2017 Q4

2017 Q4

National Association of Division Order Analysts October / November / December 2017

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NADOA N a t i o n a l A s s o c i a t i o n o f D i v i s i o n O r d e r A n a l y s t s G R O W T H T H R O U G H E D U C T I O N

Volume MMXVII • No 4

www.NADOA.org

Contents Feature

NADOA 2017 Officers President Sandi Rupprecht

Articles

In This 2017 Membership Recognition Awards...........................................4 Legislative Update Oklahoma Non-Resident Withholding........................................11 Legal Updates: Can a Lease Survive Foreclosure?................................................16 Pooling in Texas...........................................................................18 Maintaining an Oil & Gas Lease Beyond The Primary Term....................................................................19 TX Supreme Court Continues Case-by-Case Analysis for Mineral Deeds......................................................21 Institute Thanks and Highlights....................................................22 President’s Corner. ................................................................1 2018 NADOA Board Election. ..............................................2 Decimal Points......................................................................3 Certification..........................................................................6 Cob Webs Hopper App.........................................................................9 Salary Survey Results. .........................................................9 NADOA Webinars.............................................................10 Interaction...........................................................................10 New Members......................................................................11 Counterpart Connection......................................................12 Division Order $al..............................................................22 2017 Institute Committee....................................................35 2017 NADOA Board/Committee Chairs..............................36 Calendar of Events. .............................................................37 Issue

1st Vice President Cheryl Hampton 2nd Vice Presiden t Jason Lucas Treasurer Michele Lawton

Corresponding Secretary Luanne Johnson, CDOA Recording Secretary Stephanie Moore, CDOA

The NADOA News Magazine is a quarterly publication of the National Association of Division

Order Analysts PO Box 44009 Denver CO 80201

Subscription: By membership to NADOA, at $75.00 per year.

News Magazine Editor Rona L. Erickson, CDOA Kaiser-Francis Oil Company [email protected] 918.491.4319 Associate Editor Cheryl Hampton [email protected]

On the Cover: Nightfall at Lost Pines

All rights reserved. No part of this publication may be reproduced/copied without written permission. Editorial disclaimer: The contents of this newsletter are intended for member use only and any other use without permission from the NADOA Board of Directors is strictly prohibited.Articles published herein represent the view of the authors; publication neither implies approval of the opinions expressed nor accuracy of the facts stated and NADOA accepts no liability for misprints.

President’s

Corner

Sandi Rupprecht 2017 NADOA President

My year as President of NADOA for 2017 is ending in December. I have enjoyed the camaraderie and friendships I have developed with the members of the board and many of you whom I have met along the journey. I will truly miss my frequent interactions with everyone. As the year comes to an end, I want to reflect on the accomplishments made by the 2017 Board on behalf of the membership. • As of November 2017, our membership is at 1211. We have accepted 129 new members this year. • 2017 was the inaugural year for the digital NADOA Newsmagazine, saving the association over $20,000. • The digital Newsmagazine has the capability of video and voice ads and articles as well as print ads and articles. • We held a total of 6 Webinars in 2017. Average attendance has been 128 people per webinar. • The 2017 salary survey results are posted to the members section of the NADOA website. All completed results are viewable (once logged in) at: http://www.nadoa.wildapricot.org/page-1709228 • The By-Laws were updated to include the use of electronic voting by the Board members. • The By-Laws were updated to add attending one Board meeting electronically (if necessary) by Go-to-Meeting. • The 2017 Institute was postponed due to Hurricane Harvey. • NADOA should make made a small profit in 2017. • The Silent Auction held at Institute raised approximately $2,725 for 2018 Scholarships to Institute in Nashville, TN. It was encouraging to see all the CDOA’s in attendance at the 2017 Institute. A co-worker was impressed that so many attended and were recognized for their accomplishment. We can be proud of our 30-year old CDOA program and the quality of people who have obtained certification. Looking forward, I see an organization that is growing with the times using Facebook, Instagram and other forms of social media to keep everyone up to date on NADOA happenings. We are embracing new technologies in our workplaces and being educated in new ways. Even with these advances, I still recognize the need for hands on education. I urge you to work with your managers and supervisors to be able to attend Institute in Nashville in September 2018. The cooperative learning and ability to hear presentations and take part in the question and answer portions of the presentations is priceless. My role as Board Advisor in 2018 will be fun as I contact many of you to run for a Board position in NADOA. It is an experience I would not trade for anything. I have made lifelong friends and have grown to appreciate our differences in geographic areas. NADOA Rocks.

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2018 NADOA Board Election NADOA thanks our Nominating Committee for agreeing to serve and for their efforts in putting together a great slate for NADOA’s 2018 offices. This Nominating committee was approved by the Board on March 1, 2017. Brenda Pirozzolo, Chairman Darryn McGee - - - -

Treasurer

Recording Secretary

Corresponding Secretary

Board Advisor NADOA also wants to thank the Tellers Committee who met at 5 pm Wednesday, November 8 in the Republic Board Room to review ballot finalizations and sign off on the results. Brenda Pirozzolo, Chairman Tannen Mitchell-Briggs Vincent Parasco

Ida Lemaster Susan Bradley Judy Moreland Debbie McKee Wendy Hopkins

Brad Brown Peggy Balch

The members running for the below offices were sent to our Administrator who then formatted the ballot. Ballots were sent electronically and the membership voted. - President - First Vice President - Second Vice President

These two committee’s efforts keep the organization running smoothly and it is greatly appreciated by the organization. Brenda Pirozzolo, CDOA

