Oklahoma City Energy Services: 7 Debt Moves Starting With the Lien You Never Filed

The oil and gas lien is strong, but there is a deadline. Anyone supplying labor, materials, machinery or supplies used to drill, complete, operate or repair a well or pipeline is entitled to a lien, and that includes contractors and subcontractors. The lien must be filed with the county clerk where the well is located within 180 days of the last work.

Your 180 days begins with the last day working on the well or delivering material. The deadline is not the due date of the invoice, and it is not based on when it was paid. They are calendar days, so weekends and holidays count. The day after a job is complete, the job-site coordinator should add 180 days to that last work date and set a calendar date for the lien to be filed.

The lien statement needs to be verified by affidavit and include the amount due and the items involved in the claim. It needs to name the owner of the land, the person with whom the claimant contracted, and the claimant. It requires a legal description of the property. When you file the lien, the clerk will mail a copy of the notice to the property owner within 5 days, so make sure they have yours too. The amount claimed in a lien is set in stone. Although the court can allow you to amend your statement, Oklahoma law does not allow you to amend the amount claimed.

The lien “attaches” only to the oil and gas leasehold and to a mineral owner’s working interest in the well. As for money from oil sales, you can reach the proceeds by mailing the purchaser a copy of the filed lien by registered or certified mail. Until the purchaser of the oil gets that certified copy, the lien does not bind it as to the sale proceeds, and it has no obligation to pay anything to you. The money keeps flowing to the operator.

What does it mean if your lien has “priority”? Priority is your leverage, and priority over a lender or a lease can mean the difference between payment and pennies, depending on the security pledged. A timely, valid well lien shares equal rank with other well liens and “relates back” to the first day of work on the lease, so it can outrank a mortgage recorded during or after the well-drilling. A file-stamped lien proves where you stand in line and can be helpful when negotiations go bad. If you have recorded your lien and are satisfied that you have complied with the rules, you can sit down with the lender and the operator to negotiate your release.

If you are unsuccessful negotiating your payment, the clock will run out on your lien. Lien enforcement means filing a lawsuit to foreclose your lien. This is a formal lawsuit in district court in the county where the land sits. For starters, your suit must be filed before the one-year anniversary of filing your lien.

In Oklahoma, be sure of your claims. If you win a lien suit, you get an attorney fee, but if you lose, the owner can also claim its attorney fee, so weigh the risks before filing the suit and pay attention to those added costs.

Your own unpaid suppliers might file liens on your customer’s lease. For example, your unpaid supplier might not have been paid for materials it sold for your performance on a job for your customer, and those liens become part of a spider web of debt that also includes your unpaid account. On the other side, the owner or another interested party can deposit cash or a surety bond worth 125% of the claim with the county clerk, and that deposit will replace the lien. The claimant can go after the cash or bond in the same time and manner as foreclosing the lien.

If you miss the 180 days, your lien deadline has expired and you are likely out of luck when it comes to ranking as a secured creditor. Your actual debt still exists and you still may be able to recover payment, but what that means is you have lost the “lien leverage” that may have been your biggest bargaining tool. A suit on an unpaid written contract in Oklahoma generally must be filed within 5 years after the claim arose. More time, but no guarantee.

The last move to try and avoid total collapse is federal bankruptcy court. If you sell oilfield services, a small business bankruptcy, referred to as a “subchapter V,” is capped for any debt at $3,424,000 at the time of writing. The law changing the cap was just passed by Congress, H.R. 7730, and as of early October was still waiting for the President’s signature to increase it to $7,500,000.

Start today: pull your job tickets. Go find the final day you worked on every job listed. Start on the invoices that have been unpaid longest, and work to the most recently unpaid. Count to 180 days after each. File every lien still open. List each lien you have filed and find the suit deadline. The others follow from that.