Buying Oil and Gas Royalty Interests Using the Six-Step Method Buying oil and gas royalty interests are an amazing investment option for medium as well as small investors. This is partly because the returns that can be made range between 12% and 30% and because small investments like from the one-man shops can start with the business if they have some knowledge about this topic. Below you will read about how gas and oil royalties can be bought. For simplifying the methods below, we must assume a few givens, namely: 1. You have already consulted legal advice concerning the trade of mineral royalties such as gas and oil law from Geary, Porter and Donovan (Dallas) or Philip Mani (San Antonio). 2. You must have established a legal body to purchase them with that can either be a partnership, under your own name or a company. 3. You either have a war chest or have acquired funding for buying oil and gas royalty interests. Anyone who has bought gas and oil royalties means that they are the owners of mineral rights. In rare cases, this scenario fails to be true but you might often come across ‘mineral rights’ and ‘oil royalties’ used interchangeably. Buying minerals happens in clear steps:
Step 1-- Find likely royalty holder sellers Step 2-- Ask sellers with an offer to buy their royalty Step 3-- Accept incoming calls from traders with questions. Step 4-- Quickly complete due diligence on sellers who consider selling Step 5-- Send out paperwork and mineral deeds to those sellers who consider selling their royalties. Follow up on these sellers immediately.
Step 6-- After receipt of deeds and paying the royalty seller, file the sale-purchasedeed with the exact county courthouse. Here is every step in detail:
 Step 1 – Find Them You need to find likely royalty sellers. Does it sound simple? Yes, it is however, doing is a completely different story. In fact, the major problem in buying oil and gas royalty interests is the locating of mineral owners who will be willing to sell their mineral royalties to you. This is like the end of line before even starting that many people run into. Here are a few places where leads can be found on royalty sellers: 1. Division Orders:If you are a proud owner of royalties already, then you may have a Division Order with you. These documents show the share of royalty that each party will receive and based on what calculations. Some petroleum firms only send a document mentioning your share while others unsystematically ship the division order with all the other owners. If you are lucky and possess a division order, you will use these addresses and names as leads. If you do not possess one of these, you will have to go to the second option.
2. Accessing Royalty Owner’s Database through a Data Vendor:At present, the only existing gas and oil royalty data vendor is Blackbeard Data Services from Austin, Texas. Their database consists of all information about Kansas and Texas royalty owners. They can provide over four million names, which is plenty to get started.
Step 2 – Make Offers The data you have collected from Blackbeard Data or from division orders should have the following: o Lease Name o Owner’s Name o Owner’s Address o Percentage of Royalty o Value of Royalty (This may have to be derived) This is enough to distribute offers. The average person buying oil and gas royalty interests will mail out several thousand letters containing offers, counting on data to come. Here are three ways to make offers: a. Send an offer letter with bank draft b. Send an offer letter with no draft c. Send a letter discussing your interests in buying mineral royalties with no offer You can approach a single way for specific offers like for small offers, (a) is recommended while for medium offers (b) is recommended. For huge acquisitions that exceed over $500,000 in value, (c) would be the best approach. These recommendations are based on an experience of over 12 years of discussions with the petroleum industry.
Step 3 – Spool Them In You can and should expect at least three responses from every thousand letters sent. It is correct because a 0.3% response in Texas is normal. Those are not closings but merely calls. They better you close will be the deciding factor of you buying mineral from either one out of the three or two out of those. If you ask my opinion, I would count on half of the responses closing with you. To improve the odds of your closing, you need to receive calls as soon as they ring and make sure that the receiver is always a human being rather than an answering machine. You need to provide them with answers, reassure them that you are a true buyer and really interested and also confirm that you will close in seven days and their money will be transferred to their accounts. Firstly, you should inquire about whether the ones you have contacted are shopping their royalty to some other potential royalty buyer. If they are not, then you will be able to buy the royalties cheaper, most likely 30 to 40 months of production (monthly royalty check x 30). If they are wise and manipulating the market for other buyers then they will be looking for 60 to 70 months of production. This is the time when you need to discuss their expectations for the buyout. Give them the opportunity to speak first.
Step 4 – Screen Them A wise proverb goes like “Trust no one alive, and walk carefully around the dead” when we talk about money and human. It certainly brings out the worst in us. You need to confirm whether the royalty they are selling actually belongs to them. This is very simple, as they will have to send you only the last four months of pay for royalty or if the acquisitions are really expensive, a quick trip to the courthouse for examination. Whatever you have planned, you will have to act fast before they change their mind or shop their royalty to someone else.
Step 5 – FIRE!
Once you are completely sure and confident that this is the royalty you want, and then call the seller, tell them your offer and once they accept, FedEx the paperwork. The paperwork here will depend on the legal advice but will also include some sort of mineral deed. A possible 24 hours after they have received it, call them to confirm the receipt but this call will be really an attempt to keep the ball rolling before they change their
demands
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 Step 6 – File with the Courthouse Your legal team is there to advise you on which documents to sign once you receive them back and the next step would be payment to the seller. Possibly, you will be paying with escrow, either way, once the deed has been signed, close it. Next, you need to file the deed with the court and contact the firm that was paying the royalties. It will most probably take three months before you begin receiving your new royalty check. Longer duration may be possible and is not uncommon due to the bureaucratic delays. Uni Royalties Limited is the trusted source to evaluate your gas and oil lease for maximization of asset withdrawal. Uni Royalties specializes in speedy evaluations, processing of gas and oil investment leases, providing complete solutions on behalf of investor and also helps in buying oil and gas royalty interests. Visit them for a chat as this company ranks as one of the reputed
purchasers of gas and oil royalties nationwide.