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oil royalties for dummies oil royalties for sale

What are Oil Royalties?

Oil royalties are a pretty simple concept but can warrant some very significant income. Here is a century fact in the United States. Individuals have been receiving oil royalties for the valuable resources below their property. In this article, we are going to give a brief overview of what are oil royalties. Additionally, we will talk about some opportunities for oil royalties for sale.

Oil Royalties for Dummies: A Simple Overlook

An oil royalty is a payment receivable for the percentage ownership on the sale of produced oil. The royalty amount is agreed upon between the mineral rights landowner and the oil producer in a mineral rights lease.

Mineral Rights Leases: The Lessee vs. The Lessor

In a mineral rights lease, a landowner allows an oil company (as well as surveyors and engineers associated with the production) to explore their land for the purpose of extracting oil.

Here, the property owner is the lessor. The Lessor will still maintain the ownership of the property after the lease has expired. Similarly, the oil company is going to be the lessee. The lessee is entitled to the property’s subsurface for the duration of the lease, with access to the property’s surface defined in the contract.

How Can I Get Oil Royalties?

Once you found out what are oil royalties, the next question is to understand what is the most common way to get oil royalties. The answer is simple – it’s about leasing your mineral rights. Do you own property that may contain valuable resources below its surface? Then oil and gas companies may want to lease your land. In negotiating an oil and gas lease, you will likely receive an upfront bonus payment as well as monthly oil royalties from the sale of the minerals extracted from your land.

How Much are Oil and Gas Royalty Payments?

As you may imagine, there is a huge range between different oil and gas royalty payments around the country. For most oil and gas leases, the property owner receives between 10% to 25% of the sale of precious minerals extracted from the land.

As wells can produce highly variable amounts of oil and gas, royalty payments can range anywhere from a few hundred dollars to tens of thousands of dollars each month. Commonly, oil and gas royalty payments are split between multiple owners.

If you have further questions about oil royalties or have oil royalties for sale, we can assist you further here.

oil gas pump for subsurface extraction

Subsurface Rights: What Exactly Do I Own?

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So you’ve just bought some property, congratulations. Under the sale of a fee simple estate, it is common for most landowners in the United States to own both the surface and subsurface rights of their property. In this article, we are going to define subsurface rights and cover everything you need to know about what you own below your property.

Surface Rights vs. Subsurface Rights

Surface rights are extremely easy to identify and understand. A property’s surface rights entitle the owner for use of everything above the ground within the property boundaries. This includes structures like buildings and fences, as well as trees and water access rights. Subsurface rights, as the name suggests, refer to the ownership of the land below a property’s surface.

Are Subsurface Rights Real Property?

Subsurface rights are considered a real property, just like any other real estate asset. Subsurface rights can be owned independently or divided and shared between several parties. Most commonly, subsurface rights constitute ownership of mineral rights.

Mineral Rights

If you own your property’s mineral rights, then there are a few ways that you can utilize your asset. Mineral rights can be sold or leased in a split estate. Here, you can either sell your mineral rights to an interested party or lease your mineral rights to an oil and gas company.

Why are they Valuable?

As suggested above, there may be many people interested in purchasing or leasing your subsurface and mineral rights. This is because they present an opportunity for you to sell your asset in one lump sum or receive a portion of resource sales.

In the United States, subsurface rights are considered valuable for the precious minerals that can be extracted and sold. Most commonly in the United States, oil and natural gas are the most sought after subterranean resources.

Selling Mineral Rights in Texas

Selling Mineral Rights in Texas: 5 Simple Steps to Take

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Here in the Lone Star State, we know what we have is valuable. Texas is a great place to live and also has some of the world’s largest producing oil and gas fields spread across the state. If you’ve got a special piece of this land that you’d like to sell for your financial gain, the property’s mineral rights can be very valuable. In this article, we will outline five simple steps to take when selling mineral rights in Texas.

1. Get Your Paperwork Ready

In order to sell mineral rights in Texas and any other state, you will need to prove that you own them. Try to locate any documents that legally describe your mineral rights property like fees, leases, and stubs. This is important because mineral rights transactions are not required to be published, and occasionally mineral rights records are lost.

2. Evaluate the Value of Your Mineral Rights

Next, seek out an industry expert to provide you with unbiased, honest information about your property. Get together any records of your property’s wells history in addition to GIS maps and data. This will give you a baseline for companies to bid upon.

