MRP 163: Listener Q&A July 2022

MRP 163: Listener Q&A July 2022

  • Post author:
  • Post category:Podcast

In this episode, we answer listener questions that were submitted via email by John, Sarah, Helen, Jeffrey, Ervin, Danny, John, Chuck, and Michelle.

Thanks again to everyone who left a review or who submitted a listener question!  If you have a question about your minerals or royalties, you can send it to feedback@mineralrightspodcast.com and who knows we might just answer it on the air!

If this has been helpful, please take a moment and leave us an honest rating & review on Apple Podcasts.  This feedback really helps keep us going and helps make sure that we are putting out content that is tailored to your needs.

Listen on Apple Podcasts

Listener Q&A

My family has surface and mineral rights on a part of a section of Oklahoma since buying it from the Native American tribes in the early 1900s. Since 1921, the mineral rights have  been leased continuously  under the same lease.  I believe the existing production wells may go down 2,000 feet or so.

Recently, a large player has unitized the same section, along with another section, and  has started a horizontally  drilling program. 

My main question is this. Is the lessee of the 1921 lease entitled to 7/8ths of the  royalty of the new horizontal production that would customarily go to the mineral rights owner if no existing lease was in place. This is despite I signed a new pooling agreement and/or the horizontal drilling several miles deeper than  the “1921” lessee. 

Additionally, there is no way to determine what section the oil production is flowing from the horizontal fracking.  Finally, so far, the new horizontal wells, are located on the other section.

This quandary will likely is likely hitting  your other listeners.

Thank you for you time, your podcast, and consideration.

John

Thanks for your question, John! Your question is multifaceted and there’s a lot of assumptions that I have to make in terms of answering this without having a look at your oil and gas lease. First, I assume that you don’t have a depth clause in your lease. So in other words, you didn’t lease only down to two thousand feet and anything deeper would need a new lease. So I’m assuming that that’s not the case. Similarly I’m assuming that you have a 1/8th royalty on that 1921 lease based on your statement that the lessee would be entitled to 7/8ths of the proceeds from the sale of any oil or gas (in other words, they have an 87.5% Net Revenue Interest in the lease). Also, I’m assuming that you’ve had continuous production since that lease was signed in 1921 since that’s what you mentioned so assuming that’s the case this this acreage is considered to be what’s called held by production. What that means is even if they only have a well that goes down two thousand feet it’s a vertical well that is holding your lease. If the operator comes in and drills a long horizontal wells under your your minerals, in most cases you would still be held by that 1921 lease and the royalty rate and the other terms that are in place. The fact that you had a pooling agreement means that your acreage is pooled with other other tracts in 2 sections. The boundaries of the drilling spacing unit and all of this will be outlined in that pooling order that you should have gotten from the Oklahoma Corporation Commission so that is something you can look up if you don’t have that handy. You can just go to the um, the occ website look up the legal description of your property and then look for those those pooling and increased density orders in terms of the number of wells that are allowed to be drilled now.

You mentioned here is that there is no way to determine what section the oil production is flowing from and actually that pooling order will tell you what sections are being pooled together. That is how they determine what sections the oil production is flowing from when it comes to any horizontal wells that are drilled. So one of the reasons they do those those pooling orders is ensure that the operator has a valid case in terms of how they are going to protect correlative rights and make sure that they’re going to develop that in the most efficient and effective way possible. And the pooling order will outline all of this. So in your case even if the surface location of that well is in another section I’m presuming by the fact that you got the pooling agreement, that those horizontal well bores are actually going under your property. So it doesn’t matter where the surface location of those wells are, what matters is where that well bore penetrates the target formation and then you know what mineral tracts are underneath where that occurs.

Now to to determine your decimal interest in these wells, you would need to divide the number of net acres that you own by the size of the drilling spacing unit (if it is 2 sections then it typically would be a 1280 acre spacing unit), then multiply by the fraction of your mineral interests that are within the drilling spacing unit and then multiply by your lease royalty rate. For example, if you have 1 net acre and it’s entirely within the 1280 acre spacing unit, Your decimal interest would be calculated by 1 net acre divided by 1280 acres times your royalty rate which appears to be 1/8th. That’ll tell you what your decimal interest is in those horizontal wells in terms of your net interest. It seems very complicated at the at at the surface but it really is not too too difficult if you read those those pooling um orders and read your oil and gas lease.

The terms of your lease will dictate exactly what you get paid and so if that’s something you need help with you can contact an attorney that’s licensed to practice law in Oklahoma. I hope this helps! Thanks again for your question, John!

Question #2

Hi, Can you suggest an online service where you can look up deed records? I’ve come across several but need to know which one is the best. I’m in Harrison and Panola County Texas. Is this something that depends on the county?

 As always, I love your podcast and have learned so much! I am currently going through the division order analysts program at Midland College. I’m doing the program to learn how to better manage our family surface and mineral estate. 

Thank you!

