Is it better to sign a lease and have your mineral rights be come Royalty interest at a smaller fraction? Than staying a working interest owner for a bigger share of your mineral rights but have to pay part of the production cost. Tinsley feild MS
Sometimes you can end up with both. It is very hard to give advice without knowing a lot of specifics on this one, but basically it will boil down to the money for you. Can you afford to be a working interest holder? If so, the rewards are greater (potentially), but so are the risks. You will be responsible for a share of ALL expenses, even those a long time from now including reworking, shutting in, or even plugging the wells. And after the production starts to taper off, it may be hard to sell the interest.
My personal suggestion is to form a company that will hold the interest, so you are protected. Because remember, a WI holder is considered a business, and if you are doing that business under your SSN instead of a corporate (corporation, LLC, LP, etc) even in a debtor state business assets are always up for liquidation. And if you are doing it as yourself under your SSN, that means your home, cars, etc are able to liquidated to cover the expenses you would owe on if you were unable to pay. Granted a lot of that risk can be mitigated to the operator, so just ensure the JOA is a good one and do yourself a favor and have an attorney look it over.
Thanks Ryan for replying , The feild in question is the Tinsley Field in MS under unification terms and c02 injection at this point the lease agreement is for 3/16ths royalty interest with a signing bonus on a 3 year lease that stays in affect as long as the wells are producing after the three years are up. When I asked the oil companys Atturney if I decided to stay a working interest owner what percentege would I be payed on he said 8/8ths. But I have to call him back to clareaffy be cause I am not sure if he thought I was speeking for all of my brothers and sister, or just my self. Any insight would be helpful. and are you an ATT. or just an experianced mineral owner. Thanks for your help Bob
Dear Mr. Dawkins,
It appears that the Tinsley Field is under field wide unitization. For the operators, they are sometimes looking at a 5-6 year payout.
The Field Wide Unitization Agreement typically takes years to negotiate, unless one operator owns the majority of the field. If so, they the agreement of the mineral/royalty owners are important to determine their share of the Allocation Formula. All in all, a very tiring process.
Ask for a copy of the Field Wide Unitization agreement and the allocation formula and see if this is something that you have the ability, time and expertise to commit to a project of this magnitude.
Bob Dawkins said:
Thanks Ryan for replying , The feild in question is the Tinsley Field in MS under unification terms and c02 injection
at this point the lease agreement is for 3/16ths royalty interest with a signing bonus on a 3 year lease that stays in affect as long as the wells are producing after the three years are up. When I asked the oil companys Atturney if I decided to stay a working interest owner what percentege would I be payed on he said 8/8ths. But I have to call him back to clareaffy be cause I am not sure if he thought I was speeking for all of my brothers and sister, or just my self. Any insight would be helpful. and are you an ATT. or just an experianced mineral owner. Thanks for your help
Bob