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Here is a list of frequently asked questions. Just click on the
question to go to the answer. Also, at the bottom of the page are
some oil and gas abbreviations and
definitions. If you have additional questions,
then call us toll free at 800-950-6954 or E-mail
us.
1. What are oil and gas mineral, royalty
and 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 due to cessation of production.
Overriding royalties are created from the working interest. For
example, Bob Jones (a land man) may have secured the leases for
a well that ABC Oil Company is going to drill. Instead of a cash
payment for his services, Bob Jones may have received a 1% overriding
royalty interest in the well. If the well is successful, then Bob
Jones will receive 1% of the revenues generated from oil and gas
sales.
Like mineral and royalty owners, the owner of an override also
receives a portion of the income from the production of oil and
gas. 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 and 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
(as quick as 48 hours) 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?
Absolutely not. 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.
6. How do you determine the value
of my oil and gas royalties?
A registered professional petroleum engineer performs an engineering
and economic 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?
You can contact us at 800-950-6954, and we can most likely prepare
the documents for you.
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 Title Transfer section to see
a detailed description of each of these types of deeds.
9. I'm confused by all the estate
and probate terminology. Can you help?
Yes we can. Go to the Title Transfer
section to see definitions of common terms encountered when handling
oil and gas royalties held in estates.
10. 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.
11. What does the future hold
for oil and gas prices?
If you compare current prices with the prices that were forecasted
by major oil companies over the past 25 years, one thing is certain:
they were always wrong! You'll hear one expert say that oil inventories
are high and that prices are going down, and then another expert
will say just the opposite. At Legacy Royalties, we feel that it
is impossible to predict what oil and gas prices will do, and that
the best approach is to not get too carried away on either extreme.
12. Why do my oil and 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 thing 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 steady reduction in production and a corresponding
decrease in the amount of your monthly check.
13. 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 no longer be producing.
To determine what's going on, simply call the phone number listed
on the last check you received. If you cannot find a phone number,
then you can E-mail
us or call us at 800-950-6954. We will most likely have the phone
number you need.
14. 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. Please call us toll free at 800-950-6954 or E-mail
us with your question.
COMMON ABBREVIATIONS
AND DEFINITIONS
Listed below are some common abbreviations and definitions used
in the oil and gas business. If you don't see what you're looking
for, or if you have any questions about the oil business, please
E-mail
us or call us toll free at 800-950-6954.
OIL AND
GAS ABBREVIATIONS
BOPD: Barrels of Oil Per Day
BOPM: Barrels of Oil Per Month
BWPD: Barrels of Water Per Day
DO: Division Order
DR: Delay Rental
GWI: Gross Working Interest
JOA: Joint Operating Agreement
MCFPD: Thousands of Cubic Feet of Gas Per Day
MI: Mineral Interest
NRI: Net Revenue Interest
NWI: Net Working Interest
OGML: Oil, Gas and Mineral Lease
ORRI: Overriding Royalty Interest
RI: Royalty Interest
SI: Shut In
SWDW: Salt Water Disposal Well
WI: Working Interest
OIL
AND GAS DEFINITIONS
ASSIGNMENT
The legal instrument whereby Oil and Gas Leases or Overriding Royalty
interests are assigned/conveyed.
ASSIGNEE
The person to whom Oil and Gas Leases or Overriding Royalty are
assigned.
ASSIGNOR
Person conveying Oil and Gas Leases or Overriding Royalty in an
Assignment.
BONUS
Cash consideration paid to a landowner or mineral owner on the execution
of an Oil, Gas and Mineral Lease.
CHECK STUB
Stub attached to a check disclosing well name, month of production,
price received and total volumes produced.
DELAY RENTAL
Yearly payments paid during primary term to Lessor to delay drilling.
DEPOSITORY BANK
A bank designated in an Oil, Gas and Mineral Lease to receive and
distribute delay rentals.
DIVISION ORDER
A schedule of owners and their decimal share in revenues of the
well derived from the sale of oil or gas.
GRANTOR
A person who grants or conveys lands, minerals, etc.
GRANTEE
The person receiving the grant of lands, minerals, etc.
GROSS WORKING INTEREST
Same as Working Interest.
JOINT OPERATING AGREEMENT
An agreement among working interest owners describing how a well
is to be operated.
LANDMAN
The person who secures leases and handles damages for oil companies
who are drilling new wells or laying pipelines.
LANDOWNER
The person who generally owns all or part of the minerals under
his lands and is entitled to lease the same.
LEASE
Another name for Oil, Gas and Mineral Lease.
LESSEE
The purchaser of an Oil, Gas and Mineral Lease.
LESSOR
The party who grants an Oil, Gas and Mineral Lease.
MINERAL OWNER
Generally one who owns only minerals under a tract of land (but
no surface) along with the right to execute a lease on the same.
MINERALS
Same as Participating Royalty. AKA Mineral Interest.
NET REVENUE INTEREST
An owner's interest in the revenues of a well.
NET WORKING INTEREST
Share in well proceeds attributable to the Working Interest.
NON-OPERATING INTEREST
A working interest owner in a well, but is not Operator.
NON-PARTICIPATING ROYALTY
A royalty interest which "participates" in any oil or
gas found but does not "participate" in lease bonuses
or rentals.
NORM
Normal Occurring Radioactive Material. Can cause environmental concerns.
OIL, GAS & MINERAL LEASE
The agreement outlining the basic terms of developing lands or minerals
such as royalty to be paid, length of time, description of lands.
OIL & GAS LEASE
Same as an Oil, Gas and Mineral Lease.
OPERATING AGREEMENT
Same as Joint Operating Agreement.
OPERATING EXPENSES
The costs of operating a well
OPERATING INTEREST
A working interest owner who is also the well operator.
OPERATOR
The party designated in the Operating Agreement to conduct the operations
of the well.
OVERRIDING ROYALTY
A royalty interest derived from the working interest, in excess
of the royalty provided in the Oil Lease. Usually added on during
an intervening Assignment.
PAID-UP LEASE
An Oil and Gas Lease where rental payments are paid along with bonus.
PARTICIPATING ROYALTY
A royalty interest giving its owner the right to "participate"
in bonuses received in leasing along with the right to "participate"
in any oil or gas found.
PRIMARY TERM
The initial period in an Oil and Gas Lease to develop the property.
PUGH CLAUSE
A clause added to an Oil Lease to limit holding non-producing lands
or depths beyond primary term of lease.
ROYALTY
Funds received from the production of oil or gas, free of costs,
except taxes.
RUN STUB
Stub attached to a check disclosing well name, month of production,
price received and total volumes produced.
SALT WATER DISPOSAL WELL
A well into which oilfield salt water is disposed.
SEVERANCE TAX
A tax due the state on oil or gas produced or "severed"
from the earth.
SEVERED MINERALS
Minerals whose title has been severed from the surface title.
SHUT-IN
An oil or gas well which is inactive.
SURFACE OWNER
Usually a landowner who owns no minerals under his land.
UNLEASED MINERAL INTEREST
A mineral interest not subject to an Oil Lease.
WORKING INTEREST
Interest in a well which bears the drilling and operating expenses.
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