Oil and Gas Royalties

Oil and Gas Royalties In this article, we are going to focus on 4 things, namely; what a royalty and mineral rights is, how is it calculated and what is it based on? Let us begin with a small description of mineral rights. We all know in most countries all the mineral resources belong to the government. This may include: valuable rocks, minerals, oil, gas, etc. The various organizations in those countries have no rights to sell or extract those minerals without the consent of the government.

However, some countries give the property owner the legal rights to those minerals that may be present underneath it. This is called, ‘mineral rights.’

At times a company is not willing to buy the property because they are not certain that it may contain any minerals. In such cases, the company will lease the mineral rights or a portion of those rights. When the production of oil and gas begins, the landowner is eligible for some part of that production. This money is known as a, ‘royalty payment’. The amount that the owner will receive will depend on the lease agreement that was signed earlier.

Oil royalties can be paid as oil. In this case, the landowner may receive the oil from the lesser (company owner) and market it. The landowner has to understand that receiving the royalty in terms of oil is purely a disadvantage. The better way would be to receive cash at the posted

price of oil. When talking about gas royalties they are paid as financial units in the country. The landowner has the right to specify separate royalties for oil and gas. The landowner should specify the due date of the royalty payment, and in case the date is passed there can be an interest charge for the late payment.

How are the Oil and Gas Royalties Calculated?

Drilling and producing oil and gas costs money. These costs are divided between the landowner and the production company. The company has to bear the cost of the exploration, production and marketing. The expenses that occur after the production are either solely borne by the production company, or shared between the two. There are 3 methods to calculate the royalties: 1. The first method is the market price and the value of the minerals.

2. The second method ties the royalty to the actual income received from selling the minerals. This method is mainly used for computing gas royalties.

3. The last method is called the ‘inline’, where the landowner takes belongings of the minerals, even before the minerals are marketed by the production company. This method allows the landowner to receive more royalty, and flexibility, because it is based on the decisions of the market.

Three Bottom Lines 

Get Professional Assistance: mineral rights royalties and mineral lease royalties involve huge sums of money and is a very complex process. Always involve an attorney for further assistance. If you do not have an attorney, please contact the local bar association for guidance.



The surface owner has rights: in general, when we talk about the lease agreement, we are talking about the production company, however, we should not forget that the owner has some rights as well.



Buyers and Sellers beware: in order to benefit from the production of minerals, it is very important that you and your attorney has created a good contract. Two things will determine the success of your deal, namely; negotiating skills and knowledge.

If you own a piece of land that has been unused for long, then the best option in this case would be to sell your property or lease it. There are many individual’s looking to purchase your mineral rights royalties. Why not benefit from this land now? You can never be sure of the price of the minerals in the near future, especially oil and gas. So, if you are short on cash or if you are sure about your land being rich in minerals, give it a try. This can bring large amounts of money instantly. But, you need to be sure that the company you are selling your royalties is a reputable one and they should be willing to make a fair deal. Make sure they produce the value as soon as possible and end the transactions quickly. Look out for the hidden costs etc. Be wise and be patient. The landowner should have some knowledge on selling mineral rights. In case, they are not aware of any knowledge, it is best to use some legal help. The document also includes what type of exploration will take place to extract the minerals. This is done to protect the land from harmful and unnecessary mining and drilling. One of the other reasons to involve a legal help is to make sure the rights of the owner are protected Contact Uniroyalties now. It is a famous name in the market. They evaluate your oil and gas lease and maximize your asset withdrawal. Uniroyalty, believes in fast evaluation and processing of your investments of oil and gas. They will provide you with a complete solution. http://1stoilandgasroyalties.blogspot.com/2015/05/oil-and-gas-royalties.html