POSITION EMAIL ADDRESS President...................................Cheryl Hampton.......................Lime Rock Resources.............................. [email protected] 1st VP/Finance.........................Jason Lucas................................Steptoe & Johnson PPLC....................... [email protected] 2nd VP/Site Selection...............Luanne Johnson, CDOA...........Newfield Exploration Company. ............ [email protected] Treasurer...................................Stephanie Moore, CDOA..........Newfield Exploration Company. ............ [email protected] Recording Secretary..................Jennifer Lujano..........................Concho Resources, Inc........................... [email protected] Corresponding Secretary...........Donna King, CDOA.................Forward Land LLC................................. [email protected] Board Advisor...........................Sandi Rupprecht........................Enerplus Resources Corp........................ [email protected] Director - CAPDOA.................TBA Director - DALWORTH..........Melanie Finnegan, CDOA. .......Comstock Resources, Inc........................ [email protected] Director - DADOA..................Lauren Dauer............................Whiting Petroleum................................. [email protected] Director - HADOA..................Lucretia Jones............................Newfield Exploration Company. ............ [email protected] Director - PBADOA.................Kaprice Pearson.........................Concho Resources, Inc........................... [email protected] Director - SADOA....................Rona Erickson, CDOA..............Kaiser-Francis Oil Company................... [email protected] NAME COMPANY

(L to R) Cheryl Hampton, Jason Lucas, Luanne Johnson, Stephanie Moore, Jennifer Lujano, Sandi Rupprecht (Not pictured, Donna King)

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NADOA

Decimal Points

Rona Erickson, CDOA News Magazine Editor

2018 News Magazine Deadlines

First Quarter...............................February 9 Second Quarter...............................April 27 Special Institute Edition.....................June 1 Third Quarter..............................August 17 Fourth Quarter........................ November 9

Introducing our new Associate News Magazine Editor: April Luedecke, CDOA. April hails from Houston, where she works as a Senior Division Order Analyst for Anadarko Petroleum. Many thanks to Cheryl Hampton who has been the Associate Editor since 2015. Cheryl will have her hands full with NADOA Presidential duties in 2018 and April’s willingness to help with the magazine is greatly appreciated.

If you have a suggestion for someone to act as a Regional Reporter to help NADOA keep abreast of current legislation and legal issues for your region, please submit the name or the name of the firm.

Regional Reporters ABADOA

Steptoe & Johnson PLLC

[email protected]

CAPDOA

Chelsea Wright

[email protected]

DADOA

Sharon Siemer, CDOA

[email protected]

DALWORTH

Lewis Box, CDOA

[email protected]

HADOA

Stephanie Moore, CDOA

[email protected]

MAADOA

Angie Coady, CDOA

[email protected]

PBADOA

Shawn Thompson

[email protected]

SADOA

Rebecca Helt, CDOA

[email protected]

Arkansas

Jackie Clotfelter, CDOA

[email protected]

North Dakota

Kimberly A Backman

[email protected]

New Mexico

Zachary P. Oliva

[email protected]

Louisiana

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2017 MEMBERSHIP RECOGNITION AWARDS

Each year during Institute NADOA recognizes a few outstanding members for their contributions to the Association throughout the year. This year NADOA had five very deserving recipients.

Interaction Award

Vicki Danielson The Interaction award belongs to a member who has demonstrated leadership in the promotion of the profession to the industry and the community. Vicki Danielson is so deserving of this award. She is continually on the forefront of organizing an event to coincide with educational opportunities. She is a leader among leaders. With a smile on her face she encourages those around her to do more and be part of more. She has been part of the Institute committee for many years. Every year she brings new and fresh ideas. She represents NADOA with professionalism and enthusiasm. Vicki, we thank you for your hard work this year for NADOA. Luanne Johnson The Education award is presented to the NADOA member who has achieved a high level of distinction in NADOA’s education activities as demonstrated by their contributions of time and service to the betterment of Division Order professionals. Luanne Johnson has contributed countless hours over many years devoting herself to teaching NADOA’s members, organizing education opportunities such as webinars and overseeing the CDOA committee. NADOA exists to educate its members and Luanne exemplifies a member who cares very deeply about making sure that happens. Thank you, Luanne. Steve Smith and Legacy Royalties The Corporate award is presented to the group or company that has contributed the most to NADOA’s growth and development, the Division Order profession and or the industry during the past year. Steve Smith and Legacy Royalties generously support NADOA’s membership through education opportunities, event sponsorship and active participation in NADOA. Legacy Royalties exemplifies outstanding service to NADOA members and royalty owners across the nation. Steve Smith is a familiar face to many of us. In addition, he welcomes NADOA members to Legacy’s pasture party. Thank you so much for sponsoring this year’s Thursday Night event at Institute and for bringing in Uptown Drive for a fun and memorable evening.

