Buying Mineral Rights Oil and Gas Royalties
Eight Types of Mineral Rights
April 18, 2023 No Comments

The Eight Types of Mineral Rights

The Eight Types of Mineral Rights

Mineral rights may be acquired via purchase, inheritance or court order, and the various types each come with their own plusses, minuses and risk profile.

There are eight types of mineral rights you should be made aware of, and these include mineral interest (MI), royalty interest (RI), overriding royalty interest (ORRI), working interest (WI), non-operated working interest, net profits interest, leasehold interest and non-participating royalty interest (NPRI). In this post, we will briefly explore each of these – also important to keep in mind is that “working interest” is the only type of mineral right that comes along with an obligation to pay expenses related to drilling, operating and plugging a well.

 

Mineral Interest (MI)

A mineral interest ownership includes the executive rights to explore, develop and produce the minerals under a specific tract of land. Put simply, a mineral interest refers to a real property interest, which can be received when minerals are severed from a land’s surface; this is different from, say, royalty interests, which ensure that holders enjoy a fraction of the generated production revenue.

Further, a mineral interest grants its holder the right to explore and exploit subsurface minerals, and when the aforementioned severing from the surface occurs, the entity that acquires the mineral interest may have complete control of the subsurface resources – even though the right over everything above the land belongs to another party.

 

Royalty Interest (RI)

As we alluded to above, royalty interest owners are entitled to a percentage of the well’s revenue without having to pay for any of the expenses associated with drilling or operating the well.

 

Working Interest (WI)

Working interest includes the right to explore, develop and produce minerals granted by an oil and gas lease, in addition to the obligation to pay expenses (along with royalty payments).

 

Non-Operated WI (Non-Op)

Non-operated working interest owners do not make operating decisions, but are still obligated to pay for the drilling and operating expenses; both types of working interest are eligible (and receive) tax benefits.

 

Non-Participating Royalty Interest (NPRI)

An NPRI is an interest in the proceeds from the sale of minerals, carved out of the mineral estate. These types of owners do not possess “executive” rights, meaning they cannot sign an oil and gas lease.

 

Overriding Royalty Interest (ORRI)

An ORRI is an interest in the proceeds from the sale of minerals instead of an interest in the actual minerals, carved out of the working interest.

 

Leasehold Interest

A leasehold interest is another term for working interest, and is often used to describe working interest in a lease that has not yet been developed.

 

Net Proceeds Interest

Net proceeds interest (also referred to as net profits interest) describes an interest in proceeds from the net profits; this is the least-common type of mineral rights.

If you’re in the market to buy mineral rights or are looking to sell your mineral rights, get in touch with Ten Cow Holdings by calling (210) 960-1564.

 

Buying Mineral Rights Oil and Gas Royalties Selling Mineral Rights
Mineral Rights Assets
January 12, 2023 No Comments

Mineral Management and How it Affects Your Assets

Whether you find yourself immersed in good times or more challenging ones, mineral interests can provide you with income streams unlike any other assets. Into this foray have come entities such as Ten Cow Holdings, with teams of specialists who provide a turnkey solution to the often complex and time-consuming responsibilities that come with mineral ownership.

Indeed, protecting and maximizing the value and potential of minerals, oil or natural gas assets – because of the complexity of this asset class – can present itself as a full-time job. The right kind of mineral management will handle the following in a concise, professional manner:

  • Title analysis and research
  • Turnkey lease evaluation and negotiation solutions
  • Division order processing and verification
  • Lease administration and compliance monitoring
  • Well proposal analysis
  • Portfolio performance reporting and analysis
  • Sales and auction coordination
  • Research and recovery of escheated and suspended funds
  • Ad valorem tax administration
  • Regulatory compliance monitoring via SSAE 16 (SOC-1) audit report
  • Dormant mineral review and claim filings
  • Dynamic energy environment to keep clients informed

Mineral management firms, essentially, are comprised of oil and gas professionals who run the gamut from attorneys and accountants to landmen, estate planners and even geologists and reservoir engineers. Regardless of where a client or mineral interest is located, the assets an individual such as a landman manage are more than just an asset to be managed and extrapolated for wealth – rather, these assets are safeguarded for future generations.

