The Money Spring

The Money Spring

Mike Shellman at Oily Stuff, pens the best blog on the oil business. He often writes regarding the unsustainability of the shale drilling business model.  In his most recent post, he commented on a recent report that Haynes & Boone released on what sources companies are using to raise capital to fund their 2018 exploration and production efforts….

A Well Proposal In Oklahoma - A Boon to the Mailman

A Well Proposal In Oklahoma - A Boon to the Mailman

Berlin's friend Bruce called her up on Friday, and after he finished ranting about planting his tomatoes before the last frost date, he got down to asking about well proposals and why he is receiving them in the mail for his Pittsburg County, Oklahoma mineral rights…

Assorted Links (and a chance to win an Amazon gift card)

Assorted Links (and a chance to win an Amazon gift card)

The Perfect Oilfield (unfortunately, not the STACK/SCOOP/MERGE..): 

Once one starts tacking on zeros to the production numbers, Berlin's former tong working brain starts to spin a bit (like chains...). It sounds very impressive and I'm sure the Bedouins of that desert preferred the sovereign didn't own the mineral rights....

Tom Ward is back and that is good news for Oklahoma mineral owners

Tom Ward is back and that is good news for Oklahoma mineral owners

NewsOK business writer Jack "in the" Money, reported a new partnership, BCE-Mach, LLC ("Mach"), that was formed earlier this year between Mach Resources, LLC, and Bayou City Energy. Bayou City Energy will be providing capital to the acquisition and development efforts of Mach Resources, LLC, that is led by Tom Ward.

This announcement should make Oklahoma oil and gas mineral owners smile (and start dreaming about purchasing a new combine...)

Splitting the Baby and the Pooling Bonus

The Oklahoma Corporation Commission has been regulating on the fly as to rule changes on multi-unit horizontal wells. One of the recent changes is that applicants now must offer a formation election if the applicant desires to force pool more than one common source of supply. Berlin thinks that this effects the unleased Oklahoma mineral owner more than the commissioners had originally intended... 

Extending an Oil and Gas Lease

It can happen to the best of us, it was three years ago and nobody was drilling deep gas in Custer. You signed an oil and gas lease with an option to extend the primary term. Now, things are different, the "macro-headwinds" have shifted. There are folks with deep pockets paying 3x what you will be paid for your option. Even though $500/acre for a 160 acre lease on the home place would make most smile, you have a yellow equipment problem...

Mark Papa's Got a Brand New Bag, and it's Weird

Mark Papa of Centennial Resource Development, Inc. ("Centennial") has made some bold statements recently regarding the future of oil and natural gas production from shale reservoirs. The thrust of his claim is that energy companies will not be able to produce as much oil and gas as they have forecasted. Berlin will not fault Papa for his statement, which could very well prove to be correct, but she believes that his arguments are faulty. Since Berlin has not interviewed Papa, all that she can analyze are his public statements. Berlin's comments are bolded and italicized after Papa's quotes:

Spudding Before Forced Pooling

Bruce was a bit pissed when he called up Berlin today. Apparently, his fence line weaning efforts cost him about 6 hours of sleep after he found the fence knocked down and the calves back with their mommas.  After he calmed down a bit, he asked why so many operators are spudding their wells before a forced pooling order has issued and what his options are as an unleased Oklahoma oil and gas mineral owner named as a respondent in the pooling proceedings...

Free Rider Problem: Fee Increases at the Oklahoma Corporation Commission

The Oklahoma Corporation Commission (the "OCC") plays a large, but often misunderstood role in the Oklahoma oil and gas industry ecosystem. The OCC is the regulator of almost all (less Osage County) oil and gas production in the state. Jack "Show me the" Money (a name destined for fame on the business desk) at NewsOK wrote a column regarding the proposed fee changes at the OCC...

I Thought You Were a Professional?

Berlin was having coffee at the sale barn this week where she ran across an ol' boy named Keith. Keith asked Berlin what she did when she wasn't raising stockers and she mentioned she's a landman. Keith looked a bit perplexed when he said "a landman? I thought you were a professional, like an accountant or doctor or some sh*t....

