Bonus money-company wants to change from lump sum to payments?

Signed a lease last year, have not been paid any bonus money-the company has a month or two yet to pay per the terms of the lease. They contacted us, and said due to market conditions, they are seeing if they could split the bonus payment into 3 installments. (One payment per year) They said nothing would need to be changed on the original lease, and the payments would be taken care of by an "OPP".

We contacted our attorney about this, and are waiting to hear back, but thought I'd also check here to see if anyone has any experience/thoughts on this? My biggest concern is that the original lease being a "paid up" lease, and now accepting payments if that would create problems. 


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Not sure how much money you are talking but it could save you a bundle in taxes. All you need to do is add an addendum to the payment schedule

Very true, provided one is aware of (IRS) Revenue Ruling 68-606 and is OK with it.

This is true save you a ton in taxes....


Do nothing until you and your lawyer familiarize yourselves with (IRS) Revenue Ruling 68-606.  After that, you will be able intelligently to decide how to proceed.  Here is a link:

Link to IRS Revenue Ruling 68-606 information

You most likely will benefit from reading as many of the references there as time permits.

Could the company go bankrupt?

If they were to start a well in the first year would they still be obligated to pay the 2nd and 3rd installments?

Thanks so much for the thoughts! The IRS ruling 68-606 I was not aware of-talk about an eye opener there! Mentioned to the company on the initial phone call about them going bankrupt, and they were speechless...pretty much it ended with them saying we are "guaranteed" to get paid.

Good point also if they put the well in right away if they'd have to make the payments...this company so far has been pretty upfront and honest, 'course that could change or if the lease ends up at another company...

I should add, that in my original post "OPP" is incorrect, it should be "OOP" (Order of payment) Sorry for any confusion!

This happened to a friend of mine - they ended up receiving only one payment before they were put into a unit.  It took another two years before they started getting royalties.  The royalties were well worth it, and they were happy to start getting them so soon, but they were definitely "misled" by the O&G company about their plans - they had been told there would be no activity in their area for at least four years (five-year lease) and that even when it started, they would still get their annual payments.  They believed the landman.  But the way the lease was written, as soon as the activity started, their lease payments stopped.


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