Things to do Before Leasing Oil and Gas Royalties

By | December 3, 2011

Due to the increased demand for resources like oil and gas the number of exploring companies is rising drastically and the activity of exploring and drilling these resources became a continuous process in US. Since the sub surface rights of the property belongs to the surface owner, many oil and gas companies are approaching the land owners with different proposals of either leasing or buying their mineral rights. So, it is important for every land owner who receives an offer from the company to do few things before really entering in to the contract. Let us see the things which should be considered.

  • When you are the land owner with mineral rights, and one of the companies approached you, the first thing you should do is to check whether any other companies approached your family members who also posses legal rights on your mineral rights. Make sure no company approached them and they are not involved in any deals.
  • Secondly, the company will definitely send you a person to make the initial conversations. He/she might be the agent from the company, or a person recruited by the company for performing such functions, or another party who buys the rights from you and sells to the mining company for higher profits. So, make sure who approached you, so that you can make the conversation even more beneficial and worthy.
  • Once you are convinced with what all was discussed with the person, get ready with all the documents and make sure that all the respective partners of the rights are in agreement with your proposal.
  • If you have two different mineral like oil and gas and the company wants to explore both of them ask them for two separate deeds and royalties in order to prevent problems which may arose in near future.
  • Also do enough research on the company who approached you, about their track record, reputation, experience in the industry and the information about the previous deals from the surface owners who are already in deal with that particular company.
  • Don’t be rigid towards your expectations from the company and the royalties, as a well reputed company will never cheat you and will definitely offer the best price in the industry. If you have any doubts that need clarifications from the company make sure that you are putting them forward before signing the agreement.

These tips when followed carefully help you in making a successful deal.