The Clear Difference between Mineral Rights and
Royalties
Oil and gas royalties are not that
difficult to understand as many people think. In fact, the explanation and the
calculations are justly simple. Reading further, you will get a clear
understanding of whateach of the terms mean and how do they generate cash.
You being the owner of a farm mean
that you own a land, which are also known as surface rights. If you had gone
over the papers when buying the farm, you might know that because the deed must
have clearly stated the mineral rights beneath
the surface along with the farm’s surface rights. Owner of mineral rights means
you have legal permission to extract, explore and sell minerals beneath the
surface like gas, uranium, coal, oil, helium or others that rest under the
surface.
Much of the landowners do not have
the geological knowledge to realize the presence of potential minerals beneath
their land. Most landowners even forget that they own the mineral rights of
their land. Moreover, many do not have millions of dollars lying around to
explore for minerals or even the necessary networking skills to elevate a fund
with millions of dollars for that matter.
Energy and petroleum asset management
companies have the knowledge as well as the funds so as soon as they identify a
region rich in minerals, they negotiate to lease the mineral rights for
exploring, from the landowners. The lease then gives the oil and gas firms the permission required to explore for minerals
and petroleum products, to produce and even sell if they are successful in
finding petroleum in abundant quantities.
The Bonus Payments & the Royalties
The owner receives two kinds of
compensation against the leasing of his mineral
rights. One is called the “The Bonus Payment” which is a signing amount
paid on the basis of per acre and typically the amount is calculated ranging
from $200 to $500 per acre. The bonus is paid once, at the signing of lease
documents and might be the only sum of money the owner receives from the deal.
The other is known as royalty, which
is calculated as a percentage of the money generated
through the sale of gas and oil from the mineral owner’s property.
Traditionally, the percentage was 12.5% but has climbed up to 18 - 25%
recently. The percentage however, depends on how well the negotiation was and
what would the extraction of gas and oil cost the company.
If the company finds no traces of
petroleum or not in saleable quantities then the prospect is abandoned, the
lease expired and the mineral rights are reverted to the owner again. In this
case, only the bonus payment was the earnings from the negotiations. However,
if the hydrocarbons are found, then the oil and gas royalties are earned. If
production were 100 barrels a day with $80 per barrel then the royalty received
would be $1,200 per day.
Royalties Decline over Time
Royalties earned often last decades
however, as wells deplete, owners experience a decrease in royalties. An
average well lasts to about 35 years. The royalties die at the end and their
might be future leasing possibilities.
Finding Buyers of Mineral Rights Is Hard
It is indeed hard to find a reliable buyer
of mineral rights but with the reputed Uni Royalties Limited in the industry,
all your tensions will fade away. We promise the best payoffs for oil and gas royalties.
Visit http://www.uniroyalties.com
Contact Us
UNI Royalties, Ltd.
P.O. Box 1959
Parker CO 80134
Phone:(720) 663-1187
Toll Free Phone: 1-888-916-0220
Toll Free Fax: 1-888-491-8525
Local Phone: 1-720-663-1187
Local Fax: 1-720-746-2899
E-mail: sellroyalties[at]gmail.com
