AboutFrederick M. Scott CMM Expertise I can answer questions about the terms and clauses contained in an oil and gas lease. I can answer questions about the oil and gas leasing process, and give suggestions on how to respond and what to expect when contacted by an oil company or their representative. I can answer questions about selling minerals. It seems some people prefer to sell rather than lease due to the apparent tax breaks. I can also answer questions about forced-pooling, correlative rights, conveyance (deed) interpretation, and deductions from royalties. I am most experienced with Oklahoma properties and laws, but am able to answer questions concerning other oil and gas producing states in many cases.
Experience I am a Certified Professional Mineral Manager (CMM) (certified by the National Association of Royalty Owners in Tulsa, OK) and have managed my own oil and gas properties in Oklahoma for over 10 years and have dealt with many landman, attorneys, and other oil and gas professionals in the process of doing so. I am also a member of several professional associations and have written articles of interest to royalty owners which have appeared in several industry publications. I have prepared deeds and done title work and curative for my own minerals; and am pretty familiar with Oklahoma oil and gas law, and to a lesser extent, other state's oil and gas laws.
Question Sir;
I don't understand the process of signing an mineral lease with a middle man. Will a bonus payment effect the amount of royalty percentage.
Properties under question:
S/2 of NE/4 of Section 8, Township 4 North, Range 10 East, Hughes County, Okahoma
There are two more properties that I don't have the discription available.
Is it best to sing the lease or wait for the royalty.
Thanks James
Answer James, in order to receive any royalty payments, you must either sign a lease, or be force-pooled. Signing a lease is the best option for you in my opinion. A forced-pooling has many similarities to a lease, but doesn't offer as much protection in most cases.
You can be force pooled (a "forced lease" of sorts) if you refuse to sign a lease...that's why they call it "forced." Better to sign a lease. Just take care to understand what you are signing. I will try to help explain here a bit, but you should probably buy the booklet I recommend at the end of this to better familiarize yourself with the process.
Many oil and gas companies hire "land companies" (the middle man you speak of) to buy leases for them rather than doing it themselves. They sometimes do this so that other companies will not know where they are leasing, while in other cases it's just that they prefer to use a land company to do their leasing. The leases will usually be signed over to the actual oil company within a few weeks or months after you sign with their agent (the land company.)They are not doing this to "fool" you or anything, it's just the way it's done.
You choose the bonus and royalty before you sign the lease. Once you've done that it doesn't change. Companies will sometimes give you more than one option to consider when signing a lease. Often they will offer a 3/16 royalty with a certain bonus in addition to the royalty; and might also offer a 1/4 royalty and no bonus as another option.
If a producing well is drilled before your lease expires, the lease is "extended" and will continue in force until production ceases. You will be paid whatever royalty you signed for on the lease. The bonus you agreed to (if any) is usually paid within a month of signing the lease and is yours to keep whether they drill a well or not. You will not get a royalty check until about six months after a well starts producing.
One final piece of advice James; if you choose the bonus and 3/16 option, don't settle for less than a $1,000 per acre bonus. If they argue with you, explain to them that two sections right next to yours were pooled for that amount recently. They'll know what that means. Also explain to them that you'd like a "depth clause" in your lease. They'll know what that means, too, and should agree to put one in for you.
I’d also suggest buying “How to Survive Forced Pooling in Oklahoma from NARO (800-558-0557) if you don’t understand what pooling is. The booklet also has some good leasing tips. It’s an easy read and is full of tips.
