You are here:

Oil/Gas/Title Opinion/Division Order

Advertisement


Question
QUESTION: Good Morning Marsha,
Hope you can give me some guidance. I was new to all this when I was approached about a lease. I signed blindly. Property is located in Howard County,Tx. Section 25, Blk 33 T1N W2 SW4 40 acres. Lease was signed in 2012 for 3 years with Grella Oil. In 2014 they assigned the lease to Big Star Oil. In late 2014 I was informed that I was a NPRI on another 40 acres being the W2 W2 SW4.In Feb 2015 they completed drilling on the well Ryder A2H. Mid 2015 Big Star stated that they were in the process of title curative. They were having issues with my Great Grandmother deceased interstate. Through my own searches, in Jan 2016 I found an affidavit for heirship for her signed by my deceased Grandmother on record in Harris County. I provided to Big Star the info. Shortly after they stated that the issue with her was resolved now they needed a will, probate or affidavits for my father. I provided marriage and children info. The Landman with Big Star corresponded with me in mid Feb 2016 stating he had not had a chance to look at the information sent because he had been out of the office. 1 month later 3/16/16 I emailed him again to see what the status is. He has not responded to me. What can I do to get this in pay status?
On another note, since reviewing this site and some of your answers I have discovered that I should have been paid a bonus for the ratification that I signed. In addition they pooled the unit in Jan 2015, recorded it in Feb 2015 but did not send me the unit agreement till June 2015. Of course the document was worded so the agreement would be effective as if I had signed before the unit agreement had been recorded. We are not located on the drill track. My sister has not signed her ratification for pooling yet does that give us any leverage? Also in 2015 Big Star Oil and Grella Oil became partners so now the entity is BSM Energy. Any and all answers would be greatly appreciated.

ANSWER: Sorry for the delay in answering your question, but it was quite involved and I did some research before responding.  I am going to state your question below, with my comments and answers intermingled. That was the best way for me to make sure I addressed everything, in a manner that you could easily follow.

Good Morning Marsha,

Hope you can give me some guidance. I was new to all this when I was approached about a lease. I signed blindly. Property is located in Howard County,Tx. Section 25, Blk 33 T1N W2 SW4 40 acres.

Lease was signed in 2012 for 3 years with Grella Oil.  

In 2014 they assigned the lease to Big Star Oil.

In late 2014 I was informed that I was a NPRI on another 40 acres being the W2 W2 SW4.  **I assume that this is in addition to the mineral rights lease royalty you own by virtue of the Grella Oil lease that was sold to Big Star**.

In Feb 2015 they completed drilling on the well Ryder A2H.  **The wellbore runs directly along the eastern boundary of the W2 SW4, for @ 2646’.  The distance from the first take point to the last take point is 7,704.15’ according to the official plat filed with the TRRC.  That means that your lease royalty is calculated [mineral interest] x [lease royalty rate] x [# acres in which you own lease royalty / total acres in Section 25] x [# feet of wellbore lateral running through Section 25 / total # feet of lateral between FTP and LTP].  According to the drilling-permit preliminary plat on file with the TRC, they planned to have 7,704.15’ between FTP and LTP, but the As-Drilled plat doesn’t note the actual distance.  You need to know both pieces of wellbore length in order to finish calculating your lease royalty part.  Then from that calculation you will have to deduct any NPRI interests carved out of your lease royalty.  For the NPRI part, it is calculated [NPRI fraction or percent in the land] x [# acres in which you own lease royalty / total acres in Section 25] x [# feet of wellbore lateral running through Section 25 / total # feet of lateral between FTP and LTP].**

Mid 2015 Big Star stated that they were in the process of title curative. They were having issues with my Great Grandmother deceased intestate estate. **Intestate means “without a will”.** Through my own searches, in Jan 2016 I found an affidavit for heirship for her signed by my deceased Grandmother on record in Harris County.  **It needs to be filed also in Howard County, Texas deed records, so that ownership by the heirs to the Howard County properties is there for landmen and others to find.**

