Comment

Comment by Samuel J. Orr on December 7, 2012 at 5:52pm

Take a deep breath. No need to hurry and sign with CX or anybody else, for that matter. Not much is going to happen until perhaps April 2013, maybe a little sooner. The  O&G companies will have new annual budgets for leasing. They will also have a better idea of what to offer as the results of the exploratory wells become known. Remember there is not just the drilling, but also the fracking process, and the 60 day rest period thereafter before a well can be evaluated. The new increased tax rates are going to take a lot of your bonus money, so why be in a hurry to sign with CX. If I were to sign with a group like CX, I would sign for just 2 or 3 months and without any renewal clause. But you do what you think is best. CX will be overjoyed to take 6% of your bonus money. They will probably say you have to sign by a certain time or they will charge you 8%. In any case you will have enough time to get in at the lower rate.I am not saying you absolutely should not sign with CX. I am saying that I would be in no rush to sign now. There are still a bunch of people who signed with Halcon in Mercer County through CX/M&P who did not get paid. If these people do get paid, they probably will not get paid by Halcon, and they probably will get paid less. M&P and presumptively CX are attempting to find another O&G company for the properties that Halcon reneged on. This is to their credit. Nevertheless, Geology is still king. Contiguous properties that can be combined into a drilling unit of between 640 and 1280 acres are valuable. Five acres surrounded by properties held by production are likely not to be so valuable. A problem in at least part of Crawford County is that Range Resources holds thousands of acres. While they may need to fill in some patches, it may mean that they will be the only driller interested in leasing a particular piece of land. I think Range's holdings are predominantly in the eastern part of the county. If none of this makes sense to you, disregard it! Sometimes the decision choices we have are just different shades of gray. Best wishes, whatever you do.

Comment by rex roae on December 7, 2012 at 12:21pm

Sam, I appreciate your input as I'm starting to feel I'm in over my head. 

Perhaps, it would be best for me and my family to just sign with CX or one of the landowners groups and let people with more knowledge than myself do the negotiations.  We're not much into the group thing but in this case, I believe it's probably the prudent move.  We're in a good position money wise so we can afford to be patient but sometimes that is my achilles heel.  

I just don't want to get greedy and have it come back on me.

Comment by sldouglass on December 7, 2012 at 11:09am

I am not sure whether or not my last effort at a message got through.

I want you to know that I have had an occasional client say to the landman, when you are ready to write a check come around and I will sign a lease.

I have had clients say: "ok, I will play your game and wait for most of the bonus, but I have to have something for my time and trouble when I sign the lease, nonrefundable - not only enough to cover the cost of the lawyer but actually something for the time and effort put in by lessee.

It is surprising that Guardian or any producer would readily walk the lease - unless it is for the purpose of renegotiating more favorable terms.  At least some of the problems Rex mentioned are likely to be resolved - maybe all.  The test of how far to bo back in a search is the time of the earliest known severance of oil and gas in that county.  Drake well was 1859.  It would not seem like there would be much actifity before that but it is possible.

I would be surprised if an experienced title sercher in Crawford County could not locate the original patent for the subject property and then work the search forward from there.  It is easier usually to start with the most recent owner and go back from current ownership from current ownership following recitals in deeds, but sometimes there is no recital of the previous owner in the deed and the abstractor has to get creative to find erlier owners.  It sounds like this is a foreign landman without much experience with PA titles.

I am surprised that there would be a problem with NW Savings Bank.  Its website makes clear an interest in oil and gas and specific staff people to support that interest.  Some banks deem properties with O&G leases unmortgageable but I was assured some time ago by one of that bank's people that they did not have that concern - but perhaps required some additional paper work.

I guess I just do not know enough, but it is hard to figure out how adverse possession is relevant in mineral titles.

I guess I do not know enough to understand the situation, but if Rex can get free of the lease, he has an opportunity to do better the next time - unless he is pressed for cash and cannot wait.  Perhaps in another lease Rex can better spell out what is a title problem and how it should be handled.

Comment by Bob Jenness on December 6, 2012 at 3:19pm

Rex, do you have a lawyer?  I'd sure be talking to one at this point.  Sam, are you watching this thread?  Can you help us to understand what's going on here?

