How Does SB212 Affect Oklahoma Mineral Buyers

Oklahoma Senate Bill 212: Impact on Mineral Ownership and Guidelines for Mineral Buyers

Comprehensive Analysis of Oklahoma's New Legislation Affecting Foreign Investment in Oklahoma Mineral Rights and Real Property

Oklahoma's Senate Bill 212, enacted in 2023, presents a pivotal change in the state's approach to foreign investment in mineral rights and land ownership. This legislation is particularly relevant for mineral buyers and stakeholders in the Oklahoma mineral market, as it introduces stringent regulations and compliance requirements. Here's an in-depth look at how this bill reshapes mineral ownership and the implications for mineral buyers in Oklahoma.

Key Features of Senate Bill 212: Restructuring Mineral Ownership Regulations

• Foreign Ownership Restriction: The bill enacts a critical prohibition on non-U.S. citizens acquiring or holding mineral rights in Oklahoma, both directly and indirectly. This includes ownership through business entities or trusts, barring certain legal authorizations. This provision is a direct response to the increasing foreign investments following the legalization of medical marijuana in Oklahoma, targeting illegal land and mineral rights acquisitions​​.

• Mandatory Affidavit for Mineral Rights Transactions: A central component of Senate Bill 212 is the obligatory inclusion of an affidavit with all mineral rights deeds filed in Oklahoma. This affidavit must verify the transaction's compliance with state and federal laws, particularly focusing on the new restrictions on foreign ownership of mineral rights​​​​.

  • Links to the form affidavits

• Detailed Compliance Measures for Mineral Rights:

  • Affidavit Specifics: The affidavit must outline the affiant's role within the business or trust, the entity's legal name, and the citizenship or residency status of all relevant parties. This requirement is crucial for ensuring transparency in mineral rights transactions​​.

  • Trust and Business Compliance: For trusts, all grantors, trustees, and beneficiaries must be verified as U.S. citizens or bona fide Oklahoma residents. Businesses must ensure the same for all direct and indirect owners​​.

  • Legal Liability Acknowledgment: The affidavit mandates acknowledgment of legal responsibilities, highlighting potential penalties for false statements, including criminal charges for perjury and financial liabilities​​.

Implications and Enforcement: What Mineral Buyers in Oklahoma Need to Know

• Statewide Implementation: The statute applies to all mineral rights deeds recorded in Oklahoma from November 1, 2023, onwards, necessitating adherence to the new affidavit requirement by all parties involved in mineral rights transactions​​.

• Closing Loopholes in Foreign Ownership: Senate Bill 212 addresses and closes previous legislative gaps that allowed indirect foreign ownership of mineral rights in Oklahoma. This shift necessitates heightened diligence from mineral buyers and sellers in ensuring compliance​​.

• Ongoing Clarifications: The Oklahoma Attorney General's office is expected to provide further guidance on the bill's implementation, which will be crucial for mineral buyers and legal representatives in navigating the new landscape​​.

Senate Bill 212 marks a significant transformation in the regulation of mineral rights ownership in Oklahoma, especially in the context of foreign investment. Its focus on detailed compliance and the introduction of an affidavit requirement in mineral rights transactions underscore the state's commitment to closely monitoring foreign influence in this sector. For mineral buyers in Oklahoma, understanding and adhering to these new regulations is paramount to ensure lawful and transparent investments in the state's mineral market.

Will this legislation make a difference? Besides adding $4.00 in doc stamps for every deed filed, it is too early to tell.

More to follow

Transfer on Death Deeds vs. Life Estates: An Exploration of Oil and Gas Mineral Interests

All,

Berlin is neither an attorney or a CPA, but has recently had a few clients ask her about the differences between Transfer on Death Deeds versus Life Estates. Here is Berlin’s attempt to summarize.

When dealing with valuable assets like oil and gas mineral interests, it's essential to have a firm grasp on effective estate planning. Today, we'll explore two commonly used estate planning tools: Transfer on Death Deeds (TODDs) and Life Estates. We'll compare and contrast their respective advantages and disadvantages, focusing on how they apply to the transfer of oil and gas mineral interests.

Understanding Transfer on Death Deeds and Life Estates in the Context of Oil and Gas Mineral Interests

Both Transfer on Death Deeds and Life Estates are legal devices that allow owners to designate how their oil and gas mineral interests will be distributed upon their death.

Transfer on Death Deeds: An Overview

A Transfer on Death Deed (TODD) allows you to name a beneficiary who will inherit your mineral interests after your death, bypassing the probate process.

Life Estates: An Overview

A Life Estate allows you to transfer your mineral interests to a recipient (the "remainderman"), while retaining the right to receive income from those interests during your lifetime.

Advantages: TODDs vs. Life Estates for Mineral Interests

Advantages of Transfer on Death Deeds

1. Avoids Probate: With a TODD, your oil and gas mineral interests can bypass the lengthy and often expensive probate process.

2. Maintains Full Control: You retain full control of your mineral interests, including the right to lease or sell them without the consent of your beneficiaries.

3. Revocable: TODDs can be changed or revoked at any time during your lifetime.

Advantages of Life Estates

1. Immediate Transfer of Ownership: Upon your death, the remainderman immediately becomes the legal owner of the mineral interests, eliminating the need for probate.

2. Continued Income: With a life estate, you can still enjoy the income from the mineral interests for the duration of your life.

3. Potential Tax Benefits: The remainderman may receive a stepped-up cost basis, which can minimize capital gains tax if they decide to sell the interests.

Disadvantages: TODDs vs. Life Estates for Mineral Interests

Disadvantages of Transfer on Death Deeds

1. Potential for Conflict: If you name multiple beneficiaries, conflicts can arise after your death, particularly if one wants to sell the mineral interests and the others do not.

2. Unprotected from Creditors: TODDs do not protect your mineral interests from creditors, who can place liens that must be settled before the interests can be transferred.

3. Lack of Tax Benefits: Unlike life estates, TODDs do not offer any potential tax benefits.

Disadvantages of Life Estates

1. Reduced Control: Although you maintain the right to income from the mineral interests with a life estate, you lose some control as selling or leasing typically requires the consent of the remainderman.

2. Irrevocable: Life estates are often irrevocable. Reversing a life estate can be complicated and costly.

3. Potential Gift Tax: If the mineral interests' value exceeds the annual gift tax exclusion, the transfer could incur gift taxes.

Choosing the Right Option: TODD or Life Estate?

The decision between a TODD and a Life Estate will depend on your unique situation and objectives. If you prioritize maintaining full control of your mineral interests and having the flexibility to change beneficiaries, a TODD may be the better choice.

However, if you're looking to protect your interests from creditors and potentially offer tax benefits to your heirs, a Life Estate might be the ideal option.

