All Mineral Rights Owners in OK are Provided the Right to Participate in Ownership with a Working Interest in a Well.
You can if you wish as a mineral rights owner invest into part ownership in any well up to the gross amount of your NMA or any amount in between. By investing into the well you buy in and get a working interest in it. A Working Interest income from a well can be anywhere from 2 to 20 times or more, that of a simple Royalty income. Probably the biggest mistake mineral or royalty rights owners make is by not investing into a well when they are able. Now most landman will not inform the mineral rights owner about their ability or right to invest into a well to participate in a WI. because they work for the oil companies and the oil companies do not want you to invest into their wells and take what they think is there profit away from them. See by investing into a WI of a well you are provided the profits of that well of the percentage that you own of it. Now you also have the cost and expense of that as well. However a WI can provide you 2 to 20 times or more that of a simple Royalty payment.
Something as a mineral rights owner you may want to think about and run it by your accountant CPA and your landman. Some of that 401K may provide you with a much more comfortable retirement or a retirement period.
You need to get comfortable with a calculator.
In your other thread you asked how much a 1/4 or 25% lease is in comparison to a working interest. A well's total production is 100%. A 1/4 lease would be 1/4 of that less any gas flared, less "enhancement" charges, if any. Your effective royalty for a gas well with Chesapeake might be 5%. With a reasonable and fair company, I would say your effective royalty could be as much as 20% range.
You need to learn about deductions, intangible and tangible. I would recommend you learn as much as you can about the geology under your acres.
The odds may be in your favor but don't bet more than you can afford to lose.
Don't sign a joint operating agreement or any piece of paper until you understand it completely.
If you go the working interest path, you are going to have to learn an industry inside out. It will be a new career. Bear this in mind.
Capt.
As the owner of many working interests and royalty interests as well as a geologist and engineer, I can't fault your grasp of arithmetic in comparing working Interests to royalty interests. Arithmetic is but a very minor part of decision making between the two. Amount of disposable cash available and Risk assessment are much higher components of decision making. Disposable cash availability is a personal item whose application is based on family priorities not arithmetic. Risk assessment in the subject option is another matter. The risk of taking royalties vs. WI investment is similar to getting on a hobby horse at the merry-go-round and breaking a big wild mustang. You have a good idea that the hobby horse will get you where you expect and perhaps how long it will take to get there for the price of a ticket. Taming a wild horse to be a fine means of conveyance is quite risky. You have to buy a saddle and halter, boots and gear in anticipation. Then, if an when you get on, how and where you go is dependent on the mustang not you. If you are lucky, you may end up with a good animal but there is a strong possibility that you will get bucked off and break your neck depending on how experienced you may be at breaking mustangs. Mustangs don't care about your arithmetic.
So, after determining that you have WI costs lying around and have no better use for it than to risk it and chance that you won't get bucked off, Get some advise from a petroleum engineer (not a landman) who has ridden the mustang before and survived. Arithmetic may be the beginning of an idea, but should never be the single basis of a decision. Nor should regulation rights established by politicians.
Knowing your personal acceptance of risk is a good thing. Drawing to an inside straight with borrowed money is foolhardy.
Gary L Hutchinson
Minerals Managment