3. Let the Offers Flood In

When you’re ready, you can begin to contact oil and gas companies or property managers to help you sell your mineral rights. Mineral rights in Texas can be extremely valuable, so there are many people ready to help you earn the best possible deal on your sale.

4. Determine the Best Deal on Selling Mineral Rights in Texas

After contacting enough potential partners, carefully analyze the contracts and the subsequent negotiations. There really is no standard contract for selling mineral rights, so the value of your sale is determined by your property’s value, your negotiations, as well as current market prices.

There are some search terms you can use on Google like “mineral rights texas search”.

Most importantly, you will want to try and receive a large lump sum for the sale of your mineral rights. Secondly, you may be able to later earn royalty interests on the land’s oil or gas production.

5. Sign the Paperwork and Celebrate

Once the documents are signed, the hard work is over. In oil and gas leases as well as mineral rights sales, the mineral rights owner rarely has to do much of anything at all. Instead, they are able to earn an income from selling valuable mineral rights.

Conclusion on Selling Mineral Rights in Texas

If you have further questions on Selling Mineral Rights in Texas, feel free to reach out to Ranger Land and Minerals.

colombia oil

Mineral Rights For Sale – What Happens When You Sell It?

Many people know how to sell their mineral rights. Some will just market it and have a simple promotion such as “Mineral Rights For Sale”. In fact, if you have valuable producing or non-producing mineral rights in the United States, you may be getting offers to sell all the time. The fact is, oil and gas companies need land to extract resources, and your mineral rights may be extremely valuable to them. In this article, we will outline what you can expect when you decide to sell your mineral rights.

Mineral Rights for Sale Drives Compensation

First things first, when you sell your mineral rights, you will receive some compensation. If you’re selling mineral rights in Texas, Colorado, South Dakota, or any other highly valued state, then you may get a lot of money.

File the Correct Tax Information

Unfortunately, you will not receive the exact amount of money that is on your deed. It is because mineral rights sales are taxable transactions. There are two main methods that you should remember. You can use these to make sure that you do not pay too much tax on your mineral rights sale. It is recommended to speak to a CPA to help choose between filing for a capital gains tax or a 1031 Exchange.

Capital Gains Tax

Do you own your mineral rights for more than a year prior to selling them? If yes, then you qualify for a long-term capital gains tax. In doing so, you will be able to limit the sale’s tax rate. This is usually anywhere from 20% all the way to 0%, depending on your income bracket. The design of capital gains taxes are to be lower than the standard income tax rate.

1031 Exchange on Mineral Rights for Sale

If you are using the sale of your mineral rights to directly finance another asset, then you can utilize a 1031 Exchange. A 1031 Exchange, which is named after a section of the IRS code, allows you to defer the taxes on your mineral rights sale if you use the funds to purchase a similar kind of property. In the eyes of the law, mineral rights sales are exchangeable. Usually for other real estates purchases like land or homes.

If you have further questions about the sale of your mineral rights, feel free to reach out to us here.

oil royalty and oil royalty interest

What is the Difference Between an Oil Royalty and an Oil Royalty Interest?

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Whenever you are selling or leasing your mineral rights, negotiating the best deal is very important. If you allow an oil or gas company to explore and drill on your land, then you will want to ensure that you are compensated for the absolute highest share possible.

Two of the most common ways to be paid for the production of oil and gas are through royalty payments and royalty interests. Despite the fact that they sound so similar, the two terms actually refer to two completely separate kinds of transactions. Not knowing the difference can end up being very costly to your future income streams.

In this article, we are going to fully define royalty and royalty interests as they relate to the oil and gas industry. In doing so, we hope to provide a helpful insight for anyone looking to sell or lease mineral rights.

What is an Oil Royalty?

An oil royalty is a landowner’s share in the oil or gas production below his or her property. In some cases, single landowners may be the only parties that receive a royalty payment. More commonly, however, joint and combined subsurface rights make it possible for landowners to earn a smaller share of a larger oil production.

Those who own mineral rights of a plot of land can receive oil or gas royalties. In this scenario, the shareholder is considered a “non-interest royalty owner.” Once production begins, the royalty payments are then paid as a percentage share of the well’s output and resource sales.

What is an Oil Royalty Interest?

Of course, landowners are not the only ones involved in the extraction process. In addition to oil and gas drilling operations, there are many financiers and contractors that enable a plot of land to be explored and drilled for oil or gas. For these contributions, individuals and entities are awarded with oil royalty interests.