Education Award

Corporate Award

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Russell Schetroma Memorial Speaker’s Award

Sandi Rupprecht Sandi Rupprecht began in the oil and gas industry in 1982 as a Revenue Accountant who transitioned to Division Orders eight years later and immediately became involved in her local association. Her accounting background served the local association well because she focused on ensuring the association remained financially sound. She is a talented fundraiser who works hard to preserve the funds she raises. Sandi became a member of NADOA in 1994 and sat on the National Board. Since that time she has served on the Institute committee as Education chair several times, Kacie Bevers The Russell Schetroma Memorial Speaker’s award is given to an individual who has contributed to NADOA’s growth and development by speaking, educating and sharing knowledge on numerous occasions to the NADOA membership, the Division Order profession and the industry during the past year. Kacie is a talented individual from whom our members have had the privilege of learning through the local associations as well as during this year’s Institute. She is a member of HADOA and devotes her time and energy to the success of that organization as well. Thank you, Kacie, for sharing your expertise with the members of NADOA

Lifetime Achievement Award

Transportation committee and as co-chair of the Institute. She has worked tirelessly to help NADOA run regional seminars, netting over $10,000 in income at each seminar. Through her creative problem solving she helps keep NADOA solvent. Outside of NADOA, Sandi has spoken at NARO Colorado and for the Colorado Petroleum Accounting Society. Sandi encourages younger members to participate and grow in leadership. Sandi is an outstanding analyst, extraordinary mentor and exceptional advocate of NADOA and our industry. She has been the Land Administrator supervisor at Enerplus for over six years. She has served NADOA as Treasurer, Second Vice President, First Vice President and is the 2017 NADOA President. Sandi, thank you for your years of service to NADOA and this industry.

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NADOA

CANDIDATES FOR CERTIFICATION Publication of the following “Certified Division Order Analyst” applicant(s) fulfills the requirement as stated in the Voluntary Certification Policy, III C.2 which states: “…applicant’s name will be published in the NADOA Newsletter or other official publication of NADOA.” This allows the NADOA membership an opportunity to present objections to the certification of the applicant. Any objection to the certification of the applicant must be in writing and signed by a NADOA member or non-member who qualifies his knowledge and objection of the applicant. All such letters will be considered confidential and must be received by the NADOA Certification Committee at the following address within thirty (30) days following the last day of the month in which the Newsletter or other official publication of NADOA was published: Certification Congratulations to the following new CDOAs!! Stephanie Nguyen Brianna Kelley O’Keeffe

NADOA Certification Committee P O Box 44009 Denver CO 80201

If the objection warrants denial of the certification or temporary withholding of certification, the applicant will be notified by Certified Mail.

CANDIDATES FOR RECERTIFICATION

Rebecca Helt – Tulsa, OK Sandra Holmes – Oklahoma City, OK Luanne Johnson – The Woodlands, TX Diane Jolly – Houston, TX Thomas Killelea – Dallas, TX Connie S Marino – Dallas, TX Anna McMinn – Dallas, TX

Teri Messena – Tulsa, OK Melody Murta – Tulsa, OK Charles Pearson – Tulsa, OK Carlos Perez – Houston, TX Janise Powell – Plano, TX

Bessie Andrews – Houston, TX Peggy Balch – Oklahoma City, OK Cheryl Bigbee – Oklahoma City, OK Susan Bradley – Tyler, TX Belinda Cathey – Houston, TX

Patricia Redding – Sugar Land, TX Terry Bryant Reid – Colleyville, TX

Angie Coady – Wichita, KS Brenda Dickey – Tulsa, OK Rona Erickson – Tulsa, OK Erica Hartnauer – Tulsa, OK

CANDIDATES FOR CERTIFICATION

Jennifer Lee Cramer – Cody, WY Becky J. Kennedy – San Antonio, TX

Noemi Torres Peralta – Midland, TX Courtney Milann Poitevint – Stanton, TX

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2017 CDOAs Jennifer Lee Oden Courtney Jane Mayes Hannah Yee Kristy Michele Peters Kaitlin Joleen LaFlamme Tanya Marie Ward Katherine Wilson Murrell Stephanie Nguyen Brianna O'Keeffe Congratulations!

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30 years of CDOA

The 2017 NADOA Institute is now in the books. We had an impressive lineup of speakers and topics giving us the opportunity to learn things we didn’t know, brush up on the things we do know and get those recertification credits! The social events were great and gave us the opportunity to build those lasting friendships that are rewarding both on a personal and a professional level. I was honored to address the Friday lunch assembly and very pleased to introduce 11 new CDOAs since the 2016 Institute. More excitement when all CDOAs in attendance came to the stage to commemorate the 30th anniversary of the CDOA! It was truly an honor to stand on stage with this group of professionals with the CDOA designation. The last 30 years have seen 681 individuals obtain their certification! At Institute, we had a few in attendance from the double digit certification numbers. Chris Nightingale had the lowest certification number at 18. Tanya Ward, certification number 678, was the most recent CDOA in attendance. As I shared with the Friday lunch assembly, when I first came to the Division Order Department at my company we had one CDOA, Jane Green. The other Analysts told me about her certification and I remember being impressed. Years later, several of us decided to bite the bullet and take the exam. Jane sacrificed her lunch hours over the course of several weeks to conduct a group study. That, plus our own personal commitment to study, helped us pass the exam. I know several of you likely have similar stories and we would love to hear them. From the NADOA website: “A CDOA possesses experience, knowledge,

and professional competency in the duties generally associated with the Division Order Administration. The CDOA designation denotes the individual has a sense of personal and professional ethics, high moral character and integrity”. There are many, many more Division Order Analysts in our organization that possess all these same competencies and traits—all they need to do is “get the fever” and take the exam. Let us know when you’re ready. The Certification Committee and your fellow CDOAs are more than willing to help. To those who are already certified on this 30th Anniversary of the CDOA, congratulations on your certification! You wear it well! As always, thank you for the opportunity to serve as your Certification Committee Chair.

