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Update: 12/09/2010 We probably won't make it by the first of the year (not a chance really), but progress is being made. Most of the current individual owners are in agreement on principal. We are still evaluating the type of organization (LLC, LP, LLP, LLLP.).

Pecos_Org_Plan

First - Be assured ALL who are involved will have all the information I have, and it will hopefully be all that is necessary for an informed decision.  As far as I am concerned, we all play from the same sheet of music or we not play at all. The other two professionally managed owners groups - The Miller and Shoemaker Trusts -  like this Idea, and have wished me luck in putting it together.

The Idea is we will form an Organization of interest owners under TX Law by the end of this year or 1/1/2011 if we can (you really don’t have to join at that time but…….)

The organization looks most likely to be a LLC (passive income- no current TX taxes on such a Org.) - We then hire a Management Company to handle:

A. Financial management:

a.  Track and disperse the cash flow to the property (O&G leases and a small amount from a grazing lease)

 

b.  Pay expenses / Taxes. From the gross cash flow, the management company withholds, in escrow, money for the ad valorem taxes (Surface and Minerals), management costs, and some small amount for unexpected costs

 

c. The members (shareholders) of the organization (LLC ?) would receive 1 monthly check (if there is money coming in!) and then an End of Year Statement for tax purposes.

B. Maintaining the property and Records: Provide oversight of the status of current conditions (Lease releases, maintenance of right of ways, enforcement of environmental impact by lessees), and of course, a central depositor of property and transactional records.   

C. Pursue new Income.  Actively seek New O&G Leases and possibly Wind Farm leases.

What we get, as a minimum, grouping together and by paying a management company a fee:

A.. Hopefully, the active marketing for new leases.

B.  Relief from handling, tracking, and verifying multiple sources of income and if needed, change of addresses.

C.  Ensuring that ALL of the taxes are paid on time by all of the interest owners.

And for just grouping together in a formal organization

A.  The power of the group when negotiating new leases with O&G developers.

B.  And a Big One - An easier way to transfer via sale, gift or inheritance - the “value” of the interest held. You do realize that your interest ownership is / should be / recorded as such in Pecos County, TX. And any changes to that ownership should also be recorded there.

Under the ”Pecos Land LLC” or whatever it gets named - you will have Shares which could be bought, sold, or passed on just like shares of Chevron…  

The current company that we are looking to for management services is “The Swallow Group” (their current fee schedule is 5.5% of gross for managing current income, 5% of new income):- It is not set in stone that we go with them, and even if we end up doing so, if we don’t like their service after a year or two or five - we fire them and look else where.

At this time I do ask you to refrain from contacting the Swallow Group directly as we are already picking their brains (along with several lawyers) for free.  I will attempt pass the essential interim emails and such on to the entire interest holder list via email or snail mail if a holder does not have email. 

One of my concerns was about the Miller Group “riding our coattails” if our group finds new leases - This is less of a “problem” than I originally thought as I learned from the Oil and Gas division of the Trustee of the Shoemaker Trust (who, it looks like, will not be joining our group - and there was an email earlier to you all about that). But be assured that at the decision point of your joining the group, you will have sufficient information to form a valid decision.

For “the group”, playing from one sheet of music is a cornerstone of mine since I first started researching this stuff so my wife would have an Idea of what she inherited. My earlier work in describing in layman’s terms what Cindel (my wife) owned and identifying wells, leases, and royalty payers (and what they’re paying her for) and also passing all that info to the “Price Group” members for their information won me the respect of some very sharp and money smart people. Also, the Price Group, at least those over fifty-five -grin, and I are pretty tight with a dollar -. The idea forming a formal organization came about because the Price Group was losing the services of the lawyer whose firm had handled it since the 20’s and I wanted this income to be as stress less / effortless as possible and to make it easier to pass on to her kids.  My thought was, if she benefits by making more money (new leases etc) and has an easier time managing what she owns then similar “Interest owners” would get the same benefits - at least that’s the Big Idea.

We are doing our homework. And EVERYONE involved will have the same info to use for making decisions.  But at the end of the day the group can’t use a committee of 19 to make day to day phone calls and decisions.  When I started this it was for the benefit of my wife’s peace of mind about what she “owned”.  It’s grown from that simple start but the equal sharing of information and its derived benefits to all still apply.