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partial release of oil & gas lease



Started March 7, 2017 at 09:36 am by @deutchen in GoMarcellusShale

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deutchen
03/07/17 09:36:44AM
@deutchen

Two years ago I sold 1/2 the mineral rights under my farm. I signed a lease renewal for the remaining oil & gas rights with Gulfport. I was looking through the documents for the Belmont County Recorders office and I found a "partial release of oil & gas lease". Gulfport apparently sold my lease to the company that bought the other 1/2 of my oil & gas rights. I'm trying to figure out why this company bought the lease. They are a small oil drilling company in Oklahoma but as far as I know they haven't done any drilling around here. The only reasons for them to buy it that I can think of would be for them to make money with the lease somehow. The only ways I can think of would be to drill a well or resell the lease for a higher price.

Does anyone else have any ideas why this this sale would take place?

Ed howell
03/07/17 09:55:34AM @ed-howell:

Now that you sold half your minerals , the drill company who owns the 50% you sold  will press a partion suit if you do not sign for their terms and sell all the mineral interest on the court house steps to the highest bidder (a drill company )


Matt Lanctot
03/07/17 10:10:38AM @matt-lanctot:

On who's "terms", the terms of the small operator who purchased the 1/2 interest or who she signed the lease with?  


Jo2
03/07/17 09:55:48AM @jo2:

The small company must think you're sitting on a large deposit.  Possibly one of your neighbors have a big oil production.


Matt Lanctot
03/07/17 10:07:08AM @matt-lanctot:

Likely to hold onto it for royalties or resell at a higher price.   With most of the land in the county already unitized, it wouldn't seem practical for them to attempt to drill.  That's a guess from someone that doesn't work on the operations side of things. 

I worked brokering and buying minerals for a couple of years, and several of the investors/buyers were energy companies like this one. 


Heidlebergman
03/07/17 10:08:50AM @heidlebergman:
Maybe, this company owns an undivided 1/2 interest in mineral deed and leased it to themselves. Now they can set their own royalty rate and demand an override royalty interest from any company that they assign the lease to. Its probably not smart to lease it directly to themselves, but there are benefits to lease it to a subsidiary. Large companies do this all the time. Dominion Transmission leased to Dominion Exploration...EQT does this too. If you drill on your fee acreage without a lease and someone forgets to pay the taxes...you just lost your well. Regardless...what this company is trying to do is raise their royalty interest. Theyre probably assigned themaelves 15%...now by assigning the lease to a larger company whose intentions is to drill theyll get another 7.5% override. Theyre trading the lease bonuses in for long term royalty. This could affect you. They just lowered your property's net working interest by their override royalty rate divided by 2, and un this market of tight margins that COULD make a difference as to when you get your property unitized. NWI is very important in a down market.
Matt Lanctot
03/07/17 10:15:06AM @matt-lanctot:

Interesting.  And I guess they could purchase the 1/2 interest for the same, or close to the same, price as they turn around and lease it for, meaning they've paid 0.00 dollars for whatever override they negotiate, 12.5-20% royalty. 


Heidlebergman
03/07/17 10:55:51AM @heidlebergman:

Now they have two assets instead of one.  They have the lease, which they can leverage much easier, and the mineral deed.  Now what I would do is trade the rights of the lease for more mineral fee interest, but that's me...I would guess more and more large mineral holding companies do this, we just dont realize it.  They are leasing it back to a subsidiary or a partner.  It's probably good business if you think about it.  These larger mineral holding companies are a double edged sword...1.  They will keep the price of minerals up during down times...which is good.  2.  They will buy up large swaths of acreage and demand larger royalties, bonuses, and working interest in properties, thus making it more difficult for your E&P companies to put projects together, but...3.  They will drive up the royalty rates, and lease bonuses which is good for the mineral owner. 


Kyle Nuttall
03/07/17 11:24:04AM @kyle-nuttall:

You wrote that you found a partial release of oil and gas lease.  If that's actually the case, then the company just killed the lease.  Now, the actual document may be something other than a release of lease (the title doesn't change what the body of the lease does), but it would be worth it to read closely and see.  You may have been the beneficiary of a newbie screw up or an incompetent employee screw up or just a standard screw up. 


Jenny Behm
03/07/17 11:47:08AM @jenny-behm:

These leases are "assets."  Companies can show these assets as collateral when trying to get more money from the banks.


Bill Bergseid
03/07/17 06:39:46PM @bill-bergseid:

Sometimes companies buy the mineral interest so they can participate (especially smaller companies who want well information) in a well  where they are not able to pick up any leases. If all the leases in the area are owned by companies that want to drill, the scenario you described is one way for them to get a foot in the door.  So they bought your minerals knowing your lease would expire before a well was drilled and when Gulfport offered to renew or extend the lease on their minerals, they said no.  So the lease on their minerals expired and they can now participate in any well that includes the land in the DSU. 


deutchen
03/07/17 06:56:23PM @deutchen:

My lease was just renewed one year ago. The partial release says other than changing hands, everything else in the lease remains in effect for the rest of the 5 year lease period. The company that bought my minerals doesn't own a majority share. My brother also owns a 25% share of the total. The land is right next to the Family well & the Eagle Creek well, both high producers of gas. I don't understand why Gulfport would sell the lease for that reason.


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