Brenda Dickey, CDOA

(L to R) Chris Nightingale, Rona Erickson, Peggy Balch, Brenda Pirozzolo

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Cob Webs

THERE’S AN APP FOR THAT! By Yoli Bazan When I heard that the 45th Annual NADOA Institute would be in Nashville in 2018, the first thing I did was get on my phone to turn on my Hopper App to watch flights from Houston to Nashville. Take it from a self-proclaimed thrifty traveler that you can and will save money using the Hopper App. You are probably asking yourself, what is Hopper? The Hopper app for Android and iOS is an app that notifies you when it’s the cheapest time to fly and buy. Hopper app is designed to help travelers plan their travel for less. The instructions from the Hopper app website are as follows: “First, search for a trip by tapping dates on the color-coded calendar. Then, get Hopper’s prediction about when your flight will be cheapest. We’ll recommend whether you should wait or book. If we say WAIT, tap the binoculars to watch. Hopper will keep an eye on that trip for you and send you notifications the instant prices drop. If Hopper says BUY, choose your flights and book.” Example below from Houston to Nashville: IMPORTANT TO NOTE....I primarily use the app for its instant notifications and book directly with my airline of choice. I like the idea of working directly with my carrier so that I can garner additional frequent flyer points. As a frugal traveler, I am always looking for ways to get more for less. Hope you find this information useful and expect to see you all in Nashville in 2018.

SALARY SURVEY RESULTS

The latest salary survey results are in and are accessible in the members-only section of the NADOA website or directly at: http://www.nadoa.wildapricot.org/page- 1709228

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NADOA had some great webinars in the 3rd Quarter of 2017. I would like to personally thank David A. Zdunkewick, Partner of Andrews Kurth Kenyon LLP and Stephanie Puente, President of CoreFactor Transformative Coaching for taking part in NADOA’s webinars. Again, thank you so much David and Stephanie. NADOA webinar committee recorded these presentations so you still have the opportunity to listen to these presentations at your leisure (see links below). Should you need a copy of the pdf presentations, please feel free to email Yoli Bazan [email protected] NADOA WEBINARS

October 25, 2017 Stephanie Train Puente Title: Living Life by Your Design: 3 Keys To

only can be described as a terrifying experience that Hur- ricane Harvey was for her. She encouraged all to stay strong and give locally. In between the exceptional education, motivational and moving talks were opportunities for networking and catching up with friends at the Welcome Reception and Thursday evening murder mystery. The NALTA group definitely knows how to welcome people, gather together and have a genuinely great time! NADOA’s President, Sandi Rupprecht, attended the con- ference as NALTA’s honored guest. Julie Willis accompa- nied Sandi as NADOA’s Interaction Chairman. Everyone was pleased to see NADOA. The Merger and Acquisition magnets were a hot item, as usual. Those that stopped by the NADOA booth were glad to hear that NADOA’s Institute had been rescheduled. A few NALTA attendees expressed an interest in attending and we sure hope that they did! Accelerating Your Results https://register.gotowebinar.com/ register/676418839698534403 Upcoming 2018 Quarterly Webinars Date: Wednesday, February 28, 2018 Time: 11:30 am to 12:30 pm Central Time _______________________________________ Date: Wednesday, May 30, 2018 Time: 11:30 am to 12:30 pm Central Time _______________________________________ Date: Wednesday, August 29, 2018 Time: 11:30 am to 12:30 pm Central Time _______________________________________ Date: Wednesday, November 28, 2018 Time: 11:30 am to 12:30 pm Central Time

August 30, 2017 David A. Zdunkewick Partner Andrews Kurth Kenyon LLP Title: Bankruptcy https://attendee.gotowebinar.com/ rt/3917466855602472194

NADOA

Interaction

By Julie Willis

NADOA was kindly invited to participate and attend the NALTA Conference. NALTA was held at their sched- uled time, September 28-29 in Galveston, Texas, despite Hurricane Harvey in early September. The Conference was well attended. The theme was, “Catch the Educa- tion Title Wave.” There were dynamic speakers covering industry topics that any Division Order Analyst would love such as, “Title Examination: Curing Title with Affidavits”, “Working through Title Opinions and NRI Disputes” and “Fact and Fiction in the Fracking Debate.” Author Nancy Robinson Masters entertained and educat- ed the attendees to the maximum--giving a motivational, interactive and vibrant presentation about the power of words. Don’t whine, Shine! Of course, the effects of Hurricane Harvey were not far from everyone’s mind. Texas Strong buttons were worn throughout the event. Several thousand dollars were raised for hurricane relief during the Thursday evening event and Jo Hale gave a personal testimony about what

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Legislative

NADOA Welcomes the following NEW MEMBERS!! Abo Empire, LLC Justin McClelland

Update

Non-Resident Income Tax and Mineral Royalty Withholding

Advance Energy Partners Melva Thornton

Arsenal Resources Amy Oven

Endatus

There are several states with withholding statutes, including Montana, New Mexico, Oklahoma and Utah. Signed by Governor Fallin on April 24, 2017 and effective November 1, 2017, SB225 amended Oklahoma’s statute to add an exemption for publicly-traded partnerships.

Beth Connel

Everling Land Services, LLC Thomas Everling

Finley Resources, Inc.

Katie Cruz Ferchill

Fortis Minerals, LLC Allix Prather

Great Western Drilling Co. June Scobey Gulf Pine Energy Partners Kim Buchanan Laurie Digiulio

Hartz Capital, Inc.

Magdalena Slusarz

Palmares Energy

Laura Prejean

Pantera Energy Company Maria Roach Red Stone Resources, LLC Amy Moore

Southwestern Energy Kelli Yanchak

DEPTH. KNOWLEDGE. SCALE.

