Blog

Hidden costs of a mineral ownership report

Hidden Costs of a Mineral Ownership Report

The hunt for prime acreage culminates in the title process.  Oil & gas companies looking to lease a tract of land must first identify the current mineral and surface owners through the complex process of running title.  It is a moving target as mineral rights constantly change hands, are divided, and purchased.  Murky processes, lack of standards, and redundancies create a minefield of hidden costs with a mineral ownership report often costing thousands in legal fees.

Running the Maze: Courthouse to Mineral Ownership Report

When trying to acquire acreage in the hot plays, like the Permian Basin, courthouses can be standing room only.  This leads to E&P companies and land brokers throwing money and people at the problem often sacrificing accuracy for speed.  Indeed, recent research reveals the amount of title defects companies are willing to accept in favor of closing the deal.

The work starts at physical and digital courthouses with field landmen who are tasked with data mining vast volumes of land records.  Key ownership data is extracted from title instruments and often recorded on physical note cards then manually collated in spreadsheets or legal pads.  Chain of title and ownership calculations are often done inside of a spreadsheet.  And adding new data to the mix often requires landmen to back track and build reports again by hand.

Running title is a murky and manual process, one in which the in-house landman has little insight into the work being done in the field.  It is a process devoid of standards and inherently prone to human error and duplication of effort, resulting in significantly more time being spent on title than is truly needed.  These hidden costs amount to a billion dollar problem for an industry that spends billions annually on title.

Consider an example in which 8,000 acres is under consideration in West Texas.  The tracts involved cover hundreds of surface and mineral owners who must be chained back to sovereignty.  Billable time skyrockets as legal staff plow through thousands of instruments, manually perform calculations, and prepare mineral ownership reports by hand.   The biggest hidden cost of all is the risk companies assume through error-prone manual processes.

Bringing Transparency, Standards, and Accuracy to Title

Running title and generating a mineral ownership report is largely a data management problem.  As such, land departments will benefit from the right technologies that allow for optimal management, validation, and governance of title information.  Centralizing and standardizing the way ownership data is collected and managed brings much needed transparency to the title process, allowing land brokers and in-house landmen to drive new efficiencies across title projects.

As much as 75% of the title process is manual and repetitive.  Armed with the right tools, E&Ps can now accelerate title projects while increasing title accuracy by automating much of the process, including these steps:

  • Centralized Workflow
  • Flowchart Generation
  • Instant Runsheet and Ownership Reports
  • Accurate and Instant Calculations

By automating these steps, the title process can be reduced to just three phases: 1) landmen pull instruments, 2) input title data, and 3) verify mineral ownership report using the work product already generated by the landman. The runsheet, chain of title and mineral ownership report is automatically generated for you. Combined with standardized data input, data validation, and a real-time view of title projects, E&P companies can run title faster, more accurately, and at significantly lower cost.

  The Tracts Solution

Through its cloud-based title management software, Tracts provides land departments with a simple and effective way to generate mineral ownership reports.  The software-as-a-service (SaaS) is designed to orchestrate title projects at every level, enabling field landmen to focus on pulling and recording instruments through a standard digital note card while giving in-house landmen the oversight they need to control their title process.  Importantly, Tracts automates manual tasks, reduces project time, and reduces legal fees associated with title by 50%.

Landman Insider Review

 

Thanks to Randy Young with the LandmanInsider.com blog for taking the time to write such a detailed review of our title management software.  We truly appreciate the critique, observations, and suggestions.

If you missed Randy's review, you can get all the details on LandmanInsider.com about his experience using the software, use cases for building chain of title and other reports, and conclusions.

Read the Full Review Here

 

 

Texas Supreme Court Decision Underscores Need for Modern Landman Software

In Wenske v. Ealy, No. 16-0353, 2017 WL 2719330 (Tex. June 23, 2017), the Texas Supreme Court has recently changed the way that Texas court’s will interpret language surrounding subject-to clauses. In doing so, the Court has sought once again to “cast off rigid, mechanical rules of deed construction” and “warned against quick resort to these default or arbitrary rules.” In brief, the court’s decision means that clearing title in Texas just got tougher. In such an environment, land departments are increasingly relying on technology, including landman software, to better assess acreage opportunities.