How Can One Prove That They Exist?

Berlin received a call today from Sage, a good friend who also happens to be a company landman, Sage reported that an Oklahoma mineral owner just called to chew on his leg as the mineral owner had never heard of Sage's company (despite the fact they've drilled about 70 wells in the past 2 years). He wanted Sage to prove that his company was legitimate and their lease offer was valid...

Is $10 Actually the Bonus Per Acre?

Oklahoma Mineral Rights Owners,

Berlin received another call from Bruce today. He was angry and slightly confused. Bruce was sure that some fly-by-night lease flipper was fixin' to cheat him out of his lease bonus. The Duncan, Oklahoma based outfit had offered him $1,100 per net mineral acre for a 3 + 2, oil and gas lease at a 3/16 royalty for some of his granddaddy's minerals in Beckham County, Oklahoma, which Bruce accepted...

Smooth Move: Oklahoma Independent Petroleum Association

All,

If Berlin was a betting woman, she would venture to guess that an organization with the words "Independent Petroleum Association" in the title and that represents itself as the unified voice and advocacy group for the Oklahoma oil and natural gas industry might support an independent producer in court proceedings against a municipality. In most cases, the bet would pay out, but not when the Independent Petroleum Association in question is the Oklahoma Independent Petroleum Association (the "OIPA")....

Reversionary Mineral Interests: The Term Mineral Deed

Oklahoma Oil and Gas Mineral Owners,

Today, Berlin was approached by a fellow oil and gas royalty owner (let's call him Bruce) who needed some assistance as he just received an unexpected division order in his mailbox (nice problem to have by the way). After some researching we found that his father conveyed his Carter County, Oklahoma minerals via a term mineral deed fifty years ago. A term mineral deed is a type of reversionary interest. According to Black's the definition of reversion is:

In real property law, a reversion is the residue of an estate left by operation of law in the grantor or his heirs, or in the heirs of a testator, commencing in possession on the determination of a particular estate granted or devised. 

And a reversionary interest is:

The interest which a person has in the reversion of lands or other property. A right to the future enjoyment of property, at present in the possession or occupation of another. 
 Bruce's father with the tie and cigarette. He sold his Oklahoma mineral rights on a term mineral deed to finance his "Summer of Love" exploits. The man knew how to smoke.

Bruce's father with the tie and cigarette. He sold his Oklahoma mineral rights on a term mineral deed to finance his "Summer of Love" exploits. The man knew how to smoke.

In landman terms, this just means that the property in question will automatically go back to the original grantor or the successors of that grantor's interest to the property when a certain condition is met. The conditions could include such mechanisms as a back in, an overriding royalty interest to working interest option and others which Berlin will cover at a later date. This reversionary interest in question today was simply a term that was written into a mineral deed.

Terms are very common in the oil and gas business. The most common instrument with a term is the oil and gas lease. However, conveyances of a fee mineral interest can also contain a term and that is what Bruce owned. Long story short, Bruce's father conveyed his minerals to a grantee in 1967 for a term of 50 years. Occasionally, the term of a term mineral deed may be perpetuated by production, but that was not the case here. Simply put, the minerals rights owned by Bruce's father would revert to his heirs (if they were conveyed the reversionary rights) 50 years to the day from the original effective date of the conveyance.

Often, reversionary interests with longer terms are lost in the inter-generational shuffle of heirs. In this case, Bruce is fortunate that the attorney who originally rendered the title opinion for the operator made a note of this term instrument so the operator was able to track it through the years. Bruce  is also lucky that the operator of the lease had drilled the original well in the 1970s and continues to operate the lease to the present day. This is uncommon.

If you have any further questions about reversionary or term instruments and your Oklahoma mineral rights, or you would like to discuss selling your mineral rights or oil and gas royalties (with or without a term) please contact Berlin or comment below.

More to follow,

Berlin