Extending an Oil and Gas Lease

Oklahoma Oil and Gas Mineral Owners,

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 and were hoping that the original lessee will overlook the option and you will be able to sign a new lease at $1500/acre and buy that excavator you have always dreamed of. So what can you do? 

Some oklahoma oil and gas mineral owners trade their right to drill a well for a royalty and yellow equipment

Some oklahoma oil and gas mineral owners trade their right to drill a well for a royalty and yellow equipment

Some Oklahoma oil and gas mineral owners will attempt to claim that they never received the option bonus. While most lessees who desire to exercise their option will call the lessor to confirm their address before mailing a check, the call is not required. To perfect the option, a lessee is required to send the bonus payment to the lessor's address via certified mail and file an affidavit of lease extension with the county clerk. A lessor is playing with fire if they do not accept the certified mail in order to claim that their bonus was never paid.

What should another company do that would like to buy a lease from a lessor who has a option to extend in their old oil and gas lease that they claim was not exercised? Berlin argues they should do the following to protect themselves:

  1. Ask the lessor if they have been contacted by the lessee or its assigns or moved since they signed the lease.
  2. Check the records to see if the lessee filed affidavits of extension in the section or the surrounding sections. It would be odd that the lessee would extend some leases, but not others.
  3. Request the lessor warrant title to the lease.
  4. Require the lessor file an affidavit of non-payment and file the affidavit in front of the new oil and gas lease.

People do weird things when money is involved (and isn't is usually?). As was said in the gun club, "U Signed the M*****f****** Contract." There is no reason to complain (or commit fraud) if the option that you agreed to is exercised. And the company who desires to buy a fresh lease should protect themselves from bad behavior. 

Berlin wrote this post because a loyal reader asked to learn more about the situation. If you have any more Oklahoma oil and gas leasing or mineral rights questions, or would like to sell your Oklahoma royalties or mineral rights, please comment below or drop Berlin a line.

More to follow,