by Terry 46 Replies latest jw experiences
In Johnson Co. the going rate can be as high as a 24% royalty rate and $2,000/acre upfront lease rights. It was less than 1/2 of that 2 years ago, but, with the proven yields...they'll pay thru the nose.
Good Luck !
Rabbit
Thanks, Rabbi(t)!
The agent has called me twice this morning already. He also called my cousing, Debbie five times.
He moves fast.
I wonder how these guys are remunerated? I assume they are independant agents who don't get paid until a deal is done entirely.
Good for you Terry. Its like winning Lotto w/o buying the dang tickets. My great grandpa sold property worth BIG BUCKS in the mid 20's and came out west to Montana or Idaho to mine for something (silver or gold) and lost his shirt. Figured out why my gramma was so bitter, raised a spoiled little girl and having it all pulled out from her and waitressing for railroad guys at the age of 15 or so! Glad to know some cinderella stories still happen! I'm happy for you if all this is on the up and up. Take care, and don't spend it all in one place. Unless I am the place:)
Shelly
Title: When drillers call
Source: STAR-TELEGRAM
URL Source: http://www.dfw.com/mld/dfw/14302928.htm? template=contentModules/printstory.jsp
Published: Apr 9, 2006
Author: DAN PILLER In five years, the Barnett Shale natural gas boom has turned mineral leasing and royalties into a multibillion-dollar business affecting thousands in North Texas. Residents have had landmen knock on their doors asking about mineral rights as they seek leases for the drilling companies they represent. Many original leases have expired, and the mineral-rights owners will have a second go-round of negotiations. A lease offer can be exciting, a gusher of sudden extra income. And, in some cases, it can bring almost instant wealth. But the potential royalty recipient must navigate a swarm of issues, questions and technicalities surrounding a mineral lease that make a typical house sale appear trivial by comparison. Keith Milberger, of Proven Concepts of Frisco, is a veteran oil producer and mineral-rights negotiator who works with landowners dealing with oil and gas producers. Milberger tells landowners that they need to "understand, that once you sign a lease, you have become a partner with the oil company." "Make it a business. Keep exact documentation, keep track of the monthly production of the wells, ask questions and, if necessary, go to other people to get the answers," he said. Milberger advises against regarding royalty income as "free money," and notes that even the best natural gas wells decline in production. That decline, sometimes reaching or exceeding 50 percent after the first year, causes a corresponding decline in the royalty checks. "Royalty money should be invested, not spent. Don't change your lifestyle based on the first few royalty checks because they will decline in size as the well inevitably declines in production," Milberger says. "A lease is based on an asset that declines in value. Remember, too, that royalties will be taxed as ordinary income." The Star-Telegram posed some questions to Milberger to get some detailed answers for landowners. Question: I found out that I don't own the mineral rights under my property. How can that happen? What can I do about it? Answer: You really can't do anything about it. Somewhere along the line, the previous owner of the property or your ancestors sold or gave away the mineral rights. You also may have bought the land without asking about the mineral rights. And the seller, shrewdly, didn't include them in the deal. Texas law gives mineral-rights owners absolute right to drill or lease, regardless of the feelings of the surface owner. This is Texas, after all. It happens more often than you think. Smart sellers of land in Texas long ago learned to keep the mineral rights, and their unsuspecting buyers later learn to their dismay that they can do nothing to stop drilling on the land they supposedly own. Q: Then I don't get any lease payments or royalties? A: Probably not. You can get, however, a surface lease from the drilling operator to cover the physical abuse your property will take, such as damaged roads or fences, uprooted trees, land disrupted by heavy trucks, or oil and mud spills. Occasionally that surface lease can be in the form of a royalty, but more likely it will be a one-time payment for damage. The important thing is to negotiate to make sure that your property is put back the same way it was before the drilling. The company will dig a hideous-looking sludge pit to hold the water, mud and oil that spurts up from the well. Later they'll drain the pool and refill in the pit. Damage requirements and payments all are negotiable. Get help from someone who has been there. Q: How do I know if I have mineral rights to my land? A: You can check your land title at the county register of deeds office, Milberger says. "We run a chain of title checks back to 1900 to determine deeds and how mineral rights have been reserved and accepted. If the land has been sold but the seller reserved the mineral rights, then the landman has to chase down the owner. You need an abstract and warranty deed before starting lease negotiations. It's not uncommon for mineral rights to be signed away for payment of services or given to relatives, business partners, lovers or others. Mineral rights have been lost in card or golf games. I know of a case where mineral rights ended up as payment for a drug deal. The aftermath of a divorce can leave mineral rights in limbo. Many a family has gotten an unpleasant surprise when they go back in time through their land records. But landmen know this business, and they don't start negotiating or offering leases until they are rock-solid sure who owns the mineral rights." Q: Should I negotiate my lease myself? A: Absolutely not. Get an experienced oil and gas attorney who has been in the field, or a consulting firm that specializes in working with land and minerals. Milberger says: "Landmen have been at the leasing game a lot longer than you have. Don't play another man's game." Q: Can I tell the operating company when to start drilling? A: You can negotiate within the lease a performance calendar that requires drilling within certain dates. You also want a continuous drilling program in case the operator wants to drill more than one well on the lease. The idea is to get the drilling done as quickly and efficiently as possible, get the well fractured and tied into the pipelines, and the property cleaned up. Without a performance calendar, the operating company can wait until the end of the lease to drill, and many do just that. Q: I already have a signed