What You Need to Know Before You Sell Oil and Gas Royalties

Those who buy and sell oil and gas royalties often boast about how wonderful this process is for easy cash generation. From our experience here at H&M Land and Mineral, some of these stories are absolutely true. But those who opt to sell oil and gas royalties have a lot to consider, which is what our consultants are able to help these individuals through. If you are considering selling oil and gas royalties, there are a couple of things that you may need to know before taking the leap.

  • Surface Rights Do Not Mean You Have Mineral Rights

One common misconception is that those who have surface rights to a plot of land then have the mineral rights. For example, a client of ours owned a farm which conveyed a list of the farm owners’ mineral rights under the farm along with the area’s surface rights. This farmer, having the mineral rights, then had the right to legally explore, extract and sell any oil or gas or mineral which rested beneath the land. In the end, the farmer ended up enjoying a sizable reward.

With that said, some surface land owners do not own the minerals beneath the surface of their property. But what is even more common is the fact that most landowners have no idea of what minerals may be located beneath their surface property. They also do not have the budget to explore for oil or other beneficial minerals. This is another reason why a number of individuals contact us at H&M Land and Mineral. Our experts are able to go to accurately identify where there may be oil, gas or other minerals present under the land. In order to do so, however, landowners must lease their mineral rights for this oil and gas exploration.

  • Mineral Right Owners and Their Compensation

When a landowner chooses to lease his or her mineral rights, he or she will receive two types of compensation for doing so:

  • The landowner will receive a “bonus.” This is a signing bonus which is typically paid to the landowner on a per acre basis (usually around $200 to $500 per acre). The bonus is paid only once and it is typically paid at the signing of the lease.
  • The second type of compensation is the oil and gas royalty. This is a percentage of the money which is generated by the oil, gas or mineral which is obtained from his or her property. In the past, this could be as low as 12.5%. But with today’s high demands for oil and gas, mineral rights owners may receive as little as 18% and as much as 25%. Our company is known for negotiating the best and most fair royalty offers in Ohio, Pennsylvania, and West Virginia. If you are concerned about a royalty rate you received, give us a call.

Remember that should a company not find any oil or gas on your property, they will abandon this prospect. This means that the landowner benefits from the signing bonus, but they will not receive any royalty.

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