.com/group/bienvilleparishnetwork

http://www.gohaynesvilleshale.com/group/lincolnparish

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Permalink Reply by Skip Peel - Mineral Consultant on November 11, 2015 at 2:30

LBarton, the Catahoula Parish property would have to be a different section-township-range as it is far south of the Lincoln and Bienville parish properties.  Regarding mineral rights ownership going to the surface owner under LA mineral law, that is termed "prescription".  When a mineral right is severed from the surface estate, a mineral servitude is created.  The day of the sale or transfer that creates the servitude, the prescription period begins and runs until a point where a well is drilled on the lands or in a unit that includes the lands.  If the well is dry (is not placed in production) the ten year clock is reset and begins to run anew.  If the well is productive the ten year period is suspended for the life of the production.  When production ceases the ten year clock begins to run again.  This is a very basic description and not intended to cover all special circumstances.

The other properties you list are outside of the part of Lincoln Parish now under intense development to the east  with the exception of Section 26 - 19N - 4W which is very much in the heart of the Terryville Field.  The other tracts may be of valuable and desirable to a buyer in the future.  The Section 26 - 19N - 4W would be quite valuable but it appears that MRD Operating (the energy company that Schoeffler represented in the old lease) either has a problem with the geology under that section, there was a mistake made in tendering the check to renew the lease in September or further title due diligence has led them to believe that the mineral rights are owned by someone else. 

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Permalink Reply by LBarton on November 11, 2015 at 3:02

Yes, that is what has me questioning the recent request to buy the property. The request came from Arpent Energy Group and referenced the lease "If you are interested in receiving a specific offer for the mineral interest (or a portion thereof) associated with your recently leased property in Lincoln Parish, LA, please call our office . . . ". This letter came in July one month before the lease was due to expire. So, I believe the are aware of who owns the property and are interested in purchasing it (or were in July) but yet the lease was not renewed . . . We also received a offer to buy from Alliance Land Group referencing the Bienville Parish property. I guess my next questions are, does $6500 an acre sound like the going rate for property in Terryville Field? Or should we consider putting the property on one of the auction sites to try and get a little more for it? Or, would we be completely crazy to even put it up for sale right now? 

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Permalink Reply by Skip Peel - Mineral Consultant on November 11, 2015 at 3:12

Forget marketing the minerals until you can confirm ownership.  The two purchase offers do not confirm ownership.  Both are made based on the lease which has now expired and not been renewed. The level of due diligence employed in offering a lease is relatively low.  There is no reason to perform a greater level of title review until such time as a well is drilled and payment of royalties is imminent.  Then a full title review and new surveys are done as part of a Division Order.  It is likely that Schoeffler either missed the expiration of the extension option or they determined that your grandmother does not own the minerals.  If there were development plans for Section 26 I think that MRD or a land company working on their behalf would have realized a mistake in allowing the lease to lapse and made a new lease offer by now.

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Permalink Reply by LBarton on November 11, 2015 at 3:17

Ok, now I've really confused myself. After re-reading everything, I now see that the Arpent letter is referencing property in Lincoln Parish and a recent lease in Lincoln but the only lease I am aware of is the Bienville Property Lease. Should I be concerned that they are a referencing a lease that we are not aware of?

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Permalink Reply by Skip Peel - Mineral Consultant on November 11, 2015 at 3:27

At some point I think you should consider getting off this public thread and contacting someone who can perform the research required to know what is under lease and what is not.  I suspect that the ownership is in your grandmother's name or, possibly, your grandfather's.  To perform the research requires providing specific information that you should consider keeping private.  You can send me a friend request for access to my private GHS page or find yourself another landman familiar with what is going on in the Lincoln and Bienville areas.

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Permalink Reply by Max on November 10, 2015 at 5:43

Some questions that would make a difference; Is the $6500/acre their first offer, or has your mother already talked up the offer from a lower offer?

How many acres?  Ten acres wouldn't go very far towards retirement, one hundred acres would make a big difference in someone's retirement income. 

How will the money be taxed?  Big question that needs to be answered before any sale. 

How will the money received from the sale be used for retirement?  Invested? Annuity? Personal Bank Account? Pay off debt? Managed by someone?  

Questions about the lease and the possibility of re-lease and a well;  Was this expired lease for a 5 year term, and it was renewed 2 years ago?  Or, was it a 3/2 year lease and didn't get renewed for 2 more years? 

Is there any chance that the minerals will be leased again and a well produced to benefit your mother? (Surrounding sections have existing/proven wells and the oil/gas price downturn has slowed further exploration until price recovery)

Does your mother fully own the surface and the minerals?  Does prescription come into play? 

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Permalink Reply by Skip Peel - Mineral Consultant on November 11, 2015 at 2:38

Most purchase offers are based on leases (or memorandum of lease) recorded in the public record.  That is how companies get the information required to tender the offer.  Those offers may or may not be valid now since the lease has expired.  Understand that the old lease is no longer in force.  It expired on the 1096th. day after the effective date.  I suspect that there is a title problem involved which you need to investigate.  The easiest and most straight forward means to do this is to contact Schoeffler Energy and ask for an explanation of why the lease was not renewed considering its very good location.  If indeed your grandmother has good title to the minerals you will need to get professional assistance to maximize the value in a new lease and/or a sale, in part or in whole, of her interest.

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Permalink Reply by LBarton on November 11, 2015 at 3:07

Hmm, that's pretty much what Skip said, and now I'm a little confused. Since they sent letters requesting to buy wouldn't that mean that there are no issues with the title? This property has been in my mother's name for many years and she continues to pay taxes on it so I can't imagine that there would be a title issue. However, I will take your advice and call them anyway. But I'm wondering if renewing the lease will prevent us from being able to sell? You guys also haven me wondering now, based on the activity in that area, if the lease she signed was below value. The lease was signed in 2012 for $250 an acre with a $100 an acre renewal. What do you think?

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Permalink Reply by Skip Peel - Mineral Consultant on November 11, 2015 at 3:19

If your grandmother has good title to the minerals and there are no geologic problems such as a fault, the minerals are worth far more that what she received in 2012 and may be sold, in part or in whole, leased or un-leased. 

She could have good title to the surface which is what she is paying taxes on and not own the minerals.  Minerals are not taxed in LA, only production (severance tax).  The first step is contacting Schoeffler and asking why the lease was not renewed.  Don't waste time or raise any expectations until you hear what they have to say.  If a mistake was made in exercising the extension option I would expect you to get a swift offer for a new lease.  If so, don't sign it until you get some professional assistance.

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Permalink Reply by LBarton on November 11, 2015 at 3:35

She owns the mineral rights, she has been signing leases for years to allow for drilling. So, I've left a message with Schoeffler and am waiting for a reply. However, we are still confused about the reference to a Lincoln Parish lease when it was a Bienville Parish lease that she signed. I'm thinking the best thing we can do is exactly what you said, get some professional assistance. Thank you. 

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Permalink Reply by Skip Peel - Mineral Consultant on November 11, 2015 at 3:41

Signing lease for years on which property?  Is the Schoeffler lease for Lincoln or Bienville?  Schoeffler took lease in both parishes.  The letter from Arpent should have been specific about what they were interested in purchasing.  I'd bet it's Lincoln and not Bienville.

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