If you are a landowner and decide to sell, rather than lease, your mineral rights, then you still may be able to hold an oil royalty interest for the property’s future production. In addition to the large lump sum you will receive when selling your mineral rights, oil royalty interests allow the potential to benefit from the future sales of oil or gas.

oil-gas

The Importance of Oil to Energy Development

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The modern history and innovation of petroleum dates back to 1846 when the process of refining kerosene from coal was introduced. The credit for this process goes to Nova Acotian Abraham Pineo Gesner. The speed of time stimulated human brain cells to such an extent that Agencie Lucasovic introduced the terms to the gas refinery, which facilitated the process of purifying kerosene. The earliest rock oil cave was discovered in Buberka, near Krasno, Galicia (Poland / Ukraine). After discovering wells and deposits, scientists began working on the synthesis of chemical components of oil and the distribution of formulas. In 1854, Najman Sully, a professor of science at Yale University in Inouehaven, began the work of separating the constituents of petroleum. Was capable of meeting 90% of its oil needs. From the oil reserves, the companies traded oil to facilitate their delivery to areas where oil production is low.

Therefore, the first commercial refinery to commercialize the world was established in 1857 at Plosti, Romania. Romania is the only country in the world whose crude oil production has been tested internationally (statistically). The total volume of this refinery was 275 tons. The first oil well in North America was discovered in 1858 by James Mulrolim in Oil Springs, Ontario, Canada. The United States wanted to convert these natural metals into large-scale industrial and trade assets as soon as possible.

Click here to read the full article.

Source: Modern Diplomacy

average natural gas well production

What is an Average Natural Gas Well Production?

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More often than not, individuals looking to earn income from their mineral rights are hopeful to find oil below their property. The now-timeless art of getting rich off of your land is almost synonymous with striking a fruitful field of crude oil.

But what about natural gas? In this article, we are going to take a look at natural gas wells across the United States. After identifying the best parts of the country to earn natural gas royalties, we will answer the question, “What is an average natural gas well production?”

The States with the Most Natural Gas Production

In 2016, natural gas was the largest source of energy in the United States. In comparison to coal, natural gas is lower in price and also better for the environment with a smaller carbon footprint. For this reason, many companies may be interested in buying your mineral rights in order to extract and sell natural gas.

According to the US Energy Information Administration, 2018’s top states for natural gas production are as follows:

  1. Texas
  2. Pennsylvania
  3. Oklahoma
  4. Louisiana
  5. Ohio

How much does an Average Natural Gas Well Produce?

Within the states listed above, much of the natural gas produced can be found in some of the countries’ largest gas-producing fields. For example, the Marcellus Shale field in Pennsylvania and West Virginia is known to produce nearly 3,000 billion cubic feet of natural gas per year. Likewise, the Barnett shale, Haynesville Shale, and Eagle Rock formation make up a large portion of Texas’s gas production.

Of course, natural gas wells eventually deplete and the amount of resources that can be extracted decline gradually over time. At first, a well will likely produce between one and twenty million cubic feet of natural gas per day. After which, the rate will slowly decline over a well’s 20 to 30 year lifespan.

What Do Mineral Rights Mean and to Convey It

What Do Mineral Rights Mean and How to Convey It?

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In the United States, mineral rights can be extremely valuable in earning oil or gas royalties. However, when it comes to selling your property, the documentation may cite “conveying” mineral rights to the new owner as a part of the agreement.

If you are unclear what this means, then you’ve come to the right place. In this article, we are going to define what it means to convey mineral rights and outline some scenarios and benefits in which conveying or retaining these may be best.

The Definition of Conveying Mineral Rights

In legal terms, “conveying” is a term used to describe the sale or transfer of a property. In a split estate, landowners can choose to convey or retain their rights separately from a property’s surface rights. Essentially, when working with them, there are three basic ways in which property can be conveyed. They are as follows:

  • Conveying surface rights, while retaining mineral rights.
  • Conveying mineral rights, while retaining surface rights.
  • Or, conveying both mineral rights and surface rights to one or separate entities.

The Benefits of Conveying It

If you choose to sell your mineral rights, then that may earn you a nice paycheck. Plus, if you sell these rights on a parcel of land that is producing oil or gas (or will be in the future), then you may be able to earn a royalty interest on the future sale of resources.

In a fee simple estate, the sale, or conveying, of mineral rights is tied in with the surface rights. Therefore, it is commonplace that the sale of the property also involves the sale of the property’s subsurface. However, in a split estate, it is possible to convey your mineral rights while retaining your surface rights.