Seek Professional Advice

Estate planning, especially concerning valuable assets like oil and gas mineral interests, can be complex. It's always wise to consult with a professional or attorney specializing in estate planning before making any decisions.

And if you don’t want to mess with this at all, please contact Berlin to sell your mineral rights for a fair price today.

In conclusion, understanding the advantages and disadvantages of Transfer on Death Deeds and Life Estates in relation to oil and gas mineral interests can significantly impact your estate planning decisions.

Why You Should Sell Your Mineral Rights in 2023: The Factors That Decrease Value Over Time

All,

Are you an owner of mineral rights and royalties in Oklahoma, Texas, Kansas, or Arkansas? If so, it's essential to understand that various factors can significantly decrease the value of your mineral rights and royalties over time. Here at Berlin Royalties, we're dedicated to helping you maximize your investment. In this article, we will discuss the top reasons to sell your minerals to Berlin now in 2023 and avoid losing value due to these factors:

Marketable Title Problems

• Issues with property titles can create legal disputes and hinder the development of your mineral rights, leading to decreased value.

• Berlin Royalties has a team of experienced professionals who will work diligently to resolve any title problems, ensuring a smooth transaction at no cost to you, the seller.

Non-producing Minerals

• Non-producing minerals tend to lose value over time as new discoveries and developments surpass them. A seller must think to herself, with all of the leasing and drilling that has occurred over the past 100 years, why haven’t my minerals been leased and developed.

• Selling your non-producing minerals to Berlin now can help you capitalize on their current worth.

Property Held by Production (HBP) by Low-Producition and Marginal Wells

• HBP properties with a low-producing wells can negatively impact the overall value of your mineral rights. The current operator has little incentive to develop if the lease is not in danger of expiring.

• Berlin Royalties can help you navigate this situation by offering a fair price for your property, allowing you to invest in more profitable ventures.

Steep Decline Curves

• Steep decline curves in production can result in diminishing returns on your investment. Horizontal wells have very steep decline curves.

• By selling your minerals to Berlin now, you can secure a fair price before the decline significantly impacts your royalties.

Poor Offset Production (for Non-Producing Properties)

• Neighboring properties with poor offset production can negatively affect the value of your non-producing minerals and condem the entire area and prosepct.

• Berlin Royalties can offer you a competitive price, allowing you to avoid losses associated with poor offset production.

Low Oil and Gas Prices

• Fluctuations in oil and gas prices can impact the value of your mineral rights and royalties. Gas prices are especially volatile and has a major impact on the values of mineral rights.

• Secure your financial future by selling your minerals to Berlin now, and capitalize on current market prices.

Operator with a Bad Reputation

• An operator with a poor track record can devalue your mineral rights by impeding successful drilling and production.

Poor Economy or Recession

• Economic downturns lead to decreased demand for oil and gas, ultimately lowering the value of your mineral rights.

• By selling your minerals to Berlin Royalties now, you can ensure a competitive price and safeguard your financial future.

Now that you understand the factors that can decrease the value of your mineral rights and royalties over time, don't wait any longer. Take advantage of the current market conditions and sell your minerals to Berlin Royalties today. Our team of experts will work tirelessly to secure the best possible price for your assets, ensuring a successful and profitable transaction.

Contact Berlin Royalties now to discuss your options and maximize the value of your mineral rights!

How to Value Mineral Rights

Valuing Mineral Rights

If you are a mineral rights owner, you may be wondering how your assets are valued. Mineral rights and royalties are often seen as lucrative investments, but it can be difficult to determine their worth. Here we will explore different methods for valuing mineral rights and royalties and provide insight into what factors affect their value.

The Lease Bonus Multiple Rule of Thumb Method

One commonly used method to value mineral rights is the lease bonus multiple rule of thumb for non-producing minerals. This approach suggests that mineral rights are worth two to three times the current lease bonus being paid in the area. For example, if companies are offer to lease for $500/ac, an appropriate offer to sell would be $1000-$1500/.ac.

The 3X Cash Flow Method

Another method for valuing mineral rights is the 3X cash flow method. This approach is calculated by multiplying the 12-month trailing cash flow by three. For example, if a royalty owner received $10,000 in royalty payments, an acceptable offer to purchase the minerals would be around $30,000.

Value of the Underlying Minerals

The value of the underlying minerals is based on several factors, including the location and quality of the minerals, the cost of production, and the current market conditions. These factors can impact the overall value of your mineral rights, and it is essential to consider them when valuing your assets.

Selling Your Mineral Rights and Royalties

If you are a royalty owner considering selling your mineral rights and royalties, Berlin Royalties can help. We are buyers of Oklahoma oil and gas mineral rights, and we are committed to providing fair and competitive offers for your assets. With our extensive experience and knowledge of the industry, we can provide you with a hassle-free and straightforward process.

Contact Berlin Royalties Today

If you are ready to sell your mineral rights and royalties, contact Berlin Royalties today. Our team of experts is dedicated to providing exceptional service and support throughout the entire transaction. Let us help you maximize the value of your assets and achieve your financial goals.

More to follow,

Berlin

Choosing the Right Mineral Buying Company: What to Look For When Selling Your Oklahoma Oil and Gas Royalties

Minerals such as oil and gas are valuable resources that have the potential to generate significant profits for their owners. However, owning mineral rights does not always guarantee financial success. That's why it's important to work with a reputable mineral buying company to help you manage and monetize your assets. In this article, we will discuss what makes a good mineral buying company and how to choose the right one for your needs.

What is a Mineral Buying Company?

A mineral buying company is a business that specializes in purchasing mineral rights from individuals or companies. These companies typically work with a variety of minerals, including oil and gas royalties. They will often pay a lump sum upfront for the rights to your minerals, providing you with a quick infusion of cash in exchange for a portion of the profits generated by the minerals over time.

What Makes a Good Mineral Buying Company?

When choosing a mineral buying company, there are several factors to consider. Here are some of the most important characteristics to look for:

• Industry Experience

The oil and gas industry is complex and constantly changing. It's important to work with a company that has a deep understanding of the industry and the legal and financial aspects of buying and selling mineral rights. Look for a company that has been in business for several years and has a proven track record of success.

• Financial Stability

Selling your mineral rights can be a significant financial decision. It's important to work with a company that has the financial stability to honor their agreements and provide you with the promised payment. Look for a company that has a strong financial track record and is transparent about their financial standing.

• Reputation

A company's reputation is a reflection of their trustworthiness and reliability. Look for a company that has positive reviews from past clients and a strong reputation within the industry. Check online reviews and industry publications to gauge the company's reputation.

• Customer Service

Selling your mineral rights can be a complex and emotional process. Look for a company that provides excellent customer service and is willing to answer your questions and address your concerns throughout the process. A good mineral buying company should be responsive, transparent, and communicative.

