OIL AND GAS MINERAL ROYALTIES FAQS
1. WHAT ARE OIL & GAS MINERAL, ROYALTY & OVERRIDING ROYALTY INTERESTS?
Oil and gas minerals, royalties and overriding royalties are similar in that they all receive revenues from the production of oil and gas from a well, and they do not pay for the drilling or monthly operating expenses of the well. Often you will see the term “royalties” used interchangeably to mean either mineral interests, royalty interests or overriding royalty interests. However, there is a slight difference between minerals and royalties, and there is an even greater difference between overriding royalties and both minerals and royalties. Mineral interests and royalty interests are similar in that both involve ownership of minerals under the ground. They both receive a portion of the income from the production of oil and gas. The main difference is that the owner of a mineral interest also has the right to execute leases and collect bonus payments, and the owner of royalty interests does not execute leases or collect bonus payments. Both mineral and royalty owners receive income once the well is producing, but only the mineral owner receives the up-front bonus payment.
Unlike mineral and royalty interests, overriding royalty interests do not constitute an ownership of minerals under the ground. Instead, overriding royalties constitute ownership of a portion of the revenues generated from oil and gas production, and the ownership expires when the lease has been abandoned. Overriding royalties are created from the working interest. The main difference is that the owner of an overriding royalty does not own the minerals under the ground, only proceeds from the production of minerals. Once the lease has expired and production has ceased, the overriding royalty interest expires. Conversely, the owners of minerals and royalties maintain their ownership after production ceases.
2. WHY DO PEOPLE SELL OIL & GAS ROYALTIES?
There are a variety of reasons that people sell oil royalties. One of the most common reasons is that the oil royalties are in an estate and the heirs would prefer to receive cash instead of the oil royalties. Sometimes the oil royalties are too small to divide among the heirs, or the heirs are not familiar with managing oil and gas royalties. Another reason is that some owners no longer want to manage their oil royalties and want to simplify their investments. Finally, some owners would simply like to receive the cash for an immediate need.
3. WHAT TYPE OF INTERESTS DOES LEGACY ROYALTIES BUY?
Legacy Royalties buys producing and non-producing mineral, royalty and overriding royalty interests located throughout the United States. We buy single well interests or multiple well interests. The oil & gas royalties may all be located in the same county, or they may be located in different counties or even different states.
4. HOW DO I RECEIVE AN OFFER FOR MY OIL ROYALTIES?
In order to make an offer, we must determine the current value of your oil royalties. To do this, we need to get some information from you. You can either call us toll free at 800-950-6954, or you can submit the information online. Once we’ve receive the necessary information, we will promptly reply with an offer. We offer competitive prices and quick cash sales at no cost to anyone selling oil royalties. If you receive our offer and decide to sell your oil royalties, then we will finish our due diligence and prepare the mineral deeds. Once you decide to sell, there is very little required of you to complete the transaction. When buying oil royalties, we assume all the costs associated with completing the sale, including mineral deed preparation and filing fees.
5. IF I ASK TO RECEIVE AN OFFER FOR MY OIL ROYALTY, AM I OBLIGATED TO SELL?
No. Asking for an offer does not obligate you to sell your oil royalty. Also, receiving an offer does not obligate you to sell your oil royalty. You are not obligated to sell until you sign a written offer stating that you are accepting the offer.
6. HOW DO YOU DETERMINE THE VALUE OF MY OIL & GAS ROYALTIES?
A petroleum engineer performs an evaluation on your oil royalties to determine a fair sales price. This includes analyzing historical production data, calculating production decline rates, and reviewing historical cash flows. This information is used to forecast future well performance, calculate remaining oil and gas reserves, and predict future revenues. Our goal is to offer you a fair sales price while understanding future risks and uncertainties.
7. I WANT TO TRANSFER MY OIL ROYALTIES TO MY HEIRS BEFORE I DIE. HOW CAN I DO THIS?
Contact us at 800-950-6954 for a free consultation.
8. WHAT ARE THE DIFFERENT TYPES OF DEEDS THAT ARE USED TO TRANSFER OIL & GAS ROYALTIES?
The most common types of deeds are mineral deeds, royalty deeds, quitclaim deeds, life estate deeds and joint tenant deeds. Go to the Royalty Services section of our website to see an example of each of these types of deeds.
9. HOW DO I CALCULATE MY OIL ROYALTY INTEREST?
Take the number of mineral acres you own within a well’s producing unit, divide it by the total acres within the well’s unit, and multiply this by your royalty interest as listed in your oil and gas lease. For example, let’s say you own 8 net mineral acres out of a well’s 640 acre unit, and that your lease states that you have a 1/5th royalty. Thus, your oil & gas royalty interest in the well is (8/640) x (1/5) = 0.0025. This is the decimal interest you should see listed on your oil royalty check.
10. WHY DO MY OIL & GAS ROYALTY CHECKS VARY?
Oil and gas production and oil and gas prices will vary from month to month. Thus, variations in volumes produced and prices paid will cause fluctuations in your monthly checks. Sometimes a well may experience a mechanical problem that will cause production to cease for all or part of the month: this will reduce your check for that month. Another aspect to consider is that, over time, most wells experience a decline in the amount of oil and gas produced. This is because there is only so much oil and gas that is recoverable by a well. Thus, every month there is less oil and gas remaining to produce, which leads to a decline in production and a corresponding decrease in the amount of your monthly check.
11. I USED TO RECEIVE AN OIL ROYALTY CHECK BUT I DON’T ANYMORE. WHAT HAPPENED?
It may be that one of four things has happened: (1) There may be a different company which is now responsible for disbursing your revenues. The new company may be working to set up your oil royalty for payment. (2) The amount due may not be great enough to automatically distribute it to you, but you will be getting it in the future once it has accrued to the company’s minimum disbursement amount. In this case your interest is said to be in “Petty Suspense.” (3) Your oil and gas royalty may have been placed in “Legal Suspense” due to a change in address, change in ownership, or some other reason whereby the company is unable to disburse the revenues to you. (4) The well may have had an interruption in production or may no longer be producing. The best way to determine the status of your account is to call the phone number listed on the last check you received. If you cannot find a phone number, then e-mail or call us and we can supply you with contact information.
12. MY QUESTION WASN’T ANSWERED HERE, SO NOW WHAT?
Get in touch with us and we’ll try to answer any questions you may have. If we don’t know the answer, then we probably know someone who does. Contact Legacy Royalties toll free at (800) 950-6954 or by email at info@legacyroyalties.com.
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