In Wenske, the Court states that the subject-to clause that referenced a prior reservation of a non-participating royalty interest (NPRI) did not allocate the entirety of the burden of said NPRI to the grantee in said deed. Instead, it merely acted to limit the warranty of the grantors in said deed and provided that the prior reserved NPRI should burden both the grantor and grantee in said deed.
The specific holding in Wenske is less important that the Court’s expression of a desire to “(1) a focus on the intent of the parties, expressed by the language within the four corners of the deed, and (2) harmonizing all parts of an instrument, even if particular parts appears contradictory or inconsistent.” In doing so, the Court removes certainty considering title matters previously considered to be settled.
In his article, “Breaking: Traditional Rules of Construction for Mineral Deed Upended By Texas Supreme Court”, Thomas Ciarlone of Kane Russell Coleman Logan PC notes that this ruling “has the potential to open the floodgates to large volume of new litigation challenging the allocations of royalty burdens among mineral lessors.” At Tracts, we concur, believing that the Court’s removal of bright line rules is going to make the tough job of clearing title even more difficult.

Tracts: Modern Landman Software

Considering the Court’s desire to move towards an examination of each deed on a case-by-case basis, the need for flexible landman software that allows you to make adjustments on the fly is important. Tracts allows E&P companies to quickly review and alter deed interpretations affecting all of its acreage. Our dynamic system provides for one change in deed interpretation to immediately flow through to all other affected documents. Instead of a single change requiring hours of re-calculation, Tracts instantly calculates the entire tract saving countless hours.

Tracts to Save Energy Industry Billions with New Title Software

Venture backed Houston startup modernizes title for oil & gas companies, cuts time and costs
HOUSTON – Tracts announces the launch of its title software to accelerate the mineral ownership reporting required by oil & gas companies. Designed for land departments, the new product automates much of the title process using patent pending technology, which significantly reduces legal preparation time. In an industry that spends billions annually on title, Tracts’ new product is poised to reduce costs for oil & gas companies by 50% or more. The software developer is venture backed by Chip Davis of Houston Ventures and is strategically headquartered near Houston’s energy corridor.

Oil & gas companies must determine legal ownership of land and minerals before it can be leased for exploration and production. Unlike a real estate title search, oil & gas title research often involves hundreds of parties who own surface land and subsurface mineral rights. Moreover, a chain of title must be documented linking current owners with the first, sovereign, landowner, which can span hundreds of years. The resulting process is labor intensive and time consuming, costing companies in the United States billions of dollars every year in title costs.

Tracts’ founders realized that much of the traditional mineral title process was redundant, lacked standards and could be largely automated. Using a patent pending math engine and data visualization process, Tracts designed a modern solution to the historically complex problem of running title. The company’s title software guides users through the process of entering data from legally executed ownership records, or instruments, which are obtained from physical or digital courthouses. As instruments are added, the software dynamically creates chain of title, runsheet, ownership flowcharts, and other reports.

“Tracts has the immediate upshot of saving oil & gas companies time, which translates to 50% or more cost savings on title projects that can run into millions of dollars,” said Ashley Gilmore, CEO and co-founder of Tracts. “But even more importantly, Tracts enables companies to lower title risks and capitalize on opportunities faster than ever, such as acquiring a hotly contested tract in the Permian Basin, and in today’s fast-paced and competitive leasing arena, that’s a real edge,” Gilmore added.

Gilmore co-founded Tracts with David Dewey.  Dewey, Tracts’ CTO, is an experienced computer scientist who, together with Gilmore, pioneered the company’s patent pending data visualization process and math engine.  Passionate about replacing antiquated title processes with a modern approach, the co-founders set out to disrupt the status quo in the oil & gas title industry with cutting-edge technology.

The company’s Houston headquarters has grown rapidly in the last year, adding four new employees, including Matt Chamberlain, a marketing and sales executive with extensive experience growing technology startups.

Given the continued need for cost-efficiency after the industry downturn and with rig counts and prospecting on the rise, Tracts expects high demand for its new title processing software. The developer worked with several oil & gas companies to build and successfully field-test its product.