Q – “I saw on one of your web sites that your company often negotiated top leases for customers. I checked with another company that I was thinking about doing business with. My contract expires in less than a year. They haven’t offered me a new one. The company I’ve been talking to told me that I can’t ask for a new one, or offer the mineral rights to another company until my contract expires, so how is it that top leases work?” – Sarah - San Angelo, Texas
Answer – First of all, hopefully the company you have been dealing with took the time to review your current contract. They very well could be correct, at least to a certain extent. More often than not, contracts will carry a clause known as a “First Right of Refusal.” It’s essentially an addition to the contract that restricts land owners from top leasing without first allowing them (current lessees) the chance to “preempt.” That means that you cannot top lease your minerals without first offering the current lessee a chance to meet or beat the new offering. Contrary to what you may have been told, I have examples of BMR, LLC top leases in which mineral rights were leased to a third party for future production opportunities while still under contract with a different party, even with Right of Refusal provisions built into the existing contract.
Currently, I have mineral rights owners that are selling portions of their mineral rights. The same is true for them. They can evaluate offers from buyers, but in many cases they have to allow the group currently leasing the land a chance to preempt any offers. This is true even when the seller is not top leasing, but actually selling the mineral rights that are under lease. Usually, we have to give the current leasing party a certain amount of time to consider making offers of their own. Again, it is determined by the contract, and usually takes fifteen days before a final negotiation with a third party can take place.
In order to get a top lease offering, a mineral rights owner usually has to have mineral rights in a proven, recognized reserve. Those are plays, shales and basins in which production has occurred or formation tests display high levels of potential. If you get a top-lease, review it. It should pay a better bonus than your current lease, and it means you have high potential for good production. If you would like to fax or mail a copy of your contract, I will tell you exactly what you can do in a much more vernacular terminology than that of your contract.
Q – “I have mineral rights interest in the Bakken. I’m interested in selling royalty interest in one producing well, and working interests in an additional 33 acres. What do I need to do to take bids?” - Michael – Stanley, North Dakota
Answer - Michael, BMR, LLC does not sell working interest nor public investments in production. We negotiate the sell or lease of actual mineral rights, and we help clients with obtaining and maintaining quality leases. If you would like to give us a call, I can refer you to a knowledgeable group that does take bids on working interests in producing and non-producing wells.