If you are a landowner, we can tell you that you’re better off taking advantage of mineral management firms to manage your mineral assets, thereby avoiding the possibility of entering into a poorly-negotiated lease agreement that could cost you dearly in terms of additional expenses and lost revenue.

Understanding the Bottom Line

It’s unlikely that you or your beneficiaries are experts in mineral rights, and one primary challenge of inheriting rights to minerals is ensuring that you are capturing their full value – an effort that oftentimes (as we mentioned in the beginning of this article) becomes a full-time job. Your best bet is to seek out an experienced mineral management entity to make sense of your assets, ensure you hand them down with accurate documentation and make the most of them in the form of lease bonuses and royalties.

Ten Cow Holdings can be a knowledgeable, invaluable wealth management partner that understands specialist information such as the cost basis for inherited mineral rights and the day-to-day operational concerns connected with oil or natural gas assets. While no one will ever accuse selling mineral rights of being en vogue, Ten Cow Holdings can make the entire process easier to understand. Call us today at (210) 960-1564.

Oil and Gas Royalties Selling Mineral Rights
Oil Refinement
July 17, 2022 No Comments

How Oil is Excavated and Refined…and How Mineral Rights are Involved in the Process

The technical side of refining and excavating oil gets pretty deep, but in a nutshell, the crude oil is heated by a furnace and is sent to a distillation tower, where it is separated by boiling point; from there, the material is converted by heating, pressure or a catalyst process into finished products including fuels like gasoline and diesel, and specialty products like asphalt and solvents.

Put succinctly, the action of “refinement” breaks crude oil down into its various components, which are then selectively reconfigured into new products.

Oil is excavated (or extracted) using different methods depending on geology and location, a process that occurs, obviously, before it is sent to refineries to create the aforementioned refined products we rely on every day, such as gasoline. The first efforts to tap the oil sands resource began in the mid-20th century using hot water to separate bitumen from sand; since then, the process has evolved into the cutting-edge methods used to extract oil today.

Let’s briefly go over the ways oil is excavated in this day and age, based on the two primary oil types: conventional and unconventional.

  • Conventional Oil – This type of oil is excavated from underground reservoirs using traditional oil rig pumping and drilling methods; as a liquid at atmospheric temperature and pressure, conventional oil flows through a wellbore and a pipeline (unlike bitumen, which is too thick to flow without being heated or diluted), making it easier and less expensive to recover because it requires less processing after excavation.
  • Unconventional Oil – This cannot be recovered using conventional pumping and drilling methods, and as such it demands advanced extraction techniques. Oil found in geological formations that make it more difficult to extract, such as light tight oil (LTO) is also referred to as “unconventional” oil because non-traditional techniques are demanded to excavate the oil from the underground reservoir. Additionally, this kind of oil excavation uses horizontal drilling and hydraulic fracturing.

Other ways oil is recovered or otherwise extracted/excavated throughout the world include:

  • Surface mining
  • Oil sands tailings
  • In situ recovery
  • Steam-assisted gravity drainage (SAGD)
  • Cyclic steam stimulation (CSS)

Where Mineral Rights Come Into Play

Mineral rights often include the rights to any oil and natural gas that exist beneath a property, and the rights to these commodities can be sold or leased to others. In most cases, oil and gas rights are leased; the lessee is normally uncertain if gas or oil will be discovered, so they generally prefer to pay a small amount for a lease rather than pay a larger amount to buy.

The bottom line is that if a lessee finds oil or gas and begins production, a regular stream of royalty payments usually keeps the terms of the lease in place.

From oil drilling and mineral mining to understanding how to sell mineral rights, Ten Cow Holdings can help all landmen and others with any questions or concerns. Call us today at (210) 960-1564.