lease, but a landman has offered money for it. I'm tempted. A: Generally speaking, don't. You may be signing away years, even decades, of regular royalty payments to yourself or your heirs for a one-time payment that may be a fraction of what you might have received over the long term. Q: I've been offered a five-year lease. That seems good because it would tie me to the operating company for a longer period. A: No way. The five-year lease just gives the operator that much more time to drill elsewhere. As the potential royalty recipient, you want the operator to get on the land and start drilling as soon as possible. Don't sign a lease longer than three years and don't let the operator have options beyond that. If the operator can't get a rig and get on the land to drill within three years, you can negotiate with somebody else. Q: I've been offered something called a "production lease." What is that? A: A production lease is something you shouldn't sign. It's a way for the operator to shift some of the future costs of drilling or production onto the landowner in return for a supposed greater royalty. Wells often require subsequent upkeep and repair costs. But you don't know what those costs might be, and they could eat up most or all of your royalties. Make the operator bear the cost of the well. Q: My neighbor is sitting on a sweet spot, but the drilling company wants to drill horizontally from my property and I don't have mineral rights. What can I do? A: You get a surface use agreement. The drilling company can't come onto your land without a lease or your consent. You can negotiate a piece of the mineral royalties in exchange for putting the rig and the wellhead on your land. As long as the well is producing, they should pay you. Q: A company wants to lease my land for 3-D seismic imaging. Should I do it? A: No. Make them give you a drilling lease. By accepting a smaller lease for seismic imaging, you're shifting the risk from the operator to yourself if the seismic imaging shows problems in your mineral zone, such as water or faults. Such problems would mean that you wouldn't get a drilling lease. Make the operator take the risk. Q: I've just learned that I've inherited an interest in a lease. What do I have to do to get in on the action? A: If you inherit lease rights through a death, you need an affidavit of heirship to take to the operator. If the heirship has to be probated, go to the county where the lease was signed. After that, get the affidavit of heirship to the operating company's legal department. Be careful to note the time and date and whom you talk to at the operating company each time you make contact. Don't give the affidavit to the landman -- go directly to the producing company. Send all documents by certified mail and ask for receipts. Q: I have a choice of several operating companies. What should I look for to differentiate among them? A: First, make sure they have experience drilling in the Barnett Shale. Get their production figures and see how they've done. The Barnett isn't for rookies. Check the company's reputation with the Texas Railroad Commission and with others who have leases. Do your homework. If it's a publicly traded company, research their finances and management. Make sure they have experienced, competent engineers and geologists very high in the management structure. Q: I've been told that most of the royalty money comes right away and declines quickly. Is that true? A: Generally, yes. But the decline rates on wells vary. In the Barnett Shale a typical well will lose 50 percent of its production rate in the first year after drilling. But after that the production has tended to flatten out over longer periods. Understand that a lease is an annuity with a declining asset base. Don't change your lifestyle based on the first few royalty checks, because they inevitably will decline. Live off the interest from the royalty income, not the principal. The royalties can drop off fast, and that can come as a big surprise. Q: I own part of a leasing unit inside Fort Worth. I've heard that the city is going to crack down on drilling. A: The city probably can't crack down too hard, other than to impose some noise restrictions, without risking lawsuits from operators. The City Council is drafting a new drilling ordinance, but early indications are that it will allow drilling within 300 feet of buildings. The city may also try to forbid open sludge pits in favor of closed-loop systems that haul away the wastewater and mud. But no municipality in the Barnett Shale has been able to put much of an impediment in the way of drilling because of the sovereignty of mineral rights in Texas. Significant change, such as giving surface owners a veto over drilling if someone else owns the mineral rights, would
Interesting, eh?
This sounds like a Perry Mason plot! LOL
Actually, I have heard of these things happening before. Get a good atty in land claims and mineral rights to review the offers, if you can, hopefully on contingency.
..Oil:..Black Gold..Texas Tea...OUTLAW
Interesting, eh?
Ye-s-s...I just learned some good stuff.
Thanks.
I have to wonder why they put a notice on a house you USED to live in...are you living under a rock and are so hard to find and are totally unlisted that they couldnt track you down at your current location?
In any event...if its real honey....dont pay anybody ANYTHING. Tell them to take whatever they think you owe out of your first stipend. :)
I have to wonder why they put a notice on a house you USED to live in...are you living under a rock and are so hard to find and are totally unlisted that they couldnt track you down at your current location?
I divorced this last year and everybody moved out of the house. My ex and the kids moved to a new house and I live under a rock that is so hard to find that they couldn't track me down.
Hey Terry,
Hope it all works out good for you, you certainly could have something wonderful happen in your life.
When it all pans out
in my best May West voice......
"Come up and see me sometime" *wink*wink*
Have fun,
purps
Well, my attorney has told me that I'll be very lucky to get anything worth bothering about with just a small percentage of 4 acres involved and 6 relatives to divide amongst.
So, I'll just shrug and accept my couple of hundred a month and go about my business.
The whole thing has been an annoyance for only one reason. It invites me into imagining a larger life than what I live.That is cruel and painful :)
I did get something good out of this. I have been able to re-establish contact with my Uncle Jack whom I've not spoken to since 1980. He was the closest thing to a dad I ever had.
That's worth something!