Springbok Energy Partners, LLC Caryn Englishbee Kandra Nunez

At Concho, we believe our success is the net result of our assets and resources working together to achieve our strategy. It’s our top-tier team, our in-depth knowledge of the Permian Basin, and the scale of our operations that have made us an industry leader and the largest pure-play Permian operator.

Texland Petroleum, LP Sheila Lucas

LEARN MORE AT WWW.CONCHO.COM

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Counterpart

Connection

Jeff Kliewer, Local Association Coordinator Jeff Kliewer l i i

APPALACHIAN BASIN ASSOCIATION OF DIVISION ORDER ANALYSTS (ABADOA) Association Based in the Pittsburgh, Pennsylvania Area Serving NY, OH, PA, WV (Inactive)

CAPITAL ASSOCIATION OF PROFESSIONAL DIVISION ORDER ANALYSTS (CAPDOA) Association based in the Oklahoma City, OK Area

………………………………… ARKLATEX ASSOCIATION OF DIVISION ORDER ANALYSTS (ALTDOA) Association based in the Shreveport, LA Area (Inactive) …………………………………

MeredithWegener,Associate Professor & Director Graduate Energy Programs, Meinders School of Business, Oklahoma City University, presented, “Embracing Change and Opportunities in Energy Law” at our October luncheon. Meredith always

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Mengers who will be rolling off the Board. CAPDOA wishes you and the entire NADOA community a Happy NewYear! For more information regarding CAPDOA, please visit our website at www.capdoa.org or contact SherryWerth at [email protected]. ………………………………… DALWORTH ASSOCIATION OF DIVISION ORDER ANALYSTS (DALWORTH) Association serving the Dallas/Fort Worth, TX Area

brings a wealth of knowledge.We’re

fortunate to have forged a relationship with the Meinders School of Business at OKCU.As a result, CAPDOA members were invited to attend

the presentations given by former United States Secretary of Energy, Dr. Ernest Moniz, at OKCU in early October. Rarely are any of us given the opportunity to have access to a former U.S. Cabinet member.Thank you, Meredith, for contributing to our continuing education needs. CAPDOA was well represented at NADOA’s 44th Annual Institute in Bastrop,TX with 25 members present. Seeing CAPDOA member, Dea Mengers, was a welcomed sight.The week before Institute Dea’s house burned down: a total loss. Not only did Dea need to buy clothes to attend Institute, she had no luggage to transport them.We are very fortunate that both Dea and her husband, Karl, are fine.We know it will be long road to recovery.The CAPDOA community will be supporting Dea along the way. We were also excited when it was announced that our very own Donna King would be the Corresponding Secretary for the 2018 NADOA Board. Congratulations Donna! Of course this would put a ‘kink’ in CAPDOA’s 2018 Board since Donna was to be the CAPDOA Representative to NADOA. Fortunately a couple of members have stepped forward to volunteer for the position. By the time this is published, we will have the 2018 CAPDOA Representative named. Until then, the 2018 Board is: President: Melissa Martin, Chesapeake Energy Vice-President:Whitney Katigan, Chesapeake Energy Secretary-Treasurer: Chasta Butler, Sandridge Directors:Amber Croisant, Diamondback Energy; Michelle Harris, Chesapeake Energy;ValeriaWible, Mustang Fuel Corp. Board Advisor: SherryWerth, Linn Energy

Dalworth will be hosting its Christmas Party December 5th at the Rolling Hills Country Club in Arlington. We will be installing the 2018 board as well as giving a donation to a deserving charity. Join us in celebrating the holiday season with our last meeting! For information regarding DALWORTH, please visit our website at www.dalworth.org . ………………………………… DENVER ASSOCIATION OF DIVISION ORDER This year DADOA and its members supported several charities. Our sponsored charity this year was Oilfield Helping Hands, Rocky Mountain Chapter. This charity helps people in the industry who are experiencing a financial crisis, either due to a medical reason or other serious situation, like a natural disaster. The board donated $1000 this year and our members donated an additional $530. Our members nominated two additional charities,The Food Bank of the Rockies and LLS Light the Night. DADOA donated $400 to each of these. For more information regarding DADOA, please visit our website at www.dadoa.org. ………………………………… ANALYSTS (DADOA) Association based in the Denver, CO Area

Thanks to Donna King, Roxanne Heath and Dea

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the Bayou City with the force of a locomotive and the size of three New England states. And for one long weekend August 25, 2017,much of Houston stood paralyzed, anxious to know what providence had in store for our homes, and our lives. While some of us kept watch on the rain gauge, wondering what the ravages of wind and water might do to our fair city, others were out in the depths, saving the stranded, helping the helpless. From the Cajun Navy and Convoy of Care, to doctors of theTexas Medical Center and sons from Ohio, real Americans pulled together to help a city that was losing hope. Some were praying that we could withstand what only providence knew of the future. Others put wings to our prayers. They jumped into wet suits, helicopters, boats, ATVs, even dump trucks and took to the rushing river- streets that had become our city. Harvey relentlessly poured nearly 52”of rain into our area in 4 days, with 60,000 square miles affected inTexas alone, claiming 20 lives and leaving 300,000 Houstonians without power. Another 10 inches rained down as Harvey calmed into a tropical depression in Louisiana and

HOUSTON ASSOCIATION OF DIVISION ORDER ANALYSTS (HADOA) Association based in the Houston, TX Area

No worries Baxter, Harvey’s Heroes got this!

