There are several mineral owners on the same tract of land. What if we sign with two different companies. How does that work with the royalties being paid and does this create any conflicts?
Diane, the operator of the well usually pays each party their share. There can be ten or more participating parties in each well, they only have to pay their part of the wells drilling and operating expenses. Lets say I leased your minerals for cash and 1/6th royalty, I now basically own them. When the majority acreage holder decides to drill a well, I can flip your acres to the for cash and a royalty interest of say 23% from which your 1/6 [16.67%] is deducted. The operator pays you your 1/6 and pays me the rest 6.33%. On the other hand if I have no interest in flipping your acres in the well the operator sends me a proposal to participate in the well. If your acres made up 5% of the spacing I would be responsible for 5% of the well cost which could be as much as $500,000. If the well produces, the operator would pay me 83.33% of the value of the production and pay you the 16.67%. I have interests in wells that have a dozen different people unleased or otherwise participating in the well. In my experience it does not stop drilling. The operator is the one to pay everyone their respective share in the great majority of cases. You can own percentages of mineral rights of a property along with several other family members and even strangers. Unless you hold the executive rights, able to decide for all, you can only lease the percentage that you own and the others are free to make their own deal for more or less bonus money, royalty, term of years or conditions of the lease. It doesn't have to be one size fits all. Other lessees other than the operator will assign their lease to the operator or someone else or participate in the well according to their share of acreage. I hope this clears it up some.
Would it be safe to say that say that the majority acreage holder (Shale Exploration) would always take over ownership of my leased portion? DJ Energy has offered more for bonus & royalties. I know that Shale now has most of Daniels County leased, but am reluctant to go with 1/8 royalty. Do you know anything about DJ Energy? Thank you for your feedback.
r w kennedy said:
Diane, the operator of the well usually pays each party their share. There can be ten or more participating parties in each well, they only have to pay their part of the wells drilling and operating expenses. Lets say I leased your minerals for cash and 1/6th royalty, I now basically own them. When the majority acreage holder decides to drill a well, I can flip your acres to the for cash and a royalty interest of say 23% from which your 1/6 [16.67%] is deducted. The operator pays you your 1/6 and pays me the rest 6.33%. On the other hand if I have no interest in flipping your acres in the well the operator sends me a proposal to participate in the well. If your acres made up 5% of the spacing I would be responsible for 5% of the well cost which could be as much as $500,000. If the well produces, the operator would pay me 83.33% of the value of the production and pay you the 16.67%. I have interests in wells that have a dozen different people unleased or otherwise participating in the well. In my experience it does not stop drilling. The operator is the one to pay everyone their respective share in the great majority of cases. You can own percentages of mineral rights of a property along with several other family members and even strangers. Unless you hold the executive rights, able to decide for all, you can only lease the percentage that you own and the others are free to make their own deal for more or less bonus money, royalty, term of years or conditions of the lease. It doesn't have to be one size fits all. Other lessees other than the operator will assign their lease to the operator or someone else or participate in the well according to their share of acreage. I hope this clears it up some.