Mineral Rights

See What Happens Larry? Oil and Gas Mineral Rights in the News.

Oklahoma Oil and Gas Mineral Owners,

The Federal Bureau of Investigation (“FBI”), announced that LAWRENCE H. WOLF, a/k/a “Larry,” was arrested yesterday for defrauding banks and financial institutions around the country. Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged, Lawrence Wolf swindled and attempted to swindle banks around the country out of millions of dollars while masquerading as an oil and gas tycoon.  Now, thanks to the dedicated work of our partners at the FBI, Wolf’s alleged scheme has finally run dry.”

A tale as old as time. A slick huckster in cowboy boots will convince a number of yield-starved investors that he has a deal for them. We saw it in "Stealing from the Rich" and "Funny Money" and we will continue to see it as long as there are mineral rights to exploit and people walking the earth (so another 73 years...?).

Do you see what happens when you commit fraud by claiming ownership in others' mineral rights?

Do you see what happens when you commit fraud by claiming ownership in others' mineral rights?

Berlin's favorite part of the story though is that four banks lent Larry money and only the "global investment firm" actually ran title to the oil and gas properties in Wyoming that Larry was claiming ownership in. 

While Berlin has claimed in the past that some title is difficult, it is less difficult that explaining to your boss why you lent Larry millions without checking the records.

H/T to Matt Levine for the news and Special Agent Justin Rowland for putting the pieces together.

Bankers of the world, please advise Berlin if you are planning to lend on oil and gas mineral rights, royalties, or leases without running title and we can prevent you from being identified as a "Victim Firm."

More to follow,

Berlin 

Four Key Pieces of Correspondence for the Oklahoma Mineral Owner

(This post originally appeared on www.oklahomaminerals.com on November 8,2016)

All,

Landmen are no busier than most professionals during the work day, but it is often stated that company landmen never return the calls of mineral owners. While this might be true of the bottom 10% of the profession, most landmen know that by placing a single call to a mineral owner, he could spend 30 minutes explaining knowledge that could easily be obtained throughsimple internet research. An informed mineral owner, who asks a poignant question, is much more likely to receive the answer he needs than the owner who calls to ask the difference between a spacing application and a well proposal.

Admittedly, if one owns a single tract of minerals or maybe just inherited the minerals, then the inaugural process of leasing and receiving the regulatory paperwork while the company is assembling the drilling and spacing unit would surely baffle most.

In general, there are four key pieces of correspondence that an Oklahoma mineral owner will receive from the landman. These occasions are detailed in brief below.

The Offer to Lease

Often, the first time an Oklahoma mineral owner will be contacted by a landman is when the landman’s company is assembling a prospect. The mineral owner will be contacted by phone and/or mail with an offer to lease their mineral interest. Most landmen will offer at least two options which will differ in the amount of cash bonus per net mineral acre and the royalty.

The Well Proposal

After the landman has made a bona fide effort to reach an agreement with all owners who own the right to drill a well in the proposed unit, he will send a well proposal to the parties with whom he has not yet reached an agreement. The well proposal will offer final terms in lieu of participation in the well and details of the well to be drilled such as location, proposed depth, target formation, estimated depth and cost of the well in the event the party would like to participate. It is important to note that in Oklahoma, an election to participate in the well is not binding until the party elects under the pooling order.

Oklahoma Corporation Commission Applications

Initially one of the most confusing aspects of being an Oklahoma mineral owner is the receipt of Oklahoma Corporation Commission (“OCC”) applications and orders. Some owners ask why they are being sued and others ask to be removed from the mailing list. Owners receive the applications and orders because Operators and applicants are required by law to provide notice of their activities to the owners who their activity affects. These applications are orders are mailed from an attorney who represents the applicant in OCC matters. The three most common applications that an owner will receive are the spacing application, location exception application, and pooling application. These applications will be discussed in detail at a later date, but the pooling application will be the application that will have the largest effect on the mineral owner’s rights and pocketbook. The OCC publishes a handbook for mineral owners that can be found http://www.occeweb.com/og/PubAsst/WebRoyaltyOwnersHandbook3-2015.pdf

The Division Order

If an operator successfully drills and completes a well, the next correspondence the mineral owner will receive from the company is the division order. A division order is an instrument which sets forth the proportional ownership in the produced hydrocarbons. The proportional ownership is communicated to the owner on the instrument in a decimal form. After the division order is signed and curative title issues are completed, the mineral owner should receive their first check within six months from the date of first production from the well.

In conclusion, the four key pieces of correspondence that an Oklahoma mineral owner will receive from the landman and the company, are the offer to lease, the well proposal, Oklahoma Corporation Commission applications and orders and finally, the division order. All four of these topics will be expanded upon in future articles. If there are any other topics you would like to discuss, please mention your ideas in the comment section.

More to follow,

Berlin

Types of Oil & Gas Interests

All,

Berlin has received a number on inquiries recently about the types of oil and gas interests one can buy/sell/trade. While these are detailed in the FAQ, they are re-posted below:

WHAT KINDS OF OIL AND GAS INTERESTS ARE THERE?

All oil and gas interests share in the revenues from producing oil and gas wells. Often you will find the terms “mineral interests” and “royalty interests” are used interchangeably. However, there are important differences between these interest types.

ROYALTY INTERESTS AND NON-PARTICIPATING ROYALTY INTEREST IN OKLAHOMA

A royalty interest owner is the person who owns the revenue interest of the producing oil and gas well. Often, the mineral interest owner is a royalty interest owner and a royalty interest owner is the mineral owner. However, in some cases, a royalty interest could also be defined as a non-participating royalty interest (NPRI). This means that the owner does not own the actual mineral rights Rather, the NPRI owner is entitled only to a revenue interest of the oil and gas produced. NPRI owners do not have executive rights, which means the right to negotiate or execute a lease or receive lease bonuses. An NPRI interest is created when a mineral owner chooses to sell the income they are receiving from a property to an investor without selling their mineral rights. In Texas, NPRI owners will be asked to ratify the oil and gas lease executed by the mineral interest owner by the oil company.

OVERRIDING ROYALTY INTERESTS IN OKLAHOMA

Overriding Royalty Interests are interests created from the Leasehold Estate. The Lessee can assign or retain a royalty interest from the oil and gas lease which is free from the costs of drilling and production.

WORKING INTEREST IN OKLAHOMA

The working interest owner is the person or company who owns the right to drill and produce oil and gas. When the mineral owner leases his mineral interest to an oil company, he is leasing the working interest. Working Interest owners are obligated to pay a proportionate share of all costs associated with leasing, drilling, producing and operating a well. After royalties are paid, the WI owners share in the production revenues based upon the percentage of the working interest owned.

More to follow.

Berlin