seeking help with lease terms in Mannington, Marion County

My sister, Karen (above), and I have inherited mineral rights in several counties in WV, but mainly in Marion County.  We have had landmen representing XTO/Exxon Mobil calling for a couple of years about a particular 110+ acre parcel where we own a 50% interest.  No surface land, just the O&G.   The surface land has been divided into about a dozen properties since our ancestor purchased an interest in the mineral rights on 113 acres in 1897.  Our ancestor’s brother owned the other 50% and now a single heir on that side of the family owns that 50%.  We know this person’s name, but that is all.

I had a TX O&G attorney review the proposed lease documentation last year.  I asked for conceptual changes, rather than sharing the full lease document mark-up.  XTO said "no" to everything, but the boss called yesterday to see what it would take to get us to sign.  Our WV attorney is not an O&G person, but has an awesome paralegal who has done title work for us.  I am unenthusiastic about negotiating against myself as XTO is trying to orchestrate.

We would appreciate hearing any thoughts you have to share with us.  We sold one property a couple of years ago, but this will be our first lease.  If you prefer to comment to me privately, please email me at LSM4Kids@Yahoo.com.

We have asked for $1,500/acre bonus and 15% royalty.  XTO is at $1,100 and 13%.  This is an increase from their opening offer of 12.5%.

We asked for a provision stating that there will be no deductions from the royalty for treating, transporting, marketing etc.

We asked for a Pugh clause and a horizontal severance clause.  6 months ago the landman said they would ask their client for a Pugh clause if we agreed to a 3-year extension to the proposed 5-year lease.  Yesterday, the landman said they would pay the bonus ($1,100/acre) again if they chose exercise the 3-year extension.  We feel that bonus should be larger since we will all know how the property is producing at that time, but have not discussed this with the landman.

We asked that the $1/acre Shut-In payment be increased to $50/acre and for the annual extensions under this provision to be limited to two.

We also asked for a provision stating no warranty is given by us, express or implied.  We are inheriting these properties from someone who died in 1904 and no one in the family knew about them.  We have done reasonable title work, but expect to be able to rely on XTO's title work for the period prior to the time we became owners.

Thanks!

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Replies to This Discussion

Permalink Reply by Kyle Nuttall on May 6, 2013 at 11:43am

Hi Lisa,

It looks like you're doing well on your own.  But if you do want to hire a WV attorney with an O/G background (four years as a landman), I can help.  I'll email you, too.

For the benefit of everyone else on the forum, I'll comment that $1,500/ac for the bonus and 15% on the royalty seems really reasonable, maybe even low.  Unless XTO has a really good reason, I don't think I'd sign for that.

Kyle

Permalink Reply by Lisa McKenzie on May 6, 2013 at 12:28pm

Thanks, Kyle.  I am not aware of any reason, other than stating that they are the only game in town, for XTO's price.  We have been told that they will change the shape of their unit and exclude us.  We have been told that they can go ahead and drill and just hold our share in an escrow for us.  We have been told that they have the other half of our interest agreed but not yet signed.  Blah, blah, blah.  Months go by and then they call us both again.  Now the landman says he wants to get us approved as a second half transaction.  We are still working on documenting the title chain, hopefully without opening WV probate for a non-resident who has been dead more than 5 years, but fewer than 10 so our attorney won't do an affidavit of heirship for that.

Permalink Reply by Kyle Nuttall on May 7, 2013 at 3:31am

Only game in town, huh?  Well, that would be a good excuse.  Except there's also the option of waiting for somebody to come along and make an offer later.  There will be more offers later.  You might have to wait a long time, but there will be other offers.  You have to weight how important the money is to you today compared to what you think you could get in the future.

You shouldn't have to open probate unless that non-resident did something with the property that is different from how WV intestate law would handle it. At least, the company I worked with had that policy for their oil and gas purposes.  But your attorney will have more knowledge of the facts of your case than I do, so listen to them if they disagree.

Permalink Reply by Lisa McKenzie on May 7, 2013 at 3:41am

Our issue has been getting a "triple certified" or "exemplified" will or something else the county clerk will accept.  The last thing we provided was rejected - it was certified, but not triple certified.  The state where this relative lived does not have "triple certified" and the will did not need to go through probate.  Big Headache.

Permalink Reply by Kyle Nuttall on May 7, 2013 at 4:12am

Indeed.  I've dealt with that before.  If I remember correctly, I requested a letter from the certifying county stating that the certification they provided was the highest form of certification that they could offer.  You may have to make a bunch of phone calls to each county to get things to work out, but you should be able to make it work out.

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