I live part of the year in a place where lots of fly-by-night folks tend to practice.  Back in the day, I used to sell my cars private, and I had a strict policy that I never handed over the keys until I had cash in my hand.  Sure wish we could do this with leases.  I don't care how much they check my title before they offer me a lease, I'd even help them with a lot of that research I've already done, but there's just too much opportunity to use that title clearing privilege to welch on a deal.  Hope the LG can fence that for us.  I'd even pay for title insurance in preference to this loophole.  Has anyone ever done a lease like that?  They do it all the time on sales, and the cost is "reasonable" in the context of other for-profit middlemen in that business.

Comment by rex roae on December 6, 2012 at 12:21pm

Frank, if a person has a first lien with a bank and an oil and gas company wants to have a subordinate loan placed on the same property, I don't see where it would really matter much to a bank. 

From what I was told, Mercer County Bank will return a fax the same day allowing the subordinate lien while PNC, Northwest and SNB sometimes takes weeks to respond if they respond at all.   I would lie to know how accurate that is if anyone else has personal experience.

Comment by rex roae on December 6, 2012 at 12:16pm

Bob, Honestly I'm not quite sure what is going on.  I was bombarded with so much information when the Guardian rep was here, I'm still trying to sort it all out in my head.

Something else that was said that I thought was interesting was the Guardian rep said they weren't leasing for Halcon but in conjunction with them.  He said Halcon was interested in the western part of Crawford and they(Guardian), were interested in the eastern portion.

One thing he kept saying which I didn't quite understand when talking about how far back they they wanted the deed to be.  He kept saying in Ok, La. and Texas, the deeds were older and they could go back to patten.  Not sure if he meant patent,  padden or what but I didn't inquire further.

Comment by Frank on December 6, 2012 at 11:43am

Rex, from what I have seen most banks and morgatage companies have problems with companies that are flippers. Some not all end up using your lease as collateral against their business to borrow more money, which ends up against your property not the flipper. I say cudos to Northwest Savings Bank they are just looking out for your best interest, because if you should say sell your property or want to take a loan out against it (line of ccredit or loan) they would have to deny you because you don't have a clear title(would already have a lein on it). Again that's why I'm so glad I'm with the NWPALG, and they have educated us about this early on , I know they are working to get a lease and I'm content to wait, beacuse I know the oil and gas aren't going anywhere until I say so. I want a lease that is direct with an energy company not a flipper but that is my opinion and my opinion only and just one of the reasons why.

Comment by Bob Jenness on December 6, 2012 at 10:40am

I don't understand why they need title research back that far.  Are the Native Americans litigating?  I think some of PA wasn't originally deeded until after the 1850s.  Does anybody know of any title issues that could date from pre-civil war and still be valid?  How have all the wells drilled in the last 30 years found clear title?  Or is this unique to your property, Rex?  Or is Guardian just looking to get out of an unrequited flip? 

Comment by rex roae on December 6, 2012 at 9:48am

A representative from Guardian came over last evening to get me to sign a release from our contract and they will be mailing me the release in a week.

Apparent;y there were issues on each parcel I was going to lease.

On the first parcel, they could only go back on the deed to 1850 and even though the deed was clear, they wanted to go back to at least 1820.  I believe they wanted to do an adverse possession to clear the deed of any claims before 1850.

On the 2nd parcel which adjoins my home, we have a mortgage with Northwest Savings Bank and according to Guardian, they along with PNC and SNB(?) are very hard to wor with to get a subordinate lien placed on the property.  They said Mercer County State Bank was the one bank they have no trouble with so we're switching our loan over there.  There was also an issue of Range submitting paperwork to use the property in a unit on a previous lease but they never drilled a well and the lease expired so they didn't think that would be much of an issue.

Guardian wanted an additional 120 business days to clean up the titles and said it took about 90 days for an Adverse Possession but we decided we wanted to end the lease for now and revisit it at a later date after refinancing our one property.    They were open to the idea of putting money in escrow if we signed again and said they did that with some other landowners.

What it sounds like to me, you would need a squeaky clean title going back to 1820 or before to not run into any delays and I can understand that but feel they should have been a little more upfront about the timeframe we were looking at.  The Guardian representative was polite and answered all my questions as did the receptionist at the corporate headquarters in Texas.  We just need to take a step back and make sure we go ahead how we want.

Comment by Oliver Perry on December 5, 2012 at 5:56am

j. rick, The people that use their real name on this forum need to be careful about what they say here and I don't blame them for that. The O&G companies are monitoring this website. 

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