Sarah

Sarah,

It is good to hear from you again!  Sure – I like Enverus Courthouse’s free trial.  This product features 150 counties in Texas.  You get $100 credit and don’t have to provide a credit card (at least when I used it last).  Searches are $.25 each and viewing docs is $1, downloads are $1/page.  With this you can download most if not all of the docs for your property.  Another that is Texas focused is Texas File.  I think you can do basic searches for free on Texas File and then pay to download docs.

 You can see if Harrison and Panola are on these services.  I assume these counties haven’t digitized their records and made them available through the county websites? That would be the first place I would check since it is more than likely free to search (at least back until a certain date, like 1970 or something like that).

Congrats on taking the initiative to learn about how to manage your families interests.  If you aren’t already a member I would also recommend joining the National Association of Royalty Owners or NARO.  We have both in-person and virtual education options, in fact when we are recording this on July 13th 2022 the NARO Texas Convention is going on. So that’s another great resource to learn about how to manage your interests. 

I hope this helps!

Thanks,

Question #3

 Hi Matt

I’m one of those people whose great grandfather left mineral interests with instructions to never sell. Now that we finally have some production, I’m trying to learn the business. Joining NARO has helped a lot. My biggest concern is auditing the check stubs, spacing, and other lease provisions. Is there a pre-built spreadsheet with formulas? Better yet, an automated system?

If you’re interested, I’ve attached some history on my greats.

Thanks so much!

Helen

Thanks for your email and for sharing this info!  Here’s my royalty audit worksheet that I mention in Episode 97.  As you can see it can be pretty time consuming to manually track all of this but as you suggest there are a few minerals management platforms that can help automate some of this for you (most require you to upload a .csv (basically a text file) from EnergyLink but at least it helps eliminate most of the manual data entry.  We interviewed the founders at RoyaltyAdvocate (they just rebranded to Crosswind Tech):  MRP 92: How to Make Sure You Are Getting Paid What You Deserve with Royalty Advocate. Another good one just focused on the accounting/royalty audit portion is SherWare MRP 24: Automating How you Track and Analyze Royalties with Phil Sherwood, CEO of SherWare and Host of the “We’re Still Here Podcast”  (WellProfits Cloud is their royalty audit platform: https://wellprofits.com/cloud.html.)

Both of these have a free plan so you can try it out before you decide to upgrade.

I hope this helps!

Question #4

Hi Matt

I’ve been getting letters from oil companies wanting to lease or buy my land. I did some research and I do have a great-grandfather that had some land near Williston, ND. I guess what I’m trying to say is how do I go about claiming the land and proving its mine? Or can I? A side note in 2008 I did lease this land without understanding exactly what I was doing so when lease was up in 2011 I started looking into what I may have over there and discovered it is worth figuring out how to do this the right way. So please get back to me at your convenience. Thanks

Jeffrey

Jeffrey,

Thanks for your email.  Assuming you haven’t done it already, you would need to go through probate on your great grandfather’s interest to get it in your name.  First steps are performing a title search in any counties you think you may have inherited property, in case there are other tracts.  Also, it might be worth doing an unclaimed property search in the state where your great grandfather lived to see if he was owed royalties.  When you go through probate you can supply these records to the state comptroller to claim these funds as well.

Good luck!

Question #5

Hey Matt. Yeah, I’m a mineral owner in Texas (newly inherited). My biggest challenge right now is locating the tract of land that I inherited.  So far I’ve been able to locate the Survey referenced in a previous lease on the Railroad Commission’s GIS viewer, and get a more precise legal description by obtaining the partition deed wherein my Grandmother was the Grantee. But the description of the said tract is in metes and bounds, so I need to know exactly how I locate that on the GIS viewer. Hope you can help me out with this. Thanks.

Ervin

Hi Ervin,

Thanks for your email!  Locating property by metes and bounds descriptions is definitely a challenge.  It is like trying to find a treasure using a treasure map (walk 100 paces towards the oak tree)! 😊  You can definitely plot out the outlines of the tract on a piece of paper following the description (using a protractor to measure the angle), or there are software programs that will take the description and generate a plat showing the outline of the property.  Doing a quick search I found a video that shows you how to do this using a free piece of software (I’ve never used it but something like this helps take the guesswork out of the process).

I’m actually in the process of creating an online course on how to understand what you own and how to locate it on a map.  While I won’t be going into extreme detail about metes and bounds thanks for reminding me to include this in the class!

It sounds like you are well on the way to understanding what you owned and identifying if there is any activity near your tract.  I’ll be sure to let you know when the course will be released (make sure you stay subscribed to my email list so you don’t miss the announcement).

Thanks again for reaching out!

Question #6

Hello Matt  I have 3 brothers 1 passed away before we started getting royalties so I assumed the division was by 3 instead of 4,recently another brother passed away and can I claim his share now. We have been getting this for about 2 years and he never  signed or returned his division orders. So all of his share is sitting with the OPA Oklahoma Petroleum Allies. I have several other issues but will start with  this one as #1 challenge  Thank You

Danny

Danny, thanks for your email.  I’m sorry to hear about your brothers’ passing.  Your situation is a common one – trying to make sense of what you own and get everything in your name after inheritance.  I’m actually creating a free online course right now that will cover some of the issues you mentioned and I would love to get your feedback once it is ready.  Keep pushing forward on trying to claim your property, it will be worth it in the end.  If your brother’s royalties have been handed over to the state for management until you claim it, you can search and go the process of claiming it on your own.  We talk more about this in MRP 103: How to Find Out if You Have Unclaimed Royalties.