• Fair Offers

When selling your mineral rights, you want to get the best possible price for your assets. Look for a company that provides fair and competitive offers based on the current market value of the minerals. A reputable mineral buying company should be transparent about how they calculate their offers and be willing to explain their reasoning.

Choosing the Right Mineral Buying Company

Now that you know what to look for in a mineral buying company, it's time to start your search. Here are some tips for choosing the right company for your needs:

• Do Your Research

Before choosing a mineral buying company, do your research. Look for companies that specialize in your specific mineral rights, such as oil and gas royalties. Read online reviews and check industry publications to gauge the company's reputation and track record.

• Get Multiple Offers

Don't settle for the first offer you receive. Get multiple offers from different mineral buying companies to compare prices and terms. This will help you make an informed decision and ensure you get the best possible deal for your assets.

• Ask Questions

Don't be afraid to ask questions throughout the process. A good mineral buying company should be transparent and willing to answer your questions and address your concerns. If a company is unwilling or unable to provide clear answers, it may be a red flag.

• Consider the Terms

When comparing offers, be sure to consider the terms of the agreement. Look for a company that offers flexible payment options and allows you to retain some ownership of the minerals. Consider any potential risks or drawbacks associated with the agreement before making a final decision.

• Don't Rush

Selling your mineral rights is a significant financial decision. Don't rush the process. Take your time to carefully consider all of your options and choose a mineral buying company that meets all of your needs. Make sure you understand the terms of the agreement before signing anything, and don't be afraid to ask for clarification or negotiate the terms if necessary.

Why Sell Your Oklahoma Oil and Gas Royalties?

If you own oil and gas royalties in Oklahoma, you may be wondering why you should consider selling them. Here are a few reasons why selling your royalties may be a smart financial decision:

• Immediate Cash Infusion

Selling your oil and gas royalties can provide you with an immediate cash infusion. This can be especially useful if you have an unexpected expense or need to pay off debt.

• Mitigate Risk

Owning oil and gas royalties can be risky, as the value of the minerals can fluctuate based on market conditions. Selling your royalties can help you mitigate this risk and provide a more stable source of income.

• Diversification

If you have a significant portion of your wealth tied up in oil and gas royalties, selling them can help you diversify your investment portfolio and reduce your overall risk.

We will buy Your Oklahoma Oil and Gas Royalties.

If you're considering selling your Oklahoma oil and gas royalties, it's important to work with a reputable mineral buying company. Look for a company that has industry experience, financial stability, a positive reputation, excellent customer service, and offers fair and competitive prices.

At Berlin Royalties, we specialize in buying oil and gas royalties in Oklahoma and throughout the United States. We have over 8 years of industry experience and a proven track record of success. Our team is dedicated to providing excellent customer service and ensuring you get the best possible price for your assets.

If you're interested in selling your Oklahoma oil and gas royalties, please contact us today. We would be happy to provide you with a free, no-obligation quote and answer any questions you may have about the process.

More to follow,

Berlin

Should you lawyer up? Berlin doesn't think so.

All, if you're a mineral owner in Oklahoma and you're looking to sell your oil and gas mineral rights, you may be wondering whether you should hire an attorney to represent you or whether you should deal directly with the mineral buyer. While there are advantages and disadvantages to both approaches, in this blog post, we'll make the case for why you'll achieve a higher price and a more expedient transaction if you choose to deal directly with the mineral buyer and not to hire an attorney to be a meddlesome middleman.

Advantages of Hiring an Attorney

First, let's look at the advantages of hiring an attorney to represent you in the sale of your oil and gas mineral rights:

1. Legal Expertise: Attorneys have expertise in the law, which can be useful in navigating the complex legal landscape of mineral rights. They can advise you on the legal rights and obligations associated with your mineral rights, as well as any potential risks or liabilities associated with the sale.

2. Negotiation Skills: Some attorneys are skilled negotiators, which can be useful in getting the best price for your mineral rights. They can negotiate on your behalf with the mineral buyer, and may be able to secure a higher price than you could on your own.

3. Due Diligence: Attorneys can conduct due diligence on the mineral buyer to ensure that they are reputable and financially sound. This can help to mitigate the risk of the buyer defaulting on the sale or engaging in fraudulent behavior.

Disadvantages of Hiring an Attorney

Now let's look at the disadvantages of hiring an attorney to represent you in the sale of your oil and gas mineral rights:

Do you think a slick attorney like this really has your best interests at heart?

1. Cost: Attorneys can be expensive, and their fees can eat into the proceeds of the sale. This can be especially problematic if you have a small or marginal mineral interest, where the sale price may not be very high to begin with. Ask your attorney whether they will charge by the hour. Some charge by a percentage of the deal (up to 10%!).

2. Delay: Hiring an attorney can delay the sale of your mineral rights, as the attorney will need to review the contract and negotiate with the buyer. This delay can be especially problematic if you need the funds from the sale for a specific purpose, such as paying off debt or financing a new project.

3. Trust Issues: Hiring an attorney can create a sense of mistrust between you and the mineral buyer. The buyer may feel that you don't trust them, and may be less willing to negotiate in good faith. This can make it harder to reach a mutually beneficial agreement. Read up on the principal / agent problem.

Advantages of Dealing Directly with the Mineral Buyer

Now let's look at the advantages of dealing directly with the mineral buyer and not hiring an attorney:

1. Speed: Dealing directly with the mineral buyer can be much faster than hiring an attorney. You can negotiate the terms of the sale directly with the buyer, without any intermediaries. This can lead to a faster transaction, which can be especially useful if you need the funds from the sale quickly.

2. Control: Dealing directly with the mineral buyer gives you more control over the sale. You can negotiate the terms of the sale directly with the buyer, and can make decisions based on your own preferences and priorities. This can be especially useful if you have specific goals or requirements for the sale.

3. Higher Price: Dealing directly with the mineral buyer can often result in a higher price for your mineral rights. This is because you can negotiate directly with the buyer and can leverage any competitive bids or offers to get the best possible price. This can be especially useful if you have a highly desirable mineral interest.

Because of these advantages, many mineral owners in Oklahoma choose to deal directly with the mineral buyer and not hire an attorney to represent them. Here are some tips to help ensure a successful transaction if you choose to take this approach.

1. Educate Yourself: Before you start negotiating with the mineral buyer, take some time to educate yourself on the legal landscape of mineral rights. There are many resources available online and through industry organizations that can help you understand your legal rights and obligations. This will help you to negotiate from a position of strength and ensure that you are getting a fair deal.

