Patrick assists his clients with a wide range of oil & gas related matters. If you have a question regarding your issue, don't hesitate to contact us to determine how we can be of assistance.
Listed below is a partial selection of services we offer.
Patrick represents owners in their negotiations with oil companies. Lease negotiation involves two phases: first, the core terms, such as the bonus payment per acre and royalty rate are agreed; and second, the contractual terms of the lease are drafted to protect the owner’s interest. Although it can be difficult to determine the market value of a lease, Patrick uses a variety of data sources to demonstrate the full value of his clients’ assets and thereby obtain favorable terms. A combination of public data sources, such as state permit and production filings; along with proprietary sources such as DrillingInfo, provide guidance as to the appropriate terms. Once the “price” of the lease has been agreed upon, Patrick negotiates the contractual terms that govern the lease. Since a lease can theoretically stay in force forever (so long as a well produces), it is critical that an owner’s revenue is protected by a lease document that can withstand the test of time and changing circumstances.
Whether owners choose to negotiate their own leases or retain Patrick’s services for that part of the process; owners should be cautious about giving the lessee a signed lease without having first secured payment. Occasionally, lessees file leases in the courthouse without paying the lessors as agreed. Furthermore, the use of “bank drafts” have led to costly litigation when banks gave the leases to the oil company without releasing funds to the lessor. Patrick can reduce the risk of fraud or mistake by facilitating a professional closing and holding the signed lease until the lessee delivers the agreed upon payment. Once Patrick has the signed lease and confirms receipt of the funds, he delivers the funds to the client and submits the lease documents to the lessee. An attorney acting as intermediary greatly reduces the risk to the owner and ensures that the oil company gets nothing until they pay the agreed amount. This is how residential real estate sales are conducted every day and your minerals might be just as valuable as your residence, if not more so.
The Federal Tax Code offers a special deduction, known as depletion, for oil & gas royalty income. Recipients of royalty income can claim either “percentage depletion” or “cost depletion.” Percentage depletion allows a deduction of 15% of income; meaning 15% of the royalty income is not taxed. Alternatively, cost depletion is even more beneficial, and eligible taxpayers may deduct the full fair market value of their mineral interest against their royalty income over time. Cost depletion allows royalty income to be offset by claiming losses to the value ("cost basis") of the property. The process of claiming cost depletion is complex and time consuming. However, once it is set up, the value of this deduction far exceeds the administrative costs. This is because the deductions could reduce tax liability on royalty income for years to come. Ideal candidates for this deduction would have received their royalty interest in the past several years via gift, purchase or inheritance. Contact Patrick to determine whether you might be eligible for the cost depletion deduction.
LLC and Trust Formation
Some owners may wish to transfer their interests into an entity such as an LLC (Limited Liability Company) or Trust. Entities can simplify management of the oil and gas interests while avoiding fractionalization of the interests as more family members receive interests. The owners' powers to negotiate leases and audit lease compliance are also increased when the interests are consolidated. Finally, an entity can protect surface owners' other assets from claims arising due to operations under the lease.
Deeds and conveyances of land, minerals, and royalties
Surface Accommodation Agreements
Patrick values his relationships with his clients and takes a multidisciplinary approach toward advancing their best interests through a variety of other services offered in conjunction with oil & gas matters. In particular, Patrick can coordinate with other professionals such as CPAs to ensure that the unique nature of oil, gas and mineral assets are properly considered.