Your offer may be closer than you think

We are interested in any and all opportunities to acquire minerals and royalties. Contact us and we can let you know what information we need to make an offer on your interests.

Get Started

What Are your Mineral Rights?

Mineral rights are legal rights that entitle the owner to explore, mine, and produce the oil or gas on or below the surface of a property. In the state of Texas, the common use of the term mineral rights is construed to be oil, gas, or other associated products including casing head gas, gasoline, etc. It is not intended to include water rights or the rights of those minerals that can be mined on the surface, such as strip mines for coal.

In most countries of the world, all mineral rights belong to the government. In the United States, all mineral rights originally belonged to the owner of the surface of a parcel of land. As mineral production became economically advantageous, ownership of mineral rights often began to be separated from surface ownership. Mineral rights can be sold or leased to a third party. They may also be gifted or passed down as an inheritance to family members.

What You Should Know Before Signing an Oil and Gas Lease

You will want to make sure that the lease you are signing reflects the terms you have negotiated on the lease, including:
The term determines how long the lease will run. An oil and gas lease has two different terms: the primary term and the secondary term.

Your Primary Term is negotiated upon for a number of years and/or months.

Your Secondary Term comes after the primary term. This is for a period of time that fulfills a circumstance. Usually a secondary term will be stated so long as the land is still producing oil and/or gas.
This needs to be negotiated.

The person owning the minerals (the lessor) receives a royalty interest from the production and revenues made from the leased minerals. You will see most royalties given as a percentage of the revenues.

Most lessors get a negotiated royalty interest rate between 12.5% to 25% of the revenues.
This is the upfront cash payment on an oil and gas lease contract.

This is also quite negotiable and is typically paid based on the number of net mineral acres owned.

The price of a bonus depends on many factors.
This can also be negotiated on. However, most lease contracts are "paid up" oil and gas leases in which the delay rentals are "paid up" as part of the bonus.

In modern times, delay rentals are rare, though not unheard of. Basically a delay rental states that if the lessee (the oil company) doesn’t produce oil/gas on your land then you can get a delay rental payment.

The terms are usually expressed that if there is no production done by the lessee, then they will pay you "rental" money per year during the primary term to keep the contract active.
This must also be negotiated.

A shut-in royalty is when the lessee (the oil company) pays the lessor (the lease owner) a royalty at a negotiated rate per net mineral acre, while the well is not producing oil or gas.

These are usually on a fixed term no longer than one year.

Read the Lease Carefully

You want to make sure that everything that was negotiated is reflected in the lease agreement you are signing. If the division order does not reflect the negotiated terms of your lease, you will want to check to make sure that the company doesn’t attempt to remove negotiated protections of your ownership interest. If you are a potential lessor, make sure a mineral rights expert looks over, acknowledges, and possibly negotiates any changes before signing a finalized contract.

Frequently Asked Questions

What is a Non-Participating Royalty Interest?

A Non-Participating Royalty Interest (NPRI) is a right that has been carved out of a mineral estate in which the owner of the NPRI is entitled to receive a pro rata share of the royalties attributable to a specific tract of land. That means the interest holder does not receive any part of bonuses, rental payments, surface damages, or shut-in payments. They only get the designated percentage of royalties. Further, non-participating means that the interest owner does not have the right to execute an oil and gas lease.

How is the NRI on a division order calculated?

An example: Joe and Diane Royalty Owners leased their undivided one-half mineral interest in 40 acres to XYZ oil company with a one-fifth (1/5) royalty. XYZ oil company pooled the 40 acres into a 640-acre unit. To calculate the NRI, multiply the tract size (40 acres) by the percentage of ownership (50%) by the royalty rate (1/5) and then divide by the unit size (640 acres). So in our example the calculation is: (40.5.2)/640. This gives an NRI of .00625.

What do I need to know before signing a division order?

Check the math. When signing a division order make sure you check the oil and gas companies’ math – you don’t want to sign something that mistakenly gives you less money. You will want to make sure that it reflects what you have negotiated on the lease. Your division order will have your NRI, or net revenue interest, stated. This is your percentage share of the proceeds from the sale of the oil and gas from the well or unit described in the division order.

What is a division order?

Often with oil and gas mineral rights, a well will be owned by multiple persons or entities. A division order specifically details the individual mineral owner’s ownership interest in an oil and/or gas well. The decimal/royalty interest signifies how much of the revenue a specific mineral owner will receive as a result of the proceeds that come from the sale of the product the oil and/or gas well produces. Usually royalties will not be distributed to an owner until that owner has signed a division order.

Should I seek legal advice for the lease which determines the content of the division order?

An experienced oil and gas attorney is always your best bet when it comes to signing a lease before receiving a division order to sign. To make sure that your interests are protected you should consider consulting an attorney. Your attorney will be able to tell if everything is in order.

How do lease negotiations work?

The elements of mineral rights laws vary by state. However, there are some general points to consider when negotiating a mineral rights contract. First is the right to use as much of the surface as is necessary to access the minerals. Some types of drilling can be done completely underground with minimal surface interruption. Second is the right to receive bonus considerations. The owner of a non-participating royalty interest does not usually receive the rights to any bonus payments. Next is the right to receive delay rental payments, which are fees paid to delay production or commencement of drilling, without terminating the lease. Delay rentals are rarely used in modern times.

I have received an offer in the mail, how firm is this offer?

We base our initial offers off of the size of the unit your interest falls in and the net revenue interest (sometimes called decimal interest) you are being paid on said unit. Our offer also assumes your interest covers all depths and is not a “term” interest (an interest that expires at a given time). We gather this information from publicly available data. It is not our intention to run a “bait-and-switch” scheme of sending out larger offers than we are actually willing to pay like so many other companies. We would only ever reduce the price we are willing to pay from what we initially offered for one of two reasons: if you have sold all or part of your interest in the past year or if the publicly available data we base our assumptions off of prove to be incorrect after further due diligence.

In the offer I received from San Saba Royalty, what does it mean in the conveyance when it says “the sum of Ten Dollars ($10) and other good and valuable consideration”?

The offer that San Saba Royalty is actually making is the offer shown in the draft and offer letter. In the state of Texas, it is common practice to state on the conveyance “Ten Dollars ($10) and other good and valuable consideration” solely for privacy reasons. Because the mineral and royalty conveyance will be filed on record in the county courthouse, many sellers and buyers would prefer to keep the actual transaction price outside of the public domain.

If I haven’t received an offer for my minerals or royalties, does that mean you aren’t interested?

Absolutely not. We are interested in any and all opportunities to acquire minerals and royalties. Contact us and we can let you know what information we need to make an offer on your interests.

Get Started Now

Received an offer? Would you like to request an offer?

Call 214-389-0788 today or fill out the form below for an evaluation of your Royalty, Mineral or Overriding Royalty Interest.