2. Set Realistic Expectations: It's important to set realistic expectations for the sale of your mineral rights. While you may be able to secure a higher price by negotiating directly with the buyer, it's unlikely that you'll be able to get the same level of expertise and due diligence that you would get from hiring an attorney. Make sure that you are comfortable with the level of risk and potential reward associated with the sale.

3. Build Trust: Building trust with the mineral buyer is critical to a successful transaction. Be transparent and honest in your negotiations, and make an effort to understand the buyer's perspective. If the buyer feels that you are trying to take advantage of them, they may be less willing to negotiate in good faith. On the other hand, if you can build a relationship of trust and mutual respect, you may be able to negotiate a better deal.

4. Get Multiple Bids: Even if you are dealing directly with the mineral buyer, it's still a good idea to get multiple bids. This will help you to gauge the market value of your mineral rights and ensure that you are getting a fair price. Be transparent with the buyers that you are talking to, and let them know that you are considering multiple offers.

5. Document the Transaction: Once you have reached an agreement with the mineral buyer, make sure that you document the transaction in writing. This should include all of the terms of the sale, as well as any warranties or representations made by the buyer. Having a written agreement can help to protect your interests and ensure that both parties are clear on their rights and obligations.

Conclusion

In conclusion, there are both advantages and disadvantages to hiring an attorney to represent you in the sale of your oil and gas mineral rights, as well as to dealing directly with the mineral buyer. While hiring an attorney can provide you with legal expertise, negotiation skills, and due diligence, it can also be expensive and time-consuming. On the other hand, dealing directly with the mineral buyer can result in a more expedient transaction and potentially higher price for your mineral rights, but may also require you to educate yourself on the legal landscape of mineral rights and build trust with the buyer. Ultimately, the decision of whether to hire an attorney or deal directly with the mineral buyer will depend on your individual needs and priorities. By carefully considering the advantages and disadvantages of each approach and taking steps to ensure a successful transaction, you can feel confident that you are getting a fair deal for your oil and gas mineral rights located in Oklahoma.

If you are ready to deal with an experienced and trusted mineral buyer, please call, text or email Berlin for a cash offer with a fast closing.

More to follow,

Berlin

The Future is Here - OpenAI Says to Sell Your Oklahoma Mineral Rights

All,

If you own mineral rights in Oklahoma, you may be considering whether or not to sell them. While it can be a tough decision, there are several reasons why selling your mineral rights can be a smart move.

First and foremost, selling your mineral rights can provide a significant financial windfall. The value of minerals, such as oil and natural gas, can fluctuate greatly, but if prices are high at the time of sale, you could stand to make a significant profit. In addition, selling your mineral rights allows you to receive a lump sum payment, rather than waiting for royalties from mineral production, which can take years to materialize.

Another reason to sell your mineral rights is the potential for reduced liability. If you own mineral rights, you are considered a working interest owner and are responsible for paying a portion of the costs associated with extracting and producing the minerals. By selling your mineral rights, you can eliminate this financial responsibility.

Additionally, selling your mineral rights can provide peace of mind. Owning mineral rights can be complicated and time-consuming, as you may need to keep track of production levels and royalty payments. By selling your mineral rights, you can free up your time and energy to focus on other priorities.

Overall, there are many compelling reasons to sell your mineral rights in Oklahoma. Whether you're looking to receive a significant financial payout, reduce your liability, or simply simplify your life, selling your mineral rights can be a smart decision.

More to follow,

Berlin

*pretty wild a robot wrote this!

Why are Churches Selling Their Minerals?

Oklahoma Mineral Owners,

Berlin is back (she hopes). After a long hiatus, it is time to shake off the cobwebs and start writing again.

The topic today is why churches and other non-profits are selling their mineral rights and royalties. First, it might be useful to understand how they acquired minerals in the first place.

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Why do Churches Own Oklahoma Minerals?

Mary Jane and Johnny must have been living in quite a bit of sin in order for daddy to bequeath the minerals to the church instead of his own kids. As Tolstoy probably said,

“happy families are all alike and keep their minerals; every unhappy family is unhappy in its down way .”

No matter the reason, it is now common for churches, synagogues, and other non-profits to own minerals through the generosity of their benefactors over the years.

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Why are Churches Selling Their Oklahoma Royalties?

As Berlin understands it, there are two main reasons that churches are selling their Oklahoma minerals.

1. ESG Initiatives: Churches have begun to sell their holdings in order to satisfy their constituents’ desires for the institution to be more “green.” Even Papa Frank has called for his folks to start selling their fossil fuel investments.

2. Bookkeeping Hassles: Mineral and royalty bookkeeping can be a bit of a challenge. Most families decide to sell their minerals because accounting and tracking them is a burden. Churches and other institutions sell their mineral rights for the same reason.

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Are you a Member of a Church that Would Like to Sell its Minerals?

Berlin has purchased the minerals and royalties of a number of different religious institutions over the past year. We have provided a lump sum to fund church operations and a quick closing. Please contact us if you would be interested in divesting of your Oklahoma mineral rights.

More to follow,

Berlin

New Calculators to Assist Mineral Owners and Landmen

All,

Berlin wanted to advise you that we have recently added two calculators to our website that will be useful to Oklahoma oil and gas mineral owners and petroleum landmen. They can be found by clicking here.

Did anyone else’s grandfather utilize one of these bad boys? Berlin’s new calculators are not this cool.

-The first tool allows a user to determine net mineral acreage using a net revenue interest decimal from a check stub. This calculator is useful to both mineral owners and mineral buyers for a quick, back of the envelope calculation of net acreage owned (at least in the wellbore).

-The second tool allows a user to determine a working interest decimal in a multi-unit well. This calculator is useful to landmen who need to calculate both operated and non-operated working interest decimals when an allocation factor will need to be applied. Completed for production costs will also be automatically calculated if an AFE figure is entered. Please be careful as there is nothing in this calculator to prevent a user from entering a total allocation greater than 100%.

Berlin is currently working on a document stamps back-in to purchase price calculator among others.

Please contact Berlin if there are any other calculators you would like to see added to the site. We hate opening up excel and typing the same formulas over and over again and we are certain that is the case for some of y’all as well.

More to follow,

Berlin

The OIPA — OKOGA - What a Strange Organization

Oklahoma Oil and Gas Owners,

It’s no secret that Berlin is not a fan of the newly re-branded OIPA — OKOGA. They often complain that the oil and gas industry is unfairly targeted and that somehow oil and gas businesses are more deserving of special treatment than others.

The OIPA — OKOGA supported House Bill 2150 and claim the measure is needed to give mineral rights owners the opportunity to file court cases to battle over-restrictive rules. Some municipalities in central Oklahoma such as Newcastle, Piedmont, Minco, Amber, Tuttle and Blanchard have implemented rules that arguably conflict with the state statutes that that already bar local jurisdictions from adopting ordinances, rules or regulations that exceed the Oklahoma Corporation Commission’s authority to regulate the oil and gas industry.

