Have you been approached by an oil and gas company with an offer to lease your minerals? Is someone interested in purchasing your royalty interest? Do you have questions about Oil Gas Leasing and Royalties? Although we hope for the best, not all groups have your best interest at heart.
We are not buying or selling royalties! This site exists as a resource to help people make informed decisions about Oil and Gas Leasing and Royalties. Over the years we have witnessed first-hand the effects of predatory leasing practices, and have seen people make questionable decisions when selling their royalty interests. We hope the contents of this site can help you better navigate the challenging nature of the oil business, and get more value for your property.
- The Oil and Gas Lease
- Oil and Gas Prices
- Oil and Gas Production Rate
- An Oil and Gas Lease is a legal contract between a mineral holder (Lessor) and an oil company (Lessee) for the purpose of extracting minerals from your property. In very simple terms the Oil and Gas lease covers the following:
Lease Bonus – The upfront dollar amount paid to the mineral holder for the right to drill on the property. The lease bonus is typically calculated as a cost per acre.
Term – The length of time the oil company has to drill on the lease (or renew the contract)
Royalty– Discussed below, this is the percentage of oil and gas proceeds owed to the mineral holder
Rights of the drilling operator – The rights you give to the oil company to operate on your property. For instance, the right to operate on your property’s surface, have access to your property’s water, the ability to build and maintain roads and oil facilities, and other rights.
- For a more in-depth treatment of oil and gas leases, see our page titled Understanding Oil and Gas Leasing
Oil and Gas Royalties
- When an oil or gas well is drilled, the mineral owner (Lessor) is entitled to receive a share of the well’s output. A royalty is the percentage of revenue contractually owed to the mineral holder and is stated clearly in mineral leasing documents. The royalty is paid by the driller (Lessee) to the owner of the mineral rights (Lessor). The royalty earned by the mineral owner is based on a percentage of the gross production of the well, minus any reasonable expenses and applicable local taxes.
- If you have questions about a royalty statement you have received, visit our page entitled Understanding your Royalty Statement
How much Income Will Your Royalty Generate?
- Royalty percentages vary by region, depending largely on the level of drilling activity in the area. For instance, in undeveloped or “wildcat” areas, a royalty is typically 1/8th or 12.5 percent of production. Areas with lots of active drilling can command higher royalty percentages, from 18% and above. If adjacent landowners have already signed leases, try to find out what their negotiated rate is. You should negotiate for as high a royalty as possible.
Also important to calculating royalty is:
- Our List of Royalty Calculators will help you anticipate projected income based on price, production, and royalty percentage
Should you sell your royalties? How much are they worth today?
- Our selling royalties page will walk you through some of the fundamentals of oil and gas royalties, and our lump-sum estimators will help you determine the value gained or lost from selling royalties.
*Information provided on this site is to be used for reference only. It is not intended to provide or replace financial, legal or tax advice to the user. Royalties earned can vary depending on leasing arrangements, tax provision, applicable laws, and other factors. Please consult a qualified professional before making any financial decision.