Newbie here - received a letter to participate along with and AFE that is dated over a month ago. What happens if you do not participate, do you still earn royalties? Thank you for any assistance.
For the most part, receipt of royalties requires that you have leased your minerals. If you have not leased, then you have to look to the terms of the NM pooling order to see how you will be treated and whether you receive any income before payout.
If you go non-consent, you’ll most likely get compulsory pooled, and therefore penalized 200-300% of the drilling & completion costs. Once those wells pay out the D&C costs plus penalty, you’ll back into pay. The catch is that those wells don’t pay out 200-300%, so you’ll effectively have your reserves taken from you without compensation.
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If you don’t mind, please indicate location of minerals and producer.
You really don’t want to just sit there and not participate. Assuming you are an unleased mineral owner, they can’t force pool you without making at least a half-ass attempt to lease you. So if that is the case, you should sign a lease.