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During years when the oil and gas market is in a downturn and companies begin to face cash flow issues, it is common to see an increase in late or unpaid material and service invoices. It is important during these times for companies to carefully monitor and take the proper steps associated with the potential filing of liens against oil and gas properties. A few points to consider related to late payments and the filing of oil and gas liens:
- Liens must be filed not later than 6 months after the last date of service on a particular well/tract; failure to timely file renders the lien completely unenforceable
- If the lien claimant is a subcontractor, they must serve proper written notice to the property owner at least 10 days prior to filing their lien
- The Texas Property Code is very specific as to the information necessary in a valid lien, in order to assure sufficient information is provided for a creditor or property owner to ascertain the correctness of the claim.
- Work on different tracts (i.e. work on more than one well) can sometimes be consolidated if the wells are unitized
- The time period to foreclose a lien is relatively short (2 years after deadline to file the lien)
- Invoices secured by proper liens are considered secured claims in a bankruptcy; secured claims are much more likely to be paid and are almost always paid a larger percentage then unsecured claims
- There are also different statutory provisions for liens related to non-mineral related work providing a completely different set of rules.
Diligence in timely identifying unpaid invoices, proper record keeping regarding dates that services are initiated and completed and attention to demand letters and lien notices are critical to managing liens on oil and gas properties. This diligence will pay off in protecting valuable rights related to oil and gas properties and payment for services and materials.
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