Royalties vs. Mineral Rights
Most
people assume it is really complex to selloil and gas leases, however, the truth is that it is all about knowing how
to deal with them. Once you figure out the basics, it is fairly simple to sell
oil royalties and generate cash out of it.
The
deal with mineral rights is that if there is a specific piece of land that you
own, you automatically have rights to its surface too. When a land is bought,
the deed conveys not only rights pertaining to the surface but also mineral
rights under the farm. Owning mineral rights essentially means that the owner
has the discretion to extract, explore and sell any natural resource or mineral
that is obtained from that specific land.
The
most unfortunate thing is that most landowners are unaware of their mineral
rights and do not possess the geological education or training in order to truly
comprehend the potential minerals that their owned land may possess. In
reality, most landowners totally forget the fact that they have mineral rights
under their land and can benefit from those rights. Even if they are aware of
the rights, they do not have the resource or energy to extract those minerals
because doing so can require a multi-million dollar budget.
However,
there are a plethora of energy companies that possess the knowledge, training
and funding required to explore and extract oil and gas. When these companies
find a land that contains hydrocarbons and minerals, they strike a deal with
the landowners to give them right to extract the minerals. It becomes a win-win
situation for both the landowner and the company because the company gets minerals
while the landowner can sell royalty,
receive money and still own the land.
The Bonus and the Royalty
There
are two kinds of compensations that a landowner can benefit from; bonus payment
and royalty. Bonus payment is when they get a particular amount of capital on
the signing of the contract. This amount is on per acre basis and could vary
anywhere between $200-500 per acre. This is a one-time amount and the landowner
only receives it when the lease is signed.
The
second type of payment a landowner can receive is known as royalty, which is a
specific percent of the total capital that is generated from the minerals, oil,
and gas obtained from a particular property. This percentage is usually set at
12.5% but it could vary anywhere between 18% to 25% too depending on the deal,
the quality of minerals and oil and the negotiation skills of the landowner.
Companies
usually abandon the prospect if they do not find any minerals or valuable
resource in the land. In such circumstances, landowner only receives the bonus
and no royalty.
Royalties Dwindle Over Time
Landowners
who have mineral rights can benefit from royalties for even decades. The
royalties only drop when the wells of minerals deplete. The average time period
of lease is up to 35 years and once the lease is over, the owner is left with
mineral rights, which can be leased again too in the near future.
Finding Mineral Rights to Buy is Hard
Oil
and gas royalties are a great investment due to the reliable cash flow stream.
The only obstacle is that finding a land with a healthy mineral resource can be
hard and challenging. However, there are companies who have researched in detail
and know where exactly they can find minerals, oil and gas. Visit 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
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