Question #7

I received some PR from an oil company in Texas that said that they completed the acquisition a 325 acre oil lease in Garza County, Texas.   Does that mean that they own the land and the mineral rights or just the mineral rights?   How do I find out?   They claim that this took place around October 5th of 2021.   The Texas Railroad Commission shows them as the Operator of a well on the lease, but I could not find any records listed within the state that show they are the owners or had acquired this oil lease.  Any help you can give me would be greatly appreciated. (John provides some details about the lease).

 Not sure if you can do anything with this.   Thanks in advance

 John B.

Thanks for your email.  From what you describe, it sounds like the company (Allied) acquired the leasehold interests from MNA Enterprises including an operating well.  When there is a change of operators, it refers to the assignment of the leasehold interests from one company to another.  Unless MNA Enterprises also owned some or all of the mineral rights and/or surface rights then it is likely that they sold only the leases.  Changing operators doesn’t affect the ownership of the other surface or mineral owners but it does mean that if you have an interest in that well you should be hearing from the new operator with a new Division Order confirming your decimal interest.

We talk more about this in MRP 98: What to do if Your Wells Change Operators

I hope this helps.

Thanks!

Matt

Question #8

I am inheriting an oil producing property located near Stanley, ND. My overall goal is to get educated on what we own, what leases are in effect, when they expire, etc.

My immediate concern relates to figuring out how we are being paid for royalties on the property or if we are forced pooling. There are three different operators paying royalties-Hess is the largest- with the following wells [Well Names changed below].

100223 Well Name 2829H-1  RI

100223 Well Name 2829H-1  RU

108963 Well Name 2829H-2  RI

108964 Well Name 2829H-3  RI

108965 Well Name 2829H-4  RI

I’m trying to figure out what the mineral rights are worth and how long the checks will keep coming.

One real simple question I have is what the difference between the R1 and the Ru for the first we

I’m listening to your podcasts and am on episode 6.

Thanks!

Chuck

Hi Chuck!

Thanks for your email.  It sounds like you are on the right track with understanding what you own so great job! 

As far as your question goes, I’m not sure about Hess’s naming convention but usually when they use different abbreviations they will provide a list at the bottom of the check stub.  Usually the RI indicates “Royalty Interest”.  I’m not sure what the U might refer to but a quick call or email to their owner relations department should get them to provide more information.  Also, sometimes the operator’s owner relations department will have a sample check stub on their website with more information and further explanation.

In terms of figuring out how much your interests are worth and how long (and how big) the checks will keep coming can be done a couple of ways.  First would be to hire someone to perform a valuation of your property.  They should be able to provide a production and cash flow forecast for your existing wells and can tell you if there is any potential undeveloped acreage where future wells could get drilled.  The forecasting process for the existing wells should be able to provide a rough approximation of how long these wells could keep producing and remain profitable.  Of course things could change but that should be something that could help your budgeting in the future.

My company provides these services but if you are technically savvy, you can do some of this yourself.  Just download the production data into Google Sheets or Microsoft excel and plot the production data vs. time on a log plot.  In many cases if the wells have been producing for some time, you can simply take a ruler to the data and project a line into the future to estimate the decline rate and future production to get a rough idea. 

I talk about how to do this in a software that I use called Well Database in this very rough video I have on my YouTube channel.

I hope this helps!

Question #9

Hello, Matt,

Thanks for this resource.  

I am trying to figure out how to transfer the Royalty Interest in a lease owned by my mother to my brother, a beneficiary in my father’s will.  I am settling my father’s estate and need to transfer assets to close his estate and trust.

Michelle

Hi Michelle!

Thanks so much for your email.  To transfer your royalty interests typically requires and mineral deed that will need to be recorded in the county where the minerals are located.  Many states also require that you file ancillary probate in the state where the minerals are located.  An estate attorney with familiarity with oil and gas should be able to do this for you.  We talk about this in depth with Attorney Richard Winblad (licensed in Oklahoma) in MRP 85: Probate and Marketable Title with Attorney Richard Winblad.  While many of the specifics are related to OK property, many states follow the same process.

I hope this helps!

Resources Mentioned in this Episode:

Thanks for Listening!

To share your thoughts:

  • Leave a comment or question below (we read each one and your question may be featured in a future episode)!
  • Ask a question or leave us feedback via email or voicemail: (720) 580-2088.

To help out the show:

  • Leave an honest review on Apple Podcasts or wherever you get your podcasts – we read each one and greatly appreciate it.  Plus, you can get a shout out on a future episode!

Thanks again – until next time!

Tags: , , , , , ,