What You Must Know To Sell Oil and Gas Royalties!
April 6, 2016
Land that is rich with resources such as oil, natural gas and other minerals can be profitable for the owners of those mineral rights. Many owners choose to sell their royalties to earn an income. Yet before anyone can sell oil and gas royalties, it is advisable that mineral rights owners understand the process of selling royalties and work with an experienced royalties company.
Ownership of Mineral Rights
Prior to royalties being sold in Texas, a party must confirm that they are the documented owner of the mineral rights. Since this is not always the landowner, ownership of mineral rights must first be confirmed through title searches.
What Is It Worth?
Selling mineral royalties requires that a value be put on the minerals so the buying company can make the appropriate offer. Valuation depends on many things: the type of resource; its location and amount available; the current demand and selling rate, and more. Geological surveys are usually required to determine how much of a certain mineral is present in the soil. For wells that are already producing, the survey must be done to show how much those wells are likely to continue producing. When this worth is turned into a bid for royalties, there is nothing wrong with deciding not to accept the first bid. Truly interested companies will work to negotiate a mutually agreeable royalty lease bid that is fair to both buyer and seller.
Royalty Lease Contracts
When selling mineral royalties, it is not necessary to sell all royalties; partial royalties can also be sold. This, and many other details including lease bonus amounts, lease length, lease amount and any clauses that protect drilling areas, should be discussed. Some important clauses to discuss are Mother Hubbard which protects against inaccuracies in the land survey, and the Horizontal Pugh and Vertical Pugh which release depths and horizontal growth beyond the documented production zone. It is important for royalty owners to be informed and understand all contract terminology and clauses to prevent disputes that could later arise.
Dealing with Royalties Companies
Mineral rights owners looking to sell their royalties should always work with a reputable and experienced royalties company that will educate them along the way and facilitate an easy transaction. In doing so, owners can be confident they will receive a fair consideration and that their mineral rights will be properly valued and bid. Companies who make their name buying and selling royalties are an essential part of a quality transaction.
Although these are some of the main points those looking to sell oil and gas royalties should know about, the best thing for sellers to do is to discuss any issues with an experienced royalties company. By working with these professionals, mineral rights owners interested in selling their royalties can gain a thorough understanding of the process and the important decisions involved in profitably selling oil and gas royalties!
Selling Oil And Gas Royalties In The U.S.?
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