The Benefits of Retaining It

Because they are valuable, obviously, there are also benefits in retaining them (rather than conveying them) when selling your property. In the case of a split estate, surface rights can be sold for a large profit, while these rights are retained for future earnings. If you still own your mineral rights, then you can explore an oil and gas lease as a great way to earn royalty interests from the resources produced and sold.

If you have further questions, feel free to reach out to us here. 

oil production in texas

Oil Production in Texas

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The United States produces more barrels of oil than any other country in the world. Within the US border, no state produces more oil than Texas, and this is by a landslide. In fact, according to the U.S. Energy Information Administration, oil production in Texas produces over 3 times as many barrels as North Dakota, the second leading state.

Where is Oil Found in Texas?

So where is all of this oil found? In this article, we are going to explore some of the densest spots for oil production in Texas.

Major Oil Producing Regions

Within the Lone Star State, there are seven large basins which produce the majority of oil production in Texas. They are as follows:

  • The Permian Basin
  • The Gulf Coast Basin
  • The Anadarko Basin
  • The Fort Worth Basin
  • The Maverick Basin
  • The Val Verde Basin
  • The East Texas Basin

Among them, the Permian Basin is the most widely known and highest-producing region. In fact, the massive 250 by 300 mile landmass extends into Southern New Mexico and is divided into several different regions in itself. Within the Permian Basin, oil is found in:

  • The Delaware Basin
  • The Midland Basin
  • The Central Basin Platform
  • The Eastern and Northwest Shelves
  • The San Simon Channel
  • The Sheffield Channel
  • The Hovey Channel
  • The Horseshoe Atoll

After the Permian Basin, perhaps the second most famous region for oil production in Texas is called the Eagle Ford Group. The Eagle Ford Group, also known as the Eagle Ford Shale is found in southern Texas and extends between the Maverik and East Coast basins. The area ceased producing oil after a strike, caused by rapidly declining oil prices in 2015.

The Largest Oil Towns in Texas

Of course, in order for oil to be found, individuals and companies need to raise capital to explore and drill. After production has begun, oil royalties are only earned by mineral rights holders if the barrels are sold. In terms of related jobs and local economies, the largest “oil towns” in Texas are:

  • Houston
  • Dallas
  • Austin
  • San Antonio
  • Midland
pooling and unitization

Pooling, Unitization, and Joint Oil and Gas Leases

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Mineral rights and oil and gas leases tend to be a bit more complicated than ordinary surface rights leases. When you sell or lease a home, there is a pretty obvious boundary (oftentimes marked by a fence) that designates what the lessee can control. Below the surface, however, the spaces occupied by precious mineral reserves rarely follow the same pattern.

If an oil reserve is under multiple different parcels of land, it can still be entirely depleted from a single well. For this reason, mineral rights owners often enter into contract agreements to ensure that they are able to benefit from the sale of the oil or gas below their property.

Pooling and Unitization

Pooling and unitization are two of the most common methods for the consolidation of mineral rights. Although the two terms are often used in place of one another, they actually refer to different kinds of agreements.

What is Pooling?

Pooling is a process that combines several tracts of land together in order to cover the area of a single oil well. In a pooling agreement, all of the parties own their portion of any oil that is produced from within the pooled land. Essentially, instead of digging a new well on each separate piece of land, the reserve is drilled in the best way possible and each owner can benefit from the sale of precious minerals with oil royalties.

What is Unitization?

Unitization is a process that merges different pieces of land together across an entire oil field. Unlike pooling, unitization can combine the production of many different oil wells into one shared contact.

Compulsory and Voluntary Pooling and Unitization

Voluntary pooling and unitization agreements occur when independent owners agree to work together. The documents can be signed by the owner themselves, a legal representative, or heir. Agreements are generally made to be mutually beneficial. Voluntary pooling offers can be declined without any consequence.

Compulsory, also known as forced, pooling or unitization is a mandatory consolidation of oil and gas leases. They are conducted by a regulatory committee, most commonly the Oil and Gas Conservation Commission.

Joint Operating Agreements in Oil and Gas Leases

Lastly, two active oil and gas leases can be combined into what is known as a “joint operating agreement (JOA),” or a “joint lease.” In a JOA, operators agree upon a community lease in which assets are shared and new royalty percentages are defined. In addition to oil and gas agreements, joint leases are common across other industries such as health care.