I provided to Big Star the info. Shortly after they stated that the issue with her was resolved now they needed a will, probate or affidavits for my father. I provided marriage and children info.  **For your own best interest, if no will was probated for your father you need to create and file into Howard County deed records a new Affidavit of Heirship prepared for him (like the one done for your grandmother) and signed by someone not in line to inherit from your father but who knows all the facts and can sign it under penalties of perjury.  Now that the mineral rights are producing, your grandparents will be billed for property taxes each year. Filing both Affidavits in the Howard County deed records that contain current addresses for all of the heirs will allow the county to send tax statements to the heirs.  Without this, the mineral rights will go unpaid and the county can foreclose for non-payment of taxes and sell them on the courthouse steps by Sheriff’s deed.**

The Landman with Big Star corresponded with me in mid Feb 2016 stating he had not had a chance to look at the information sent because he had been out of the office. 1 month later 3/16/16 I emailed him again to see what the status is. He has not responded to me. What can I do to get this in pay status?  **Send copies of both Affidavits of Heirship (your grandparents) AFTER they have been filed into the Howard County deed records.  That should remove all obstacles, allowing Big Star to finally issue the division order to you that you will sign and return in order to get paid.**

On another note, since reviewing this site and some of your answers I have discovered that I should have been paid a bonus for the ratification that I signed.  **The bonus only has to be paid if you negotiate it.  It’s legal to sign a ratification without being paid a bonus, so there’s really nothing you can do at this point to get one.  However, Big Star must pay you all royalties owed to you from date of first production, regardless of when you signed the ratification, after you sign their division order.**

In addition they pooled the unit in Jan 2015, recorded it in Feb 2015 but did not send me the unit agreement till June 2015. Of course the document was worded so the agreement would be effective as if I had signed before the unit agreement had been recorded.  **This appears to be on record with the TRC as an Allocation well, not a pooled unit.  It appears that each Section should have been pooled separately, only as to leases and interests inside that Section.  You own in Section 25, so your pooling document should only say Section 25 in the legal description and not mention any other sections.  If the pooling document lists Sections 20, 25 and 26 and has been filed into the deed records of Howard County, then Big Star may have violated Texas Railroad Commission rules by failing to file a P-12 form stating under penalties of perjury that they own all of the leases or own the right to pool by virtue of contracts, all leases to be pooled for the drilling of this particular well.  If found no P-12 form in the PDF records available to the public.**

We are not located on the drill site tract. My sister has not signed her ratification for pooling yet does that give us any leverage?  **Based on what you have told me and my research on the TRC website, your information about this is incorrect.  The As-Drilled plat on record at the Texas Railroad Commission (which I downloaded a copy from their website) shows that the proration unit spans Sections 20, 25 and 26.  You stated that your lease’s legal description covers the entire West Half of the SW4 of Section 25, which covers 80 acres, not 40 acres.  The wellbore lateral runs directly along the East edge of the W2 SW4, so according to this plat, definitely you are in the drillsite tract for the lease royalty due you (presumably on the E2 SW4). The W2 W2 SW4 is not in the drillsite path because it is too far away from the wellbore, but because you signed a ratification, Big Star must pay the NPRI royalty piece to you.  If you had not signed, Big Star would not be required to pay NPRI royalties on the W2 W2 SW4, only lease royalties.**

Also in 2015 Big Star Oil and Grella Oil became partners so now the entity is BSM Energy. **This does not diminish your rights or increase their rights in any way.**

Any and all answers would be greatly appreciated.

**Let me know if you have additional questions after you read all of my comments/answers here.**


---------- FOLLOW-UP ----------

QUESTION: Thank you so much for your answers. I am more confused though. I was told by the landman that our lease was not on the drill tract. To clarify I am an executive lease holder for the W2 SW/4 40 acres. I am ratified on the W2 W2 SW/4, 40 acres. The ratification that I signed (I have signed 2), and it is recorded in Howard County, is for a pooling agreement. It does list sections 20, 25 and 26 on it. What is an Allocation Well? By signing the ratification on the pooling agreement did that reduce my royalties due me? Can you provide any legal services that could assist me? I have very limited resources. Again, Thank you for any and all answers.

