Oil & Gas Basics – Understanding Leasing Your Minerals

Oil & Gas Basics – Understanding Leasing Your Minerals

What Happens When I Lease My Minerals?

When you, the mineral owner, lease your minerals, you are referred to as a “lessor”. The person that you are leasing to, generally an oil company, is known as a “lessee”. The lease that you sign is granting the lessee a limited right of possession for a period of time defined in the lease. This period of time is known as the “primary term” and is generally for two to three years. If an oil company is able to find oil on your property during the primary term, and is able to produce the oil profitably, then the term of the lease will extend beyond that of the primary term. This period outside of the primary term is known as the “secondary term”, and the secondary term will stay in effect for as long as the oil and gas production is occurring (profitably or otherwise) on the property.
Sometimes a lease can outlive the primary term even if there hasn’t been a well drilled on the property, or it can stay in effect in the secondary term even if production temporarily ceases. This is made possible by certain clauses included in the lease. Some of these clauses include:

Shut-in Royalty Clause
Delay Rental Clause
Dry Hole Clause
Operations Clause

Because of the complexities involved in an oil and gas lease form, it is recommended that you hire oil and gas consultants to assist you in drafting a lease that is ideal for your specific needs and desires.

Can The Oil Company Come On My Property Without Permission?

If the oil company has a valid lease on the minerals beneath your surface estate, then they may use as much of the surface as is reasonably necessary to extract those minerals. A surface use agreement can be placed into the lease to clarify what the lessee can and can’t do to the surface, but absent such an agreement they can drill on the land, build roads, access the property at any time, etc.. This is another reason why it is important to hire an oil and gas consultant to help you with your lease.

What Is The Royalty Interest?

When you sign a lease with an oil company, you will retain what is known as a “royalty interest”. This royalty interest will allow you to receive a cost free share of the minerals produced from your property. The royalty interest can be very valuable for you, and this should be a significant area of focus during lease negotiations with an oil company.

For more information about the services we offer at Hilltop Royalties, visit our website at www.hilltoproyalties.com or visit our Facebook page at facebook.com/HilltopRoyalties

You can also Email us at info@hilltoproyalties.com
Or phone us at (214) 494-1024

How much are my minerals worth? How do I receive help to sell my minerals?

HOW MUCH ARE MY MINERALS WORTH? HOW DO I RECEIVE HELP TO SELL MY MINERALS? – THE VALUE OF AN ADVOCATE WHEN NEGOTIATING A SALE

Recently, we learned of a mineral owner who decided to sell her mineral interests to investors. Even though she held considerable holdings in the oil-producing Eagle Ford shale, she opted to use a friendly, but inexperienced, friend to help assist in the sale.

The friend put her in touch with a party who would buy the minerals quickly. After a short time negotiating, a deal was struck that the friend thought was good. The mineral owner’s sizable interest was sold for $20,000 per mineral acre.

A pretty nice sum, right? Well…not really.

It turns out that the buyer of the minerals never intended to hold these minerals as a long-term investment. They were merely a “flipper”.

Flippers are common in the oil industry. Typically, a flipper will negotiate an oil lease with a mineral owner, with no intention of drilling, and then sell the lease to a large oil company, profiting the difference. It occurs with mineral sales, as well. Flippers are out to make a quick and easy buck. They represent money left on the table, which should be going to you, the mineral owner.

In this case, the flipper immediately sold the mineral owner’s minerals to one of their contacts, for $24,000 per mineral acre. This resulted in a quick profit of $4,000 per mineral acre to them. And, $4,000 per mineral acre that the mineral owner could have received had she an effective advocate on her side. Put another way, the minerals were worth 20% more than the mineral owner and her friend thought, and somebody else got to profit that 20%.

Hilltop Royalties bypasses the flipper, and puts more money into your pocket.

Hilltop is a business that we formed as a hobby to help mineral owners. We do not charge an upfront fee, and we let you decide our commission amount in advance. No risk. Call or E-mail us today, and let us help you.


Click here to read our top 10 tips for negotiating an oil and gas lease!
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To find out more:
Email us at info@hilltoproyalties.com
Visit our homepage at www.hilltoproyalties.com
Checkout our Facebook page at www.facebook.com/HilltopRoyalties
Or phone us at (214) 494-1024

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