From Berlin’s reading, nothing is currently preventing mineral owners from suing local governments if the governments enact rules that would be considered a taking pursuant to Article 2 of the Oklahoma Constitution. Do we now need rules explicitly stating who can file lawsuits? Are we going to constantly push back against bad legislation with more bad legislation?

Berlin’s favorite part of the OIPA — OKOGA’s involvement in the case is that they previously supported a municipality against an independent operator when the operator was claiming that the municipality’s rules and regulations conflicted with the state statue’s regulating oil and gas development. This is weird, but unsurprising for the unprincipled.

More to follow,

Berlin

Royalty Litigation: Here We Go Again

Oklahoma Oil and Gas Interest Owners:

Berlin believes it is about time to start chipping away at the giant iceberg of issues surrounding post-production deducts and the litigation that follows. This will be one of multiple posts that address the lessor / lessee relationship, the implied duty of the lessee to market the lessor’s share of production, and the responsibilities of each party to pay for their shares of post-production expenses. As you are well aware, Berlin is merely a mineral schlepping landman and her opinion should not replace the counsel of a well schooled (and likely well paid) oil and gas attorney.

The most important issue that complicates this discussion is that Oklahoma law does not define marketability and in what state produced gas is marketable. Unless the oil and gas lease addresses the lessee’s duty to market or negates the implied duty to market, Oklahoma oil and gas lessees are subject to an implied covenant to market produced hydrocarbons. In Mittelstaedt v. Sante Fe Minerals, Inc., the Oklahoma Supreme Court stated that the lessee has a duty to provide a marketable product available to market at the wellhead or leased premises. But, they did not go so far as to define marketability.

The next question is then, under what circumstances can a lessor be charged costs against their royalties if the production is sold off-lease? The Court writes:

We conclude that the lessor must bear a proportionate share of such costs (transportation, compression, dehydration, blending) if the lessee can show

(1) that the costs enhanced the value of an already marketable product

(2) that such costs are reasonable, and

(3) the actual royalty revenues increased in proportion with the costs assessed against the non-working interest.

Recently, an Oklahoma court took one step towards defining marketability in its decision in Pummill v. Hancock Exploration, LLC when it wrote that:

…gas does not become marketable until it is capable of being sold in the commercial interstate market.

This would imply that if costs were incurred to gather, compress, dehydrate, and process the gas in order for it to be in a condition to be sold in the commercial interstate market, that none of those charges could be proportionally borne by the lessor unless the oil and gas lease stated that the lessor would be responsible for its share of costs. However, any costs incurred after the gas is marketable could be charged to the lessor if they complied with the Mittelstaedt decision and were not expressly forbidden in the oil and gas lease.

As you can see, once an ambiguously worded royalty clause and an attorney drafted post-production clause are thrown into the mix, the outcomes can become exponentially more complex.

Some important questions regarding deductions include:

Whitesnake loves Oklahoma royalty disputes and the fees they generate for plaintiffs’ attorneys…

1. Does the oil and gas lease royalty clause expressly allow or prohibit the deduction of costs?

2. Is there an provision in the exhibit that conflicts with the royalty clause in the lease?

3. Does the implied covenant to market apply?

4. At what point did the gas become marketable?

5. If costs were incurred after the gas became marketable, do they comply with the conditions of the Mittelstaedt decision?

6. Is an affiliate of the operator marketing the gas or is it an arm’s length transaction?

7. Where is the gas actually being sold and who is buying the gas?

Berlin is working on a flow chart / process to assist lessees and Oklahoma lessors in determining appropriate deduction actions. If this would be of interest to you / your company or if you would like a consultation regarding a royalty issue, please contact Berlin. Thanks for reading.

More to follow,

Berlin

Riviera Resources dice adios to the Arkoma

All,

On 11 December 2018, Riviera Resources, Inc. (“Riviera”) announced that it signed a definitive agreement to sell its interests in properties located in the Arkoma Basin in Oklahoma to an undisclosed buyer for a contract price of $68 million, subject to closing adjustments. For those who do not remember the sad saga of Linn Energy, Riviera = Linn Energy - the Linn Energy assets that were contributed to Roan Resources. Since there haven’t been many large trades in the Arkoma recently, Berlin thought it would be appropriate to analyze the metrics and valuations reported in the press release.

Snapshot of Berlin’s assumption of the operated wells under contract

Production

Riviera agreed to sell approximately 24 MMcf/day of net production. It was reported that this equated to proved developed reserves (PV-10) valued at $61 million. Berlin believes this might be slightly misstated as $61 million seems like a lot to pay for 24 MMcf/d, but if the bank who is loaning other people’s money to you says it okay to misconstrue the allocated value then it must be okay...maybe. It is Berlin’s estimate that these assets are generating ~$1.23 million / month (24,000 mcf / day * $2.86/mcf * .80 * .75 * 30 days).*

Land

If the production valuation is accurate, then Ms. Undisclosed Buyer will purchase 37,000 net acres for $7 million, a whopping sum of $189.19 / net acre. Assuming that it is all held by production (HBP), that might turn out to be quite the trade. Using data hastily queried from Oseberg’s Atla platform, the average one year pooling bonus delivering an .8125 NRI in Coal, Hughes, and Pittsburg counties in the past twelve months lies between $550 and $650 per net acre. While some of the Riviera acreage might be burdened below an .8125 NRI, it is most likely inclusive of more formations than the pooled acreage and it is HBP. Buying at ⅓ the price of your offset competition is usually a good thing and will enhance the opportunities to earn a multiple of your purchase price upon exit.

Operations

It is Berlin’s estimate that Riviera is selling 192 operated wells (174 horizontal (mostly woodfords), 18 vertical). The wells are predominantly located in Coal (94), Hughes (63), and Pittsburg counties (20). Since activity has cooled in the Arkoma and Riviera is not running a drilling rig in the prospect, Berlin reckons that Ms. Undisclosed Buyer will not immediately contract a rig to drill the already HBP’d acreage.

Potential Purchaser

At a $68 million purchase price, the universe for potential buyers is quite large. If there were more transactions in the Arkoma, it would make sense for one of the many private equity backed concerns to drag this asset along into a larger trade. However, since no large company has started to consolidate the PE shops and those PE shops seem to be settling down into their marathon paces, the PE shops should be excluded as a potential buyer. More than likely, the buyer is either a family company who already operates wells in the area such as Sanguine Gas Exploration, or one of the institutionally backed operating companies who seem to have a hurdle rate that barely clears the LIBOR; Scout Energy, Merit Energy, Foundation Energy fit this mold.

It will be worth the squeeze if Arkoma mania ever strikes again…and it will.

