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, 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, the land man may have received a 1% overriding royalty interest in the well. If the well is successful, then the land man 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.

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.

Hydrocarbon Minerals 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. Current areas of interest include the D-J Basin, Permian Basin, Powder River Basin, Anadarko Basin, Arkoma Basin, Eagle Ford Shale, Austin Chalk, Haynesville Shale, Marcellus Shale, Utica Shale, East Texas, and the Bakken Shale.

How do I receive an offer for my oil and gas royalties?

1. If your interest is producing, copies of 6 month’s worth of revenue statements from the oil company.
2. If your interest is non-producing- a copy of the most recent oil and gas lease.
3. Copy of the deed or instrument where you acquired the interest, if available.

1. Production History and projected decline curve.
2. Operator- Some are more successful than others.
3. Reservoir Formation – Some Reservoirs have longer production histories than others
4. Commodity Price Risk – Gas, Oil, or both – is it sour, treated, etc.
5. Future Production and Development.
6. Interest Type – Royalty, Overriding Royalty, Mineral Rights/Interest, Non-Participating Royalty Interest, or Working Interest.
7. Historical Cash Flows and Averages for: 12 months, 6 months, and 3 months.
8. Tax Rates for Purchase and Severance may be too high, low, or non-existent pending your state of where the interest is located, which affects a property’s value & offer rate.

The information above allows us to calculate current reserves with a prediction of future reserves and cash flows. Our objective is to offer you fair market value while addressing risks and uncertainties that may be involved and commodities prices.

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. If any of your questions were not answered here, please feel free to contact us.