1. What are oil and gas mineral, royalty and overriding royalty interests?
Oil and gas minerals, royalties and overriding royalties are similar in that they all receive revenues from the
production of oil and gas from a well, and they do not pay for the drilling or monthly operating expenses of the
well. Often you will see the term "royalties" used interchangeably to mean either mineral interests, royalty
interests or overriding royalty interests. However, there is a slight difference between minerals and
royalties, and there is an even greater difference between overriding royalties and both minerals and
Mineral interests and royalty interests are similar in that both involve ownership of minerals under the ground.
They both receive a portion of the income from the production of oil and gas. The main difference is that the
owner of a mineral interest also has the right to execute leases and collect bonus payments, and the owner of
royalty interests does not execute leases or collect bonus payments. Both mineral and royalty owners receive
income once the well is producing, but only the mineral owner receives the up-front bonus payment.
Unlike mineral and royalty interests, overriding royalty interests do not constitute an ownership of minerals under
the ground. Instead, overriding royalties constitute ownership of a portion of the revenues generated from oil and
gas production, and the ownership expires when the lease has been abandoned due to cessation of production.
Overriding royalties are created from the working interest. For example, a land man may have secured the leases
for a well that ABC Oil Company is going to drill. Instead of a cash payment for his services, the land man may
have received a 1% overriding royalty interest in the well. If the well is successful, then the land man will
receive 1% of the revenues generated from oil and gas sales.
Like mineral and royalty owners, the owner of an override also receives a portion of the income from the production
of oil and gas. The main difference is that the owner of an overriding royalty does not own the minerals under the
ground, only proceeds from the production of minerals. Once the lease has expired and production has ceased, the
overriding royalty interest expires. Conversely, the owners of minerals and royalties maintain their ownership after
2. Why do people sell oil and gas royalties?
There are a variety of reasons that people sell oil royalties. One of the most common reasons is that the oil royalties
are in an estate and the heirs would prefer to receive cash instead of the oil royalties. Sometimes the oil royalties
are too small to divide among the heirs, or the heirs are not familiar with managing oil and gas royalties. Another
reason is that some owners no longer want to manage their oil royalties and want to simplify their investments.
Finally, some owners would simply like to receive the cash for an immediate need.
3. What type of interests does Fossil Royalties buy?
Fossil Royalties buys producing and non-producing mineral, royalty and overriding royalty interests located throughout
the United States. We buy single well interests or multiple well interests. The oil & gas royalties may all be
located in the same county, or they may be located in different counties or even different states. Current areas of
interest include the Haynesville Shale, Barnett Shale, Fayetteville Shale, Woodford Shale, Marcellus Shale, and the
4. How do I receive an offer for my oil and gas royalties?
In order to make an offer, we must determine the current value of your oil royalties. To do this, we need to get some
information from you. You can either call us 708-599-1800, or you can submit the information online. Once we've receive
the necessary information, we will promptly reply with an offer. We offer competitive prices and at no cost to anyone
selling oil royalties. If you receive our offer and decide to sell your oil royalties, then we will finish our title due
diligence and prepare the mineral deeds. Once you decide to sell, there is very little required of you to complete the
transaction. When buying, we assume all the costs associated with completing the sale, including mineral deed preparation
and filing fees.
5. What documentation is required to receive an offer?
If your interest is producing, copies of 6 month’s worth of revenue statements from the oil company.
If your interest is non-producing- a copy of the most recent oil and gas lease.
Copy of the deed or instrument where you acquired the interest, if available.
6. How does Fossil Royalties determine the value of my oil and gas royalties?
Production History and projected decline curve.
Operator- Some are more successful than others.
Reservoir Formation - Some Reservoirs have longer production histories than others
Commodity Price Risk - Gas, Oil, or both - is it sour, treated, etc.
Future Production and Development.
Interest Type - Royalty, Overriding Royalty, Mineral Rights/Interest, Non-Participating Royalty Interest, or Working Interest.
Historical Cash Flows and Averages for: 12 months, 6 months, and 3 months.
Tax Rates for Purchase and Severance may be too high, low, or non-existent pending your state of where the interest is located, which affects a property’s value & offer rate.
The information above allows us to calculate current reserves with a prediction of future reserves and cash flows. Our objective is to offer you fair market value while addressing risks and uncertainties that may be involved and commodities prices.
7. If I ask to receive an offer for my oil and gas royalty, am I obligated to sell?
Absolutely not. Asking for an offer does not obligate you to sell your oil royalty. Also, receiving an offer does not obligate you to sell your oil royalty.
If any of your questions were not answered here, please feel free to contact us.
Contact Us Today
COMMON ABBREVIATIONS AND DEFINITIONS
BOPD: Barrels of Oil Per Day
BOPM: Barrels of Oil Per Month
BWPD: Barrels of Water Per Day
DO: Division Order
DR: Delay Rental
GWI: Gross Working Interest
JOA: Joint Operating Agreement
MCFPD: Thousands of Cubic Feet of Gas Per Day
MI: Mineral Interest
NRI: Net Revenue Interest
NWI: Net Working Interest
OGML: Oil, Gas and Mineral Lease
ORRI: Overriding Royalty Interest
RI: Royalty Interest
SI: Shut In
SWDW: Salt Water Disposal Well
WI: Working Interest Oil & GAS TERMS, CLICK HERE