Energy Industry (Oil & Gas)/Foreclosure in a producing unit

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Question
An OGL was taken by an operator on a parcel after the mortgage was in place and prior to foreclosure, no Subordination agreement was  signed or filed.  I have now purchased this parcel from the foreclosing lender, it is clearly within the boundaries of a producing unit. What are my rights at this point as the owner in Fee regarding Royalties and possible new OGL ? I was told by the Operator that they would simply cut this parcel from the unit. What ?

Answer
Kendall, its hard to say what your rights are without looking at the documents and the factual situation surrounding the mortgage and foreclosure.  Generally, if a lease is taken on a property that that a prior recorded mortgage that covers the mineral estate, a foreclosure of the mortgage could terminate the subsequent oil and gas lease and the operator's rights in the property.  Whether the property would remain subject to the unit is a question, but if the tract is a non-drillsite tract in the unit you may not be entitled to anything after the foreclosure.  Given the myriad legal questions involved i can't really give you a definitive answer based on what I know.

I suggest that you contact a lawyer to help you and to make sure that your rights are protected should you elect to purchase the property.

Good luck and let me know if  you have any other questions.  

Energy Industry (Oil & Gas)

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David B. McCall

Expertise

Questions regarding oil and gas exploration and production, the operation and management of oil and gas producing properties, and questions related to mineral ownership, title problems, and oil and gas leases.

Experience

I am Board Certified in Oil, Gas and Mineral Law in the state of Texas. I have more than 37 years of experience in the industry as both an in house attorney for major oil companies and as a partner in oil and gas firms. I am also a mineral owner and receive royalties from oil and gas production. I have extensive title examination experience, and have represented clients in many administrative and court proceedings.

Organizations
State Bar of Texas, Texas Bar Foundation, and Austin Bar Foundation.

Publications
Various state bar seminars on Oil and Gas matters.

Education/Credentials
I have a business degree in marketing from McMurry University, 1971, and a JD degree from Texas Tech University in 1974, where I graduated 17th in my class. Board Certified in Oil, Gas and Mineral Law in 1986.

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