Would like to lease, but already have an existing lease.

I'm wondering if anyone has some advise for me.  My parents who are 83 and 86 were offered $3000.00 per acre just recently from Hilcorp, out of Texas.  They signed the lease, then my Father thought he "might" already be in a lease. 

After going to the court house, I learned he signed a lease with Crown Energy, out of Butler.  They pay him $290.00 for each year they don't drill on his land.  He signed this lease in Feb. 2009 for 5 years.  Unfortunately Crown has NOT drilled on any of the properties that they have leased in Pymatuning Twp.  They seem to have targeted the older land owners too.  They are behind on their payment of $290.00 for this year, but in the lease they specified that my parents have to send them a Certified letter, stating that they are behind on payments, and they have 90 days to send them a payment.

I feel this company has bought leases with the purpose of re-leasing for the "Big Bucks", I'm furious that they could make a large sum of money on my Dad's land.  He owns 58 acres.

He's worked 42 years at a steel mill, worked for everything he's got, and now this company could benefit on this.  Any suggestions for help would be greatly appreciate.

 

Becky Milliron

Mercer County, PA

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Permalink Reply by Jack Straw on December 5, 2011 at 4:31am

My suggestions would be:

1). Inform Hilcorp of the situation, no sense in having them expend effort in researching at the Couthouse.

     If you inform and explain, they may still be around in February 2014.

2). Do not inform Crown that annual payment has not been received. Hope that they have forgotten about your parents property (highly unlikely). Do not cash any checks from Crown until you understand all nuances of the existing lease.

3). Cross your fingers and hope that nothing happens over the next 27 months and the lease expires.

4). Explain to your parents that they should  not sign any lease/contract without review and advise of an Attorney.

5). Carefully read over the lease, and attempt to understand it. Hopefully there are no "Gotchas" - like Crown having the right to renew at the end of the initial five year term.

Sadly, a lot of people have found themselves in similar circumstances.

Unless one our your parents were deemed mentally incompetent in February 2009, it is likely that all one can do is hope that time will allow for a second chance.

 

All in my humble opinion.

My suggestions are no substitute for the advise of a knowledgible Attorney with O&G experience.

 

 JS

 

Permalink Reply by Granny Clampet on December 5, 2011 at 5:21am

Jack,

Thank you so very much for your reply.  We do have an appt. with an attorney this week and are PRAYING for a crack in Crown's lease.  We did notify Hilcorp of the situation also.  Thanks again for you input.

Appreciated,

Becky

Permalink Reply by brian kulp on December 6, 2011 at 4:12am

check the crown leese and see if you have a right of first refusal then hillcorp can do a top leese on the property

Brian

Permalink Reply by Blindsquirell on December 6, 2011 at 4:38am

The OGL is 27 months from expiration.  You would be "locked in" to whatever Hilcorp (or anyother) would possibly offer for a top lease (and payment wouldnt be until the expire).  27 months from now the offers "could" be higher....but that would also be a gamble.  MHO, is still hope for a drilling unit and collect the royalties.   Dont get "locked into" anything that wouldnt pay you for over 2 years.

Permalink Reply by Blindsquirell on December 6, 2011 at 1:31am
That's $5.00 an acre! In 2009! Nowhere near the current going rates. That rate was paid in the early 2000's and prior yrs. Are you sure thus wasn't a Paid up lease? Sorry to say that you just may have tipped your hat to Crown by posting this. Your greatest hope would be for someone to firm a producing unit so that royalties will be paid to you. If there is no extension you can negotiate a better term in 2014. Did surrounding tracts also agree to these terms or even sign an agreement? Are the neighbors of these 58 ac also under an OGL?
Permalink Reply by Granny Clampet on December 6, 2011 at 1:36am

I have already contacted Crown via phone to ask to have this lease cancelled.  I've also contacted the Atty. Generals office, as they misrepresented themselves to MANY elderly landowners, promising to drill with no intention of doing so. 

I'm not aware of neighbors that have signed on with them.  I don't think it was a Paid up lease, as the contract states they are to make yearly payment of $290.00 which, you are correct, is $5.00 an acre.

They also show an office address, that doesn't even exist.  We went to find it and the Post Office had never heard of them.

We meet with an attorney today for his advise.  Thanks for your comments.

 

Permalink Reply by Blindsquirell on December 6, 2011 at 1:45am
Crown is a broker.....more than likely they have moved out of the area and out of the temp work space. Apparently they did their job as requested by their client or couldn't sign enough acres in area and moved on. Is their activity in the area today? Are neighbors being offered leases? 2014 can't come soon enough!

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