Desk Focus 06 · PSA Due Diligence & Defect Notices
Acquisition Due Diligence & Defect Notice Mentorship.
Acquisition due diligence runs on a ticking clock between Purchase and Sale Agreement (PSA) signing and the defect notice deadline. Work with a mentor on how to audit Exhibit A leases and wells against Defensible Title standards, calculate defect values, and write clean Title Defect Notices.
Apply for mentorshipAn application is a request, not a seat. Format, schedule, and any fee are agreed in writing only after a match.
Sample PSA audit excerpt · Exhibit A vs. record title check. Generic units, not a real transaction.
White chalk: the worksheet as built. Yellow chalk: a mentor's notes.
| No. | Instr. | Grantor | Grantee | Dated / Filed | Bk/Pg | Land and remarks | Mentor's notes |
|---|---|---|---|---|---|---|---|
| A-12 | EXH-A | Seller Deck | Buyer Audit | Dated PSA DateFiled Closing | Bk/Pg Unit 14 | Exhibit A states WI 0.75000000 / NRI 0.56250000 (All depths, Sec. 14). | Check 1: Does Seller hold record title yielding at least 56.25% NRI without a higher than 75.00% cost-bearing WI? |
| D-01 | ASN | Seller Assignor | Third Party | Dated 06/11/2019Filed 06/29/2019 | Bk/Pg 940/212 | Unlisted 2.00% ORRI assigned in Bk 940/212 reduces Seller NRI to 0.54750000. | NRI shortfall of 0.01500000 (1.50%). Compute the defect amount using the PSA formula: AV x (0.01500000 / 0.56250000). |
| D-02 | OGL | Lessor Estate | Seller | Dated 02/01/2018Filed 02/14/2018 | Bk/Pg 880/44 | Lease contains a hard consent-to-assign (void if assigned without consent). | Log on the Consent & Preferential Right schedule immediately so land administration sends the consent letter before closing. |
What we cover in acquisition due diligence mentorship
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Reading the PSA title article before opening a file.
Understanding Defensible Title definitions, Permitted Encumbrances, the individual Title Defect Threshold, and the aggregate deductible before spending hours on minor clouds that do not cross the threshold.
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Tracing Seller's WI and NRI on producing wells vs. undeveloped DSU leases.
Verifying base leases, joint operating agreement (JOA) exhibits, wellbore vs. all-depths assignments, and non-consent payout balances against Seller's Exhibit A schedule.
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Consent-to-assign, preferential purchase rights, and maintenance-of-uniform-interest clauses.
Distinguishing soft consents ("shall not be unreasonably withheld") from hard consents (termination, liquidated damages, or "void if assigned") and logging every notice requirement.
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Drafting a Title Defect Notice that holds up at the cure table.
Stating the affected Exhibit A property, the Allocated Value, the specific recorded instruments proving the shortfall or encumbrance, the curative action needed, and the calculated defect value.
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Prefer the phone? (307) 263-8515.