Just as Houston’s youngsters were preparing for another back-to-school season, Hurricane Harvey slammed into

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………………………………… SOONER ASSOCIATION OF DIVISION ORDER ANALYSTS (SADOA) Association based in the Tulsa, OK Area

summer showers in northern Georgia. The kids thought it was the coolest thing ever. Perspective is everything! Thank you to all of Houston’s Heroes, all of Harvey’s Heroes. We’re Houston Proud! #HoustonStrong Upcoming:

HADOA Holiday Luncheon Tuesday, December 12, 2017 TimeTBA Petroleum Club of Houston Total Building 1201 Louisiana, 35th Floor Come Celebrate with us!

SADOA was thrilled to have 17 members in attendance at the 44th Annual NADOA Institute this year. We had opportunities to learn in the many classes that were offered. The resort was a wonderful place to meet many analysts from other companies, face to face and share best practices to enhance our capabilities every day at work.

Cosette Barnett, HADOA Historian [email protected]

For additional information regarding HADOA please view our website: www.HADOA.org . ………………………………… MID-AMERICA ASSOCIATION OF DIVISION ORDER ANALYSTS (MAADOA) Association based in the Wichita, KS Area Be sure to check out our website at maadoa.org. It has useful links to various operations in Kansas. Diana Richecky, MAADOA Secretary [email protected] 316-267-1331 ………………………………… PERMIAN BASIN ASSOCIATION OF DIVISION ORDER ANALYSTS (PBADOA) Association based in the Midland, TX Area

As we celebrated the 30th anniversary of CDOAs at NADOA this year, SADOA is very proud to have Rona Erickson (Kaiser-Francis) and Jane Green (Cimarex) as part of our organization. These ladies were recognized at NADOA as being industry leaders, having been among the first in the nation to receive their CDOA certification.

Every year PBADOA partners up with a local food pantry. Our Christmas Social is used to collect canned foods and give to the local food pantry. To encourage participation we sell tickets to members and issue tickets based

Our group will come together for our annual Holiday Dinner Meeting on December 7 at Meadowbrook Country Club inTulsa. The event will include a raffle of wonderful donated gift baskets. The SADOA raffle will benefit the Tulsa Life Senior Services organization. Happy Holidays from SADOA! For more information regarding SADOA, please visit our website at www.oksadoa.org. …………………………………

on how many cans they bring and then play last man standing, with the winner receiving a cash reward. We all get a good laugh while also supplying the food pantry with a lot of canned foods. The winners often donate the money to the local food pantry as well. For more information regarding PBADOA, please visit our website at www.pbadoa.org.

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Legal

Update These materials reflect only the personal views of the author and are not individualized legal advice. It is understood that each case is fact- specific, and that the appropriate solution in any case will vary. Therefore, these materials may or may not be relevant to any particular situation. Thus, the author and their law firm cannot be bound either philosophically or as representatives of their various present and future clients to the comments expressed in these materials. The presentation of these materials does not establish any form of attorney-client relationship with the author or their law firm. While every attempt was made to insure that these materials are accurate, errors or omissions may be contained therein, for which any liability is disclaimed.

Can a Lease Survive Foreclosure? Two Foreclosure Cases and a New Statute By: Martin Gibson

Two recent federal foreclosure cases applied Texas law and one highlighted a fact situation that may involve a new (2015) statute. In Arbuckle v. Chesapeake, Case No. 3:14-CV-04584-M (N.D. Texas, Dallas Division September 18, 2017). Chesapeake (CHK) took oil and gas leases on properties on which there were existing mortgages. Arbuckle, one of several plaintiffs in a putative class action suit, bought the properties out of foreclosure and claimed that the oil and gas leases granted on those properties were junior to the mortgages and were, therefore, terminated by the foreclosure sale. Because this case was decided on a pre-certification motion for partial summary judgment, many facts are not yet clear. Four properties were proffered by the Arbuckle group and all appear to have these facts in common: CHK acquired leases on various commercial and residential properties in the Barnett Shale, which were covered by prior mortgages, the mortgagors defaulted, and were foreclosed. Arbuckle argued that the leases were terminated when the properties were sold at foreclosure because CHK had not obtained agreements subordinating the mortgages to the leases. CHK argued limitations, estoppel, laches, adverse possession, demanded strict proof of the terms of the mortgages and compliance with the Property Code; CHK also argued that the mortgagee’s failure to give notice of foreclosure to CHK was a violation of CHK’s due process right under the U.S. and Texas Constitutions.

then terminated by valid non-judicial foreclosure. In rejecting Arbuckle’s motion, the court examined the title documents related to each of the four properties and, in each case, found the Plaintiff ’s title to be deficient (failed to show the minerals were part of the property when it was mortgaged, the foreclosure deed went to an entity other than the Plaintiff, there was no assignment from the mortgagee to the foreclosing bank, and the foreclosure sale was conducted under a mortgage dated in 2004 instead of 2003 and was not in the record provided to the court). So the court’s decision was based on a failure of Arbuckle to prove its title and not whether a senior mortgage can extinguish an intervening lease. At first blush, the proposition that a senior mortgage, when foreclosed, extinguishes the oil and gas lease seems unassailable. The comment to Texas Title Standard 15.90 Lien Priority and Subordination says “After a senior lien is validly foreclosed, junior liens and junior interests in the same property are extinguished.” Enter the Texas Legislature. In 2015, Section 66.001(b) was added to the Texas Property Code: “Notwithstanding any other law, an oil or gas lease covering real property subject to a security instrument that has been foreclosed remains in effect after the foreclosure sale if the oil or gas lease has not terminated or expired on its own terms and was executed and recorded in the real property records of the county before the foreclosure sale.” The new law goes on to (i) extinguish the surface rights of any such junior oil and gas lease upon foreclosure, (ii) allow a subordination agreement to control, (iii) prohibit any agreement between mortgagor and mortgagee to

