Oil Rallies As Twin Storms Force Shut-Ins In Gulf Of Mexico

Oil and gas companies active in the Gulf of Mexico have shut in almost 58 percent of oil production on Monday as two tropical storms threaten operations.

Oil and gas companies active in the Gulf of Mexico have shut in almost 58 percent of oil production and 44.6 percent of gas production as a hurricane and a tropical storm are approaching the area. The shut-in oil output stands at over 1.065 million bpd and the shut-in gas production is about 1.205 billion cu ft daily.

The staff on 114 production platforms had been evacuated as of Sunday. These platforms represent 1.773 percent of all Gulf of Mexico platforms, the Bureau of Safety and Environmental Enforcement said. Workers were also evacuated from five of the ten drilling rigs in the Gulf, the BSEE also said in an update. BP, Chevron, Shell, and Equinor were among the companies evacuating platform staff.

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Source: Oil Price

Worst is Over for Oil and Gas Markets: OPEC Secretary General

According to Mohammad Sanusi Barkindo, secretary-general of OPEC, the enormous and unprecedented oil market imbalance facing the industry in April following the COVID-19 pandemic required an unparalleled response from producers

Underlining the importance of the two-year agreement signed in the Declaration of Cooperation (DoC) on 12 April by OPEC and non-OPEC oil producing countries and revalidated earlier this month on 6 June, Barkindo said he was confident that more stability would return to the oil markets in the second half of the year, but more work is needed to draw up existing oil inventories to help rebalance markets.

“As we see countries begin to open up, we will see demand start to come back,” Barkindo said. “I remain optimistic but cautious the worst is over and a recovery will be in full swing in the second half of this year, with stocks beginning to be withdrawn. However, what shape the recovery will take, whether a V shape, W or inverted hockey stick, is still uncertain.

“Nevertheless, I am hopeful by the end of this year we will begin to see some further semblance of stability restored to oil markets. Then we will be in a position to move into the next phase of sustaining that stability. Hence the importance of the two-year duration of the historic agreement signed by the OPEC Plus group of countries and non OPEC producers.”

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Source: OilReviewAfrica

Fee simple vs Leasehold, Leased Fees

Fee Simple vs Leasehold, Leased Fees in Oil and Gas

There are many different kinds of transactions associated with the buying, selling, and leasing of property. Mineral rights are no different. Whenever you buy or you sell or lease mineral rights, you may be entering into one of several kinds of agreements. In this article, we are going to define and explain some of the most common types of mineral rights ownership such as fee simple vs. leasehold.

Fee Simple Estate and Fee Simple Interests

A fee simple estate, which is also known as an “estate in fee simple” or “fee-simple title,” is traditionally viewed as the highest form of real estate ownership. In a fee simple estate, a person or entity owns both the surface rights and mineral rights of a piece of land.

When a fee simple agreement is made, the new owner is said to have a “fee simple interest” in the property. The type of ownership is considered “freehold,” which is a term that is most commonly used in European countries like England and Wales.

Leasehold Ownership and Leased Fees

In a leasehold, pieces of land are often divided into what is known as a “split estate.” Within a split estate, the landowner retains ownership of the property’s surface rights, while leasing out the mineral rights below the surface. In an oil and gas lease, a property’s full ownership is usually split between the surface rights owner and an oil or gas company.

In this split, the “leasehold” is the interest of the lessee and the “leased fee” is the amount of money or capital that is provided to the property owner. In oil and gas leases, mineral rights owners are often granted upfront leased fees for the rights to explore the property for precious minerals.

When referring to the property itself, it is common for owners and lessee’s to refer to their assets as “leased fee estates” and “leasehold estates” accordingly.

Is it better to sell or lease mineral rights?

Mineral rights can be very valuable. If you own the subsurface of your property and suspect there may be valuable resources below, then extraction companies may be very interested in working with you.

When it comes time to sign an agreement to earn money from your mineral rights, there are two basic options you have: selling or leasing your mineral rights. In this article, we will explain the benefits of selling or leasing mineral rights to receive oil and gas royalties.

Sell Mineral Rights

Just like in any other property exchange, selling your mineral rights transfers the ownership of the items at stake completely. If you sell your mineral rights to a company looking to explore, drill, and sell minerals like oil and gas from your land, then you can expect a large cash sum. Selling mineral rights is the most simple form of a mineral rights exchange.

Pros

  • When mineral rights are sold, the seller usually receives a large lump sum of cash or capitol.
  • Payment is based on land, rather than minerals found.
  • Mineral rights are considered an asset like real estate, so there are tax benefits associated with a 1031 exchange.

Cons

  • Obviously, you are no longer the owner of your mineral rights, which could increase in value in the future.
  • Depending on your contract, you are probably not able to benefit from the extraction and sale of oil and gas on your former property.

Lease Mineral Rights

Leasing mineral rights is an alternative in which a mineral rights owner retains ownership of the mineral rights, but signs into an agreement with an oil and gas company. A mineral rights lease is sort of like renting your property to someone who wants to dig for gold and share some with you. Mineral rights leases typically last about 3 to 5 years and are often negotiated if the operation is profitable.

Pros

  • In a mineral rights lease, you retain total ownership of your mineral rights. After the lease has expired, you are free to renew your lease or sell it to another party.
  • If the company who signs the lease is able to find and sell minerals on your property, then you will be entitled to a royalty interest based on a percentage outlined in your contract.

Cons

  • Sometimes, no minerals are found. Although there may be a signing bonus, some oil and gas leases fail to earn mineral rights owners a single dollar.
  • Once your property has been exhausted of its minerals, it will have very little value. Depending on the haul, you may find that you would have earned more money by selling your rights entirely.

Conclusion

Ultimately, the choice of whether to sell or lease your mineral rights is going to be an individual decision based on specific needs. If you are looking to earn a lot of money to help with retirement or to buy property, then selling your mineral rights may be your best option. If you suspect your property has a substantial about of oil, gas, or precious minerals, then leasing mineral rights could earn you a royalty check each month.