Finding The Right Title Fit
Title is one of the most important parts of the oil and gas upstream sector but not the most glamorous. You will not find any headlines about ABC Title Company raising $50 million from a PE Fund and you will not read in Oil and Gas Investor about ABC Title Company acquiring XYZ Title Company for 10X. A majority of the work does not take place in fancy offices that reach high into the sky, rather the work is done in old courthouses, and a title career is not something they push in Energy Management at the Universities (at least not when I was in school). Yet, title is the foundation that supports the glamorous sides of the upstream sector. The slightest oversight in title can be the difference in hundreds or millions of dollars and the difference in you having the right to drill a well or be left standing on the sidelines holding bad oil and gas leases.
So Many Choices
How do you choose the right title company? If you look at the sponsors for Oklahoma City Association of Petroleum Landman (OCAPL) there are over 15 title related companies listed. If you Google "Oklahoma oil and gas title companies" you get over 18 pages of results. If you tell someone you work in oil and gas they'll likely ask you if you know their friend who is a landman; in short there is a lot of competition in the title market. But not all companies who provide title as a service are the same. Your needs will determine who you need to hire; are you a well operator, a mineral company, an individual, or midstream operator? Below are a few examples of the types of title companies serving the industry.
Full Service Land Company
I would assume a majority of Oklahoma title companies fall under this category. They have services and teams in place that can research entire townships, file the necessary regulatory paperwork, lease mineral owners, and handle surface issues. A lot of the bigger operators tend to use these companies since they can have one shop handle all their needs. Probably the most common issue facing these companies, who often times have large number of contract landmen on payroll, is the up and down nature of the business which makes constantly hiring and firing landmen "just part of the business." This constant rotation of workers leads to the more experienced and seasoned members managing title teams, and the fresher faces in the courthouses pulling books and running title.
Surface Title and Right of Way Company
These companies are focused primarily on surface and usually do not get into mineral ownership too much. The title and land team are responsible for researching surface rights, easement burdens, and negotiating with landowners on numerous issues like well site locations, pipeline routes, water usage, and more. The client base for surface companies tends to be the well operators.
Often times these individuals have been in the industry for many years and once worked for a land company. Most courthouses have business cards posted for a local landman and they are great resources for individuals who need to know what they or their family own in the county. Having a connection to an individual landman who lives near your Area of Operations can be a positive should you ever need a document quickly and the courthouse is located hours away from your office. Depending on where the individual is in his or her career they might not travel too far outside their county or they might not have access to some of the modern and expensive software programs found at other land companies.
The most popular title report(s) prepared by a title attorney is the Drilling Title Opinion (DTO). These reports cover who owns in a section that is about to be drilled by a well, how much they own, and any curative requirements that affect marketability. DTOs are prepared for the operators to ensure they have the right to drill a well. Sometimes mineral and non-op companies get their hands on the DTOs (we can talk about ethics in a future blog) and can bypass the title portion of their acquisitions since they know who is in pay from the operator. Larger mineral companies usually have title attorneys on speed dial or on staff because their acquisitions regularly have mineral owner curative requirements affecting the mineral company’s pay status. In areas that have a history of oil and gas activity it is rare to find a tract that does not have “clouds” on the title.
Boutique Land Company
Convey Energy falls under the Boutique Land Company category. We are not considered a full service land company or surface title company, and do not write title opinions. We specialize in title and due diligence for mineral and non-op groups who are actively acquiring in Oklahoma. A majority of our work is seller specific (i.e. we track the seller's interests and burdens and do not focus too much on outside owners). Our title team consists of 3-5 landmen which allows us to control quality and landman qualifications.
When I first started Convey Energy Consultants, formerly known as Oklahoma Mineral Fund, I honestly tried to avoid the title aspect of the business. I was focusing on the mineral owners and trying to match them with respective buyers. But mineral owners and companies kept requesting title and Convey Energy was born. Today Convey Energy focuses on Acquisition & Divestiture, Title Research, and Data Analysis.
So next time you have a title project take a moment to reflect on your specific needs. Are you drilling a well, buying minerals, purchasing leases, installing pipeline, or just need to know what your family owns? Regardless of your needs it is important that the title is accurate (and I’ll be the first to admit everyone makes mistakes but you have to learn from those mistakes or it’ll be costly as noted above). By choosing a title company that fits your needs you are ensuring that mistakes are limited and that the title report accurately addresses the questions you need answered. And next time you encounter a title landman I encourage you to shake his/her hand, because although not glamorous at times, their job is vital the upstream sector.
Cody Tucker | firstname.lastname@example.org
Convey Energy Consultants