Arbuckle sought a partial summary judgment that four CHK leases were subject to senior mortgages, which were

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Deed was not delivered until after the bankruptcy case was filed. The debtor argued that the foreclosure sale was incomplete because the trustee’s deed had not been recorded and, if it were not recorded, then the bankruptcy trustee could take the property as a BFP under §522(h) of the Bankruptcy Code. Analyzing Texas and Bankruptcy law, the court held that for the Debtor to step into the shoes of a hypothetical bona fide purchaser, it had to be without notice, either constructive or inquiry. Since the deed was not filed, notice could not be constructive. After a discussion the court concluded that the trustee was on inquiry notice of the mortgage and should have inquired of the record Substitute Trustee whether the property had been scheduled for foreclosure. Therefore the bankruptcy trustee was on inquiry notice and the property could not become part of the bankruptcy estate. So, what about the standard Texas requirement for a valid conveyance: delivery? Texas Title Standard 4.30 says, in the comment, “Delivery is a formality essential to the effectiveness of conveyances, recorded or otherwise.” The court found that the transfer to the lender was accomplished without the delivery of a deed: “In Texas, title acquired at an execution sale may be established by proof of a valid judgment, issuance of an execution thereon, a sale thereunder, the acceptance of a bid by the sheriff, payment of the costs, and payment of the purchase money either in cash or by crediting the judgment with the amount bid at the sale. Proof of these matters establishes an “equitable and superior’ title in the purchaser. A deed from the sheriff is a ministerial act not essential to the investiture of title ...” [Quoting Glenn v. Hollums, 80 F.2d 555, 556 (5th Cir. 1935).] Take Away If you take a property based on ownership via a previous foreclosure, check again; if you own a lease covering foreclosed property, the lease may not be gone. If you loaned money against a property with minerals, you may not have the minerals. For more information on the matters discussed in this Locke Lord QuickStudy, please contact the author. Martin Gibson | 512-305-4743 | [email protected]

modify the effect of the law unless agreed to by the lessee, and (iv) deny the application of the law where the mortgage does not cover the minerals. As to the underlying mineral ownership, the statute provides that “An interest of the mortgagor or the mortgagor’s assigns in the oil or gas lease, including a right to receive royalty or other payment that become due and payable after the date of the foreclosure, passes to the purchaser of the of the foreclosed property to the extent that the security instrument under which the real property was foreclosed had priority over the interest in the oil or gas lease of the mortgagor.” The fate of the mineral interest (reversionary right) is unclear since the above provision is limited to the mortgagor’s interest in the oil and gas lease. Does the purchaser at foreclosure own the minerals after the lease expires? Probably so since nothing in the statute purports to save the underlying mineral interest – just the leasehold interest. The new law takes effect on January 1, 2016 but there is a timing limitation so that the law “applies only with respect to a foreclosure sale for which the notice of sale is given ... on or after the effective date ....” In the Arbuckle case it appears (but is not clear) that the mortgage was foreclosed before the January 1, 2016 effective date making the new law inapplicable. The legal landscape may shift in later cases where both the mortgage and lease were in place before 1/1/16 but the foreclosure is after, especially as to whether the senior lien’s priority status can retroactively be modified to deny the lien holder the traditional effect of extinguishing junior interest and whether one can, by statute, modify the terms of an existing oil and gas lease to surrender surface rights. In Re: Jones, Case No. 16-31468-SGJ-13; Adversary No. 16-03110 (USBC, N.D. Texas, Dallas Division) August 30, 2017. As long as we are talking about foreclosures, here is an interesting tidbit in a bankruptcy context. Here the Bankruptcy Court decided that a bankruptcy filing the day after the date the foreclosure occurred could not bring the property back into the bankruptcy estate. A lender held a non-judicial foreclosure sale one day before the Debtor filed a Chapter 13 bankruptcy case at which a credit bid from the Lender was accepted but the Trustee’s

Locke Lord Publications October 3, 2017. Reprinted by permission.

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Pooling in Texas: Language Dependent and Strictly Construed By Martin Gibson

While all eyes are on the Texas Supreme Court’s decision on September 1 to reinstate the Petitions for Review in the Endeavor Energy Resources v. Discovery Operating and in the XOG Operating et al. v Chesapeake Exploration et al. cases (two, arguably contradictory, decisions on how to interpret the retained acreage clause), lower courts continue to face pooling issues. In ConocoPhillips Company v. Vaquillas Unproven Minerals, the pooling language in a lease setting different units of acreage per well if any rule adopted by the RRC did so, was construed to limit the lessee’s units to 40 acres in the absence of field rules setting different sizes, that did not provide for the size of proration units, by cross referencing to Rule 38, the state-wide spacing rule. This case has since been settled and the Court of Appeals judgment set aside. In a case decided on August 30, 2017, the Waco Court of Appeals, in Chieftan Exploration Company v. Gastar Exploration (Tex. App. – Waco 2017), Cause No. 10- 15-00037-CV addressed the effect of leaving out a lease description from the unit designation. The minerals under tract 17, consisting of 56 acres, was owned, in equal parts, by two parties. An undivided 1/4 NPRI was carved out to Donelson, who later conveyed it to Chieftan, by one of the two undivided interest owners (Live Oak). Each co-owner signed a separate lease. A 702 acre unit (the Streater Unit) was formed and production established. Chieftan did not get paid and sued. The unit designation did not describe the lease from Live Oak. In response to cross motions for summary judgment, the court concluded as follows: • Since pooling clauses are a matter of contract, the failure of the designation to include a description of the Live Oak lease combined with a lease limitation of unit size to 640 acres and a failure to meet the requirement that the tract constitute 50% of the unit, the lease was not validly pooled. The court added that had the lease been included in the described leases in the unit designation, it still would not have been validly pooled due to exceeding the unit size limitation and failing to meet the ”50% of the unit” requirement.