TP

Answer
A drill site tract in Texas is any tract where any part of it is closer than 100' from the wellbore lateral. The wellbore lateral for this well runs directly along the dividing line between the E2 SW4 and the W2 SW4. It slices the SW4 in half. If your lease covers the entire W2 SW4, the most easterly 100' of your entire tract is part of the drillsite. But your NPRI in the W2 W2 is not part of the drill site tract. Unless I am misunderstanding what land you own any type of royalty interest in, part of your land is drill site. At this point, I would need to see the pooling document that you signed to be able to tell you for certain what you ratified. Owners often misunderstand what they are signing, or the company representative explaining it doesn't do a very good job. For Sections 20, 25 and 26 to be pooled as a legal production unit, a P-12 form was required to be filed with the TRC stating that the operator had the legal right to pool at least one lease in each of the tracts inside the unit. No P-12 for this well is found on the TRC website.

An Allocation well is a horizontal well that travels across lease lines, or from one designated pooled unit to another unit, and produces from more than one lease or unit at the same time, but those leases are not pooled for that particular well, and of course, the pooled unit cannot be pooled a second time. Your well here starts in Section 20, travels into and across Section 25, and terminates in Section 26. Each of those sections can be pooled separately, as to all leases inside them that are included in the proration unit. Section 25 should have been pooled, but without knowing what unit name was given to that unit (it may not be the same name as used in your well), I can't find the P-12 without quite a bit of digging.

Yes, signing the ratification reduced your royalties, but without signing it you would not be entitled to be paid anything for your NPRI in the W2 W2 SW4.

As for legal services, I can recommend that you visit https://texasbar.com to look for Texas-licensed attorneys in your area with experience in oil and gas law. There is a search form in the site where you can enter what you are looking for, and a list of attorneys meeting your criteria will be listed.

Oil/Gas

All Answers


Answers by Expert:


Ask Experts

Volunteer


Marsha Breazeale, M.Ed., CDOA, CPLTA

Expertise

All questions regarding division orders; ownership decimal calculations; title ownership and payer record changes (testate/intestate inheritance; deed; assignment; court order); oil and gas lease analysis for record-keeping and purposes of payment by operator or payer; pooling, horizontal wells, horizontal well allocation units; unclaimed property reporting; royalty owner relations questions. All questions concerning administration of surface land contracts and payment questions, such as for Surface Right-of-Way, Sub-Surface Right-of-Way, Easement, Surface Use Agreement. All questions regarding industry-standard and company-specific policies that affect land owners.

Experience

Sr. Staff Division Order Analyst. Certified Division Order Analyst (CDOA, National Association of Division Order Analysts) and Certified Lease Analyst (CPLTA, National Association of Professional Lease and Title Analysts) with 35 years of experience as a combination division order analyst and lease analyst in exploration and production in the oil and gas industry.

Organizations
National Assoc. of Division Order Analysts (NADOA), National Association of Division Order Analysts (NALTA), American Association of Professional Landmen (AAPL), American Society of Trainers and Developers (ASTD)

Publications
"How an Oil & Gas Exploration & Production Company Operates" and "Principles of Oil & Gas Lease Analysis: Standard Clauses", Oil Patch Press; Articles in NADOA Magazine; LandFocus EDU Professional Training Manuals

Education/Credentials
B.A.in Management from Our Lady of the Lake University in San Antonio; M.Ed. in Instructional Design from WGU Texas.

Past/Present Clients
Past 15 years: GeoSouthern Energy Corporation; Contango Oil Co./Crimson Exploration & Operating Inc.; Apache Corporation; BP America; Marathon Oil; Newfield Exploration

©2016 About.com. All rights reserved.