The Juice

If gas ever becomes the new oil (again) and companies (because Wall Street tells them to) start increasing their desire for gas reserves then this could prove to be a lucrative purchase for the buyer. She’s not paying a premium for the production and the acreage is coming over for the price of a couple sections of SCOOP acreage. It would be a home run if a big lease play sweeps through the basin à la 2007/2008 and she can exit for $2000 plus / acre .

If you have any additional comments or you would like to point out an error in Berlin’s math or reasoning, please drop a line below.

More to follow,

Berlin

*0.80 is the estimate of the NRI of the leases, and 0.75 is the estimate of the ratio of operating expenses to revenue. Berlin is not literate to the point where she can make footnotes in a blog post.

Occupational Licensing and the Landman. Are there rules?

All,

Occupational licensing in the United States is on the rise. It has been estimated that up to 25% of jobs now require a license.[1] There are a number of reasons why occupational licensing is detrimental to economic growth. Licensing requirements protect incumbents by preventing new entrants in the industry through the cost to acquire and maintain a license and discourages movement from areas of lower opportunity to high opportunity as requirements are often state-specific and do not transfer easily to new jurisdictions. Now landmen may be required to become licensed.

Badges to purchase Oklahoma mineral rights? It could be a thing…

Historically, landmen have not had to maintain a license. It would place a large burden on both company and independent landmen if they had to maintain some type of license in every state where they worked. As the headwinds in the basins shift and new prospect lines are drawn, a landman could spend a great deal of time and resources complying with licensing and continuing education requirements.

Recently, an Ohio court ruled in Dundics v. Eric Petroleum Corp, Slip Opinion No. 2018-Ohio-3826, that an oil and gas lease falls within the definition of real estate according to the Ohio law and the negotiation of which requires a real estate broker’s license. If it can be interpreted that the assignment of oil and gas leases fall within the definition of real estate, then one can assume that almost any oil and gas trade of any size will have to be negotiated through licensed brokers.

Most proponents of the occupational licensing claim that it protects consumers. Which party is the consumer in this case? A consumer is usually defined as a buyer or user of goods or services. In oil and gas transactions, the buyer or user or lessee or assignee is usually a professional in the business. Do they need protecting? This is weird.

Fortunately the Oklahoma Real Estate License code explicitly excludes oil and gas from its definition of real estate by clarifying that “real estate shall not include oil, gas or other mineral interests, or oil, gas or other mineral leases; and provided further, that the provisions of this Code shall not apply to any oil, gas, or mineral interest or lease or the sale, purchase or exchange thereof.” [2] While this would currently exclude landmen from having to obtain a real estate license, there is nothing to prevent the state from creating a new occupational license exclusively for landmen.

Occupational licensing is an important issue and should be monitored and advocated against in the event that other states want to copy Ohio’s regulatory overreach. Berlin would be interested to hear your thoughts on the matter in the comments section below.

More to follow,

Berlin

[1] Rodrigue, Edward. “Four Ways Occupational Licensing Damages Social Mobility.” Brookings. February 24, 2016. Accessed December 2018.

[2] The Oklahoma Real Estate Commission. “Oklahoma Real Estate License Code and Rules.” OREC. November 1, 2016. Accessed December 2018.

a version of this post originally appeared by the same author on www.oklahomaminerals.com

Same Same, but Different

All,

Bethany McLean argued in a recent New York Times piece that some exploration and production companies who drill and frac horizontal oil and gas wells are on shaky financial footing due to the fact that most don't make money. This is a good argument and it makes sense! She is correct to note that most of the drilling is driven by companies that are able to acquire cheap debt from yield starved Wall Street investors. Berlin agrees that an increased money supply has forced interest rates lower than they ought to be. This decreased cost of capital allows more projects to pencil as viable. 

What Berlin takes issue with is the fear mongering title of the article "The Next Financial Crisis Lurks Underground." Now, Berlin isn't an expert in synthetic collateralized debt obligations (but will taken an organic, gluten/dairy free, and pastured CDO of course, thanks), but here are some takeaways from the causes of the last financial crisis:

Mmmm...pastured, organic financial products above Oklahoma oil and gas mineral rights.

1. Banks lent money to subprime borrowers, but lied about the credit worthiness of the borrowers, and sold these mortgages downstream.
2. Companies sliced and diced these mortgages into complex derivatives. Few people understood the quality of the underlying assets.
3. These derivatives were given favorable ratings by the credit rating companies which qualified them to be purchased by firms thinking they were less risky than the actually were.
4. Insurance companies wrote polices on these derivatives and mis-priced the risk. Some of these insurance products were also make into derivatives.
5. Housing prices decreased and the pile of mis-priced risky assets collapsed.

I'm sure the usual commentators will point out that Berlin missed a couple key bullets, but those are the basics. What is similar in these situations (housing and oil) is that investors are looking for yield (but that is always the case) because debt is cheap. What is different in these situations is that the housing precipitated financial crises was fraudulent, opaque, and systemic. People lied about the quality of the assets, people turned these assets into financial products that few understood, and these products were sold to firms across multiple industries. 

Berlin doesn't believe that the banks underwriting these oil companies' debt offerings are committing fraud. The oil companies are admitting in their financial reporting that they are losing money. Yet folks are buying these bonds anyways as the risk premium is apparently worth it. So while it is bad for the equity owner when the company loses money, it isn't necessarily bad for the management team (who always seems to be paid well), and for the holders of the debt if they are confident that the company can continue to roll their notes forward. 

These bonds also do not appear to have been turned into derivatives and sold across multiple industries. For these reasons, Berlin believes that if in fact oil producers do go belly up (as they do from time to time), it will not cause an international financial crises like we saw in 2008.

Please leave your comments below.

More to follow,

Berlin

The Money Spring

All,

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. The report indicates that 58% of the capital deployed in 2018 will be from the raising of debt. Berlin argues that this number is actually higher as the report notes that "Joint Ventures with Private Equity firms such as farmouts, drillcos, etc" will account for 12% of the capital deployed in 2018, but those arrangements are going to be partially funded with debt also. Regardless, there is a lot of borrowed money at play. 

Sheikhs v Shale from The Economist

Is this sustainable? Mike argues that it is not and his fact based writing often explains why. Berlin argues that it is sustainable. There are many reasons why it is sustainable and listed below are a few of them:

1. We have an expanding money supply that keeps interest rates artificially low and drives yield hungry investors to riskier margins....and
2. Incentives are skewed in most public corporations and management teams often enrich themselves at the expense of the majority of the owners. This can be observed when companies take on new debt to improve short term metrics at the expense of the company's long term financial health and stability....and most importantly
3. The longer something has occurred, the more likely it is to continue to occur. While 15 years is not a long time in the span of world history, capital markets have been funding marginally profitable shale wells for 15 years. You might say "it does not make sense, why are these companies being funded?" Berlin would argue that it is your mental model that does not make sense and needs to be updated. It hurts her head too, after all, wouldn't the equity stake holders want to profit on their investment? But, since the market has funded the exploration efforts, it makes sense.