• Chieftan argued that, under the Sheppard case and the Ladd case, the lands could be pooled without pooling the lease and since the lands covered by tract 17 were included in the unit, the lands were pooled even if the lease was not mentioned. Distinguishing those cases, the court held that the unit designation for the Streater Unit combined only the leases to the extent they covered lands in the unit and, therefore, did not unitize the lands irrespective of the leases. • Since Donelson, the owner of the 1/4 NPRI before Chieftan, had ratified the Streater Unit Designation, Chieftan argued that the ratification put the Live Oak lease into the unit. Not so, said the court because the ratification was conditioned on the lessee exercising the pooling authority which, per ¶1 above, was not done. Nor did Donelson’s successful ratification of the other 1/2 interest in tract 17 (the McBeth lease) apply since Chieftan had no 1/4 NPRI in the McBeth lease and, therefore, the NPRI holder could not successfully ratify the Live Oak lease. • Great care should be taken in preparing the unit designation; omitting one lease description was sufficient to keep that lease from being pooled even though the lands covered by that lease were included in the designation. • Texas courts have a tendency to construe the grant of pooling authority in a lease when it includes the right to pool the lease and the leased premises as applying not only to what was leased but to the lessor’s reversionary interest so that when the lease expires, the mineral owner is still in the unit and liable for costs of drilling, completing, etc. What you may have thought was “boiler plate” turns out to really mean something and, often, not at all what your client intended. Locke Lord Publications September 15, 2017. Reprinted by permission. This case illustrates two points:

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About the Author:

Martin Gibson | 512-305-4743 |

Martin Gibson is Of Counsel in Locke Lord’s Austin office where his practice concentrates on energy law, with a particular focus on the exploration and production activities of independent oil and gas companies and individuals, both domestically and internationally. He is Board Certified in Oil, Gas and Mineral Law by the Texas Board of Legal Specialization and has deep experience in equity and debt financing of oil and gas related entities. [email protected]

Maintaining an Oil and Gas Lease Beyond the Primary Term

the primary term by engaging in “reworking operations.” Under the terms of the lease, Hunt was required to file a written instrument releasing all non-productive acreage within 30 days of the expiration of the primary term. During the primary term of the lease, “Hunt did not commence drilling on any new wells, convert any of the legacy wells (wells that were in existence prior to execution of the subject lease) into injection wells, nor recomplete any of those legacy wells in a new production zone.” Id. , at *12. In July 2011, just before the expiration of the primary term, Hunt began reworking operations on 10 legacy wells. Hardin-Simmons asserted that the lease should be released because the lease terminated due to non-production. Hunt, however, refused to sign a release, and argued the entire lease remained in force and effect due to the reworking clause. The Court explained that “’[p]roduction in paying quantities means ‘the production is sufficient to pay the lessee a profit, even small, over the operating and marketing expenses, although the cost of drilling the well may never be repaid.’” BP Am. Prod. Co. v. Red Deer Res., LLC, No. 15-0569, 2017 Tex. LEXIS 410, at *8 (Tex. April 28, 2017) (quoting Hydrocarbon Mgmt., Inc. Tracker Expl., Inc ., 861 S.W. 427, 432 n.4 (Tex. App.- Amarillo 1993, no writ)). The Texas Supreme Court has developed a two-pronged analysis to determine “whether a well has ceased to produce in paying quantities depends on (1) whether the well shows a profit, even small, over operating expenses, and (2) if not, whether,

In Hardin-Simmons Univ. v. Hunt Cimarron L.P., No. 07- 15-00303-CV, 2017 Tex. App. LEXIS 6934 (Tex. App.- Amarillo July 25, 2017), the court evaluated the terms of an oil and gas lease to determine to what extent the oil and gas lease remained in effect, if at all, due to a lack of production in paying quantities. In the late 1950s several producing wells were drilled on the leased premises, but production declined. In 1967, the leased premises were included in the Buckshot Unit, a 13,000 acre waterflood unit. In the 1990s, the leased premises fell out of the Buckshot Unit and the owners of entered a new lease that was subsequently assigned to United Oil and Gas (the “United Lease”). At the conclusion of the primary term of the oil and gas lease to United, the lease was released as to all of the leased premises, except for 700 acres, which lease was acquired by Hunt Cimarron LP (“Hunt”). In 2006, lessors executed an oil and gas lease covering 4,960 acres of land in Cochran County, Texas to Hunt, including the 700 acres held by the United Lease. The 2006 Hunt lease provided for a primary term of five (5) years and included a retained acreage clause and a Pugh clause. The Pugh clause gave Hunt the right to maintain the lease by engaging in a “continuous development program” prior to the end of the primary term. The retained acreage clause gave Hunt the right to maintain the lease as to certain acreage and depths included in a “production unit.” The lease also contained a “reworking” clause that permitted Hunt to maintain the lease beyond

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