Still trying to wrap my brain around all of this. I am trying to determine the pros and cons of signing a lease vs. not. From what I've read, if a rig is coming into your pooling area you have 3 options..
A. Sign a lease. You get a bonus payment up front and some percentage of the royalties i.e. 16%. They get the other 80+% of the royalties for the duration of the lease. For that 80% they take all the risks and pay all the up front costs. I am assuming there are no risks, up front costs, or back-end costs for you.
B. Participate in the drilling operation. Pay, up front, your share of getting the operation up and running. You become a "working interest" owner and once the operation starts producing, you get 100% of your share of the royalties
C. Do neither and basically participate without "consent", in which case you pay 150% (the extra 50% being a "risk penalty") of your share of getting the operation up and running. The 150% comes out of anything the operation returns. You pay all of this before you see any royalties. After that you get 100% of your share of the royalties.
I have a few questions...
Regarding A: Is it true that there is no risk, up front, or backend costs for the mineral owner.
Regarding B: What is a ballpark figure for what it would cost a person to "participate".
Regarding C: What if the well never produces anything?. Are you still liable for the money they put into the rig?.