Please comment below or contact Berlin with any more questions about the suitability of debt financing and the continued sustainability of the shale drilling business model. Or if you would like to sell your Oklahoma mineral rights under any unconventional (and conventional) oil and gas well.

More to follow,

Berlin

Separate but Equal is not Equal

Are all mineral buyers the same?

With the announcement of Longpoint Minerals II securing $802 million to purchase Oklahoma (and Texas) mineral rights and royalties, the froth will return to the marketplace after a few months of reprieve. It is not uncommon for a tract of minerals to be bought and sold three times in a short period of time within the SCOOP or STACK before ending up with the end buyer. The supply of mineral acreage is finite. The billions to deploy in a relatively small geological fairway encourages many participants to enter the mineral trading ecosystem. This article will address some characteristics of each of the participants.

Opportunists
There are more opportunists in the game than anyone else. Due to the variability within any large sample, Opportunists come in all colors. The category, in general, can be defined as individuals or companies whose desired endstate is to locate and negotiate a smaller mineral purchase transaction while simultaneously negotiating the sale of the same tract to another buyer and preferably for more money. Business models vary slightly, some opportunists just broker transactions for a commission, some will assign their purchase and sale agreement for a fee to the end buyer who will fund and close the trade, and other opportunists will fund their own closing and obtain title before marketing and flipping the acreage.

Most opportunists are no better than the snake oil tonic salesmen of the frontier. Beware of their inflated offers to purchase your Oklahoma mineral rights

The companies who discredit the category as a whole are those who contract for the sale of minerals and then fail to close. Either because they don’t have their own funds or they were unable to obtain an agreement to flip the acreage. Many Opportunists mail letters to mineral owners at highly inflated prices with no intention to close. Once the mineral owners engage with the Opportunists, the prospective buyer will drastically lower the offer. These kinds of actions understandably frustrate the original sellers. This conduct also muddies the waters for potential future buyers as they have to contend with the residue of past negotiations and unrealistic price points set by the original Opportunist who didn’t have the funds to close anyways. If sellers insist the buyer have some skin in the game, these kinds of activities are less likely to occur. For seller’s, purchase price should be just one of the factors to consider when selling minerals. The opportunity cost can be very high to have one’s minerals tied up for a few months just to have the Opportunist back out at the last moment. Timelines for closing, contingencies, and most importantly, the buyer’s willingness and ability to close are also important to contemplate when selling a mineral property.

Private Mineral Companies
The next step in the mineral trading food chain are private mineral and royalty acquisition companies (disclaimer: this is how Berlin would classify her business). These are usually smaller operations that consist of sole proprietors or at most a few partners or family members that conduct the day to day affairs. Most do not raise outside money and thus are usually not active buyers in the core of the SCOOP and STACK. These companies are content to buy producing minerals for a reasonable multiple of current cash flow and non-producing property on the fringes or in front of a developing play. Deal flow is sourced by word-of-mouth and select Opportunists. Most pay the bills from a combination of producing royalties and lease bonuses.

Aggregators
Aggregators generate most of current high dollar deal flow in the SCOOP and STACK. Like the Opportunists, they are rarely buying to hold for their own account, but unlike Opportunists, they close the trades with their own funds. Most have relationships with the private-equity or institutionally backed mineral company that provides them with exclusive rights to generate deals in certain geographical areas with an established price point in which to sell their minerals to the larger company. They are paid either on a commission basis or they may be allowed to keep the spread between what they paid for the mineral property and the price set by the end buyer. Aggregators are aggressive in generating deal flow and fill their funnels with leads from call centers, direct mailings, full-page newspaper ads in the county seat’s paper and of course personal relationships with others in the ecosystem.

Private Equity and Institutionally Backed Mineral Companies
The current end buyers of high-value mineral properties in Oklahoma are private equity and institutionally backed mineral companies. Longpoint, mentioned above, is dominant in the space, but other companies like Fortis Minerals, Luxe Minerals, and Haymaker Minerals and Royalties also compete by spending large amounts of other people’s money. These companies can pay a premium for interests in the core areas of the plays due to their lower cost of capital and the longer times horizons for their funds. From a layman’s view of prices, these companies must be modeling the substantial development of multiple geological targets in order to see a return on their investment. From a prospective seller’s point of view, it can be argued that currently, no company will pay more for your interest than one of these firms.

Publicly Traded Mineral Companies
There are a few publicly traded mineral companies. Most seem to be above the fray of the day to day transactions taking place in across the state. Instead, companies like Black Stone Minerals will buy large deals from other large companies, both public and private, that are either divesting their minerals entirely or of assets located in a specific basin. They seem to make a splash on the newswire once or twice a year with an acquisition of $100m+.

Operators
While most exploration and production companies focus their acquisition dollars and efforts on leasing, some firms are finding it advantageous to purchase minerals in sections where they are likely to drill wells. One of the quickest ways to boost the economic returns of the well is to have fewer expenses. There are few items on the well ledger that are as expensive as the royalty burden of a lease. Look to see more companies attempting to acquire mineral acreage in operated units especially if the company is planning to density the section in the near future.

Please comment below or contact Berlin with any more questions about the types of mineral buyers or if you would like to sell your Oklahoma mineral rights.

More to follow,

Berlin

(This post was first published on Oklahoma Minerals on 5 July 2018)

Hall v. Galmor (we waited two years for this?)

All,

Berlin isn't an attorney and she hesitates to provide legal advice to her readers, but she must opine on the plaintiff's answer to maybe the biggest softball of a question ever slow-pitched in the District Court of Beckham County, State of Oklahoma...

Attorney: ...now in your opinion, do you believe that you could produce seven wells in question here today in--in paying quantities?

All Hall has to say here is "no." He sued to have title quieted to his new top leases as he believed the older set of leases, not released of record, were no longer held by production. Why he topped a unit just so he could produce the wells is almost beyond belief, but stick with Berlin here. All he needs to say to this question is....

Hall: It would pay to me.

Homer often confuses the words "yes" and "no" too.

Not that Hall! Anything but that. You just agreed with the defendants' case (that the leases were commercial when the wells were shut in). And when you agree with the defendants' argument and then you lose the case in district court and then appeal the case to the Supreme Court of the State of Oklahoma and the Supreme Court of the State of Oklahoma takes the case and then issues its opinion, it's going to use that fouled off slow-pitch softball in its decision to uphold the judgement of the district court. By quoting, "but perhaps the most convincing testimony was the following exchange between Hall and his attorney" (see above for that exchange)...and, "the judge seemingly relied upon this admission in reaching his judgement." "Seemingly" seems a bit gentle, but nonetheless, Hall lost (on most of the issues).

