Introduction to Oil and Gas Mineral and Royalty Interests
Table of contents Introduction to minerals ownership Surface vs. mineral ownership Mineral leasing process Mineral and royalty interest versus working interest Margin comparison Comparison of various types of mineral and royalty…
Introduction Mineral interests: Perpetual real property interests Owns hydrocarbons and other minerals below the surface Can lease the right to develop these hydrocarbons to an exploration and production (E&P) company Primary lease…
Surface vs. mineral ownership Illustrative Ownership Surface ownership Surface owners can sell, transfer, or develop land within the guidelines established by the governing jurisdiction Surface owners may or may not own the rights to…
Mineral leasing process Illustrative 640-acre drilling unit Illustrative scenario Linda is the owner of 100% of the minerals in the southeast quarter (SE/4) totaling 160 net mineral acres Leases to E&P operator E&PCo for a primary…
Working interest vs. mineral and royalty interest Illustrative cash margin per barrel (/Boe) Royalty barrel advantage Illustrative revenue: 50.00/Boe Assuming the same revenue per barrel of oil Royalties Gathering Gathering & &…
Comparison of various types of mineral and royalty interests Nonparticipating Overriding Mineral interests Working interest royalty interest (NPRI) royalty interest (ORRI) Perpetual right to develop or Royalty interests that are…
Mineral and royalty life cycle Revenue to mineral owners Acreage developed Production revenue Working interest A portion of production Post-royalty production E&P company revenue is earned by revenue is split Unleased minerals…
Minerals acquisition process Who are minerals Direct with selling mineral Marketed transactions Brokers sourced from owners / aggregators & A&D firms Divestitures by Through which channels Direct outreach Broker networks…
Mineral and royalty acreage calculations Net royalty acres Gross DSU acres Net mineral acres 100% royalty acres (standardized to 1/8th royalty) The net mineral acres The implied acreage based Total acres within The acreage owned…
Minerals evaluations key terms and metrics Key terms Key metrics 1 DSUs (Drilling and Spacing Units) Gross DSU acreage Acreage / Net mineral acres DUCs (Drilled and uncompleted) development 100% royalty acres Spuds Net royalty acres…
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