Berlin was hoping that Hall v. Galmor would carry a bit more water in helping craft the future of these lease cancellation suits. The courts are still waffling around "capability" language, but in an interesting twist in this case, they opined that a well only has to be capable at the time the well is shut-in and that the operator (or its successors) do not have a duty to maintain the shut-in well. This is a bit odd in Berlin's view as it penalizes mineral owners which Oklahoma courts tend to not do. Either way, Berlin is certain there are many out there who will claim that Berlin is incorrect and it is in fact a landmark decision and Berlin would welcome your comments and debate below.

More to follow,

Berlin

-.pdf and link of the Supreme Court's decision

The Seller's Dilemma

Oklahoma Oil and Gas Mineral Owners:

It is a weird feeling to get an unsolicited offer to purchase an asset from another party. Berlin's initial thought is something like "well, if Shortline Minerals thinks these are worth $5000/ac, they must know something I don't as I would be happy to sell for half of that." Berlin could sell for the $5000/ac price and turn around and deploy those funds elsewhere. However, it will always be in the back of her mind how and why Shortline is able to pay that much for her fringy STACK properties. Maybe they have a company landman on the take and Shortline knows that the section is scheduled for a density test. Maybe there was a seismic shoot in the area that Berlin didn't know about and the interpretations look promising. But it's also possible that Shortline has a low cost of capital, their sponsor has a low hurdle rate or that they are paid a commission on an acreage basis. Just because someone is throwing around a lot of money, doesn't make them right or that their project will ultimately succeed.

Should they sell their Oklahoma royalties and re-invest in their cash crop or hold and wait for horizontal development? They are in the horns of a dilemma.

This internal monologue is the second most often cited objection to not selling minerals (the first being, "pa told me never to sell and for some reason this is the one thing that I never questioned my parents about..."). Berlin thinks of it as a dilemma. After all, it sounds like a decent trade if someone is willing to pay 4-7 years of cash flow for the asset and assumes the regulatory and commodity price risk of owning producing Oklahoma royalties. And if the mineral has higher and better uses for the cash it can be a decent trade. After all, a leased mineral owner cannot easily add value to the minerals by increasing production through development. However, one could take the cash and invest it into an enterprise that they do have control over.

Berlin would be interested in hearing your thoughts on the issue, both from the buy and sell sides.

More to follow,

Berlin

A Well Proposal In Oklahoma - A Boon to the Mailman

Oklahoma Oil and Gas Mineral Owners,

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.

Unless one is party to a Joint Operating Agreement, a well proposal in Oklahoma is a non-binding piece of correspondence. It is supposed to be the last of a series of efforts for all owners with the right to drill a well in a certain drilling and spacing unit to agree to drill (or not to drill) that well before a forced pooling proceeding is undertaken at the Oklahoma Corporation Commission. 

A well proposal will usually contain the following pieces of information;

1. The proposing party (and potential operator)
2. The location of the well (usually described to a quarter section level)
3. The target formation
4. The type of well (horizontal or vertical)
5. The depth of the well
6. The cost of the well (an AFE should be included)
7. The proposed farmout/lease terms in lieu of participation in the well

Ever since our friends at Chesapeake popularized not sending out a JOA even between parties who have agreed to the development of a unit, a well proposal should be viewed as a warning order that a forced pooling application will arrive in a few weeks.

Dr. Evil prefers that one forgets that elections under a pre-pooling well proposal are non-binding so he can deem Austin out of the well.

There is little room for negotiation in the terms of the well proposal. If an owner desires not to participate and would prefer to lease/farmout and doesn't like the terms presented in the proposal, the proposing party will say something like, "well, you had your chance hot shot, but now you'll just have to see what we testify to at the pooling hearing." The power of the forced pooling provisions gives her the ability to (1) call anyone she wants "hot shot," and (2) not care about responding to counter-proposals from other owners in the unit. Berlin has been told that is not the case in other states (property rights, who needs property rights?).

If an owner does want to participate in the well, he will still have to elect to do some when the forced pooling order issues. Despite the fact this is usually written into the well proposal, many parties still fail to elect under the order and the operator is more than happy to overlook their previously designated intent and deem them out of the well.

After Berlin explained these facts to Bruce, he asked the only questions that a reasonable person would ask after hearing about how worthless a pre-pooling Oklahoma well proposal is, "what's the point and who benefits?" Berlin isn't sure what the point of the well proposal is, they are often ambiguous and as stated above, non-binding. The beneficiaries are certainly the USPS who really enjoy when letters are sent certified at $7.00/piece and the potential operator's competition who get a 2-3 week notice that applications are about to be filed.  

Please comment below or contact Berlin with any more questions about well proposals or if you would like to sell your Oklahoma mineral rights.

More to follow,

Berlin

"Yes Please, I'd Rather Have a Dividend" - Stockholder

Oklahoma Oil and Gas Interest Owners:

As yall are well aware, Berlin's finance (that's "fuhnance") prowess is on par with her triple lutz, triple toe, which is non-existent. That being said, Berlin does know that as a stockholder one has claim to the future profits of the firm. Profits can be retained by the firm or issued as dividends to the owners. If the owner of the firm thinks that the firm will be able to invest the profits more wisely than the investor can elsewhere else, he will be grateful if the company retains the profits and chooses another wise investment for his capital. On the other hand, if the investor has better uses for the company's (his) profits than the company, he will push for dividends.

Production wedges....

In a Retuers' piece, Ernest Scheyder reports that investors in oil and gas concerns are demanding dividends and also according to the chief executive of energy investment at Tudor, Pickering, Hold & Co. “investors are looking for improving results, better returns and operational performance” (Maynard, wouldn't it be weird if they weren't?).

On one hand, at least these companies are now making a profit. On the other, it is not necessarily a vote of confidence for the stockholders to be demanding their cash. Since producing oil and gas requires that the company deplete its oil and gas reserves (read, assets), companies must always be acquiring new leases. Acquisitions and the development of these acquisitions require cash. Because it has proven difficult for companies to grow their production wedge out of free cash flows and with the owners taking their cash elsewhere, this will lead companies  to the debt markets which Berlin has mentioned before is problematic.

If you think Berlin has erred in her analysis or you would like to sell your Oklahoma oil and gas mineral rights and royalties. Please drop us a line or comment below.

More to follow,

Berlin

PS: Thanks to DC for his winning submission to Berlin's query regarding the meaning of "MERGE". "Must Everything Require Grand Epithet" = $10 Amazon gift card.