Minerals and Royalty Glossary
Abandon
Assignment
Assignor
Assignee
Bakken Shale
Barnett Shale
Bonus
Borehole
Casing
Check Stub
Clear Title
Completion
Conveyance
Crude Oil
Delay Rental
Depository Bank
Depth Rights
Division Orders
Eagle Ford Shale
Grantor
Grantee
Gross Mineral Acres
Gross Working Interest
Held By Production
Joint Operating Agreement
Land Broker
Landman
Landowner
Lease
Lease Agreement
Lease Bonus
Lessee
Lessor
Primary Lease Term
Legal Location
Marcellus Shale
Mineral Acres
Mineral Deed
Mineral Interest
Mineral Owner
Minerals
Monthly Cash Flow
Neighboring Offset Production
Net Mineral Acres
Net Revenue Interest
Net Working Interest
Non Operating Working Interest
Non Participating Royalty
NORM
Offset Operator
Offset Drilling Permits
Oil, Gas And Mineral Lease
Operating Agreement
Operating Expenses
Operating Interest
Operator
Overriding Royalty
Paid-Up Lease
Participating Royalty
Permian Basin
Plat Maps
Primary Term
Producing Well
Production Decline Rates
Production Payment
Production Type
Pugh Clause
Purchaser
Purchase And Sale Agreement
Qualified Buyer
Recorder Of Deeds
Reserves
Revenue Check
Royalties
Royalty Interest
Run Stub
Salt Water Disposal Well
Severance Tax
Severed Minerals
Shale
Shut-In
State Permits
Surface Rights
Surface Use Agreement
Unit
Unleased Mineral Rights
Working Interest
Wellbore Direction
Wellbore Only
To end drilling operation or production of a particular oil or gas well or to cease production on a temporary basis.
The legal instrument used to assign or convey oil, gas, and mineral leases or overriding royalty interests.
The person who conveys oil, gas, and mineral leases or an overriding royalty in an assignment.
The person or people to whom the assignor conveys or assigns the oil, gas and mineral leases or overriding royalties.
The Bakken Shale represents the largest oil discovery in the contiguous U.S., which underlies the Williston Basin of Western North Dakota and Eastern Montana and stretches into Saskatchewan and Manitoba of Canada. Production in the Bakken Shale has yet to reach its full scale, as the cost of extracting oil from the shale in the Bakken not yet as economically fruitful as other areas with better infrastructure and drilling conditions.
The Barnett Shale is the largest onshore natural gas field in Texas–occupying the Bend Arch-Fort Worth Basin. The Barnett Shale sits below Fort Worth Texas and spans seventeen counties in the northern region of the state. Natural gas production in the Barnett Shale has slowed in recent months due to the decline in gas prices and the increased cost of production in an urban area, though there is still much natural gas left below the Barnett Shale. Production activity in the Barentt is expected to return to a higher volume when natural gas prices return to previous levels. The natural gas drilling in the Barnett Shale is unique and a relative first by way of it’s location in an urban environment and has proven to many that drilling and production can co-exist with the ubran landscape without great disruption, while bringing greater prosperity to the residents and improved infrastructure as a result of the economic benefits.
A bonus is a cash consideration paid to a landowner or mineral rights owner on the execution of an oil, gas or mineral lease.
A borehole is a hole made by the drilling an oil or natural gas well.
Pipe used in a well to prevent the perimeter of the borehole from caving, to stop movement of liquids or fluids from one formation to another and to generally control the well and it’s structural stability.
A check stub is a paper stub attached to a check which states the name of the well, total processed volume, the price received, the net interest of the payee and the production month.
A clear title is a title without lien or levy from creditors or other parties. Legal ownership must be clear and unquestionable. Having a clear title means that the holder is the rightful owner and there are no legal claims or judgements involving the minerals.
After the successful drilling of a well, completion represents the labor nedded to ready the oil or gas well for for commercial production.
Conveyance is the transfer of a property title from one party to another, usually by deed.
Crude oil is a mixture of liquid hydrocarbons that are naturally ocurring.
A delay rental is a yearly payment paid during the primary term to the lessor to delay drilling.
A depository bank is a bank designated to receive and distribute delay rentals.
Depth rights are the rights an owner of minerals owns below the land surface. A mineral owner can own rights at varying depths. A mineral owner may sell mineral rights to a depth of any number of feet to the surface, while maintaining the rights to depths that are lower.
Division orders are agreements with an oil or natural gas purchaser which define the payments of oil and natural gas revenue to royalty and mineral interest owners of a well, or in other words, a schedule of owners and their share in the revenues of a gas or oil well, derived from the sale of the minerals produced.
The Eagle Ford Shale is an emerging shale play trending across Texas to the Mexico border and covering 20 Texas counties. The area is just south of San Antonio Texas and West of Corpus Christi, where many of the pipelines serving the region terminate near ports on the Gult of Mexico. Mineral production in the Eagle Ford Shale region is one of the largest ever economic developments in the state of Texas (if not the largest). The Eagle Ford Shale represents the largest amount of capital investment ever placed in carbon fuel development for a single region anywhere in the World. Mineral production in the region is therefore operating at an unprecedented scale in terms of infrastructure that has been established to date. The levels of production, the relative ease of production and the proximity to ports, pipelines and rail make the Eagle Ford Shale a highly desirable production area and home to numerous operators. The local impact of the oil and gas production in the Eagle Ford has been tremendous, creating thousands of jobs and bringing new wealth to many. With over 250 drilling rigs in operation as September 2013, the Eagle Ford boom is set to continue as a remarkable pace, and is not projected to peak in mineral production until some point well after 2020.
A grantor is a person who makes a grant of land, minerals, or other property.
A grantee is the person receiving a grant of land, minerals, or other property.
Gross mineral acres are the total acreage in a tract or area of land.
Interest in a well which bears drilling and operating expenses.
A provision in a mineral lease that extends the right to operate a lease as long as the property is producing in paying quantities of oil and gas.
A joint operating agreement is an agreement among owners defining how a gas or oil well will be operated.
An individual or business that is an acting agent for others. Land brokers negotiate contracts, purchases or sales for a fee or commission.
Landman is a person who negotiates with mineral owners over the leasing of mineral rights. This is done on behalf of an oil company or as an independent contractor.
The landowner is the person who owns the surface of a tract of land–usually permitted to sell or lease the minerals, by way of holding mineral rights. Also referred to as surface owner.
A lease in this context, usually refers to an oil, gas or mineral lease.
The outlining agreement of the basic terms and conditions for developing lands or minerals such as the description of the leased lands, the length of the term, and the royalty to be paid.
Financial consideration provided to a land or mineral owner subsequent to the execution of an oil, gas and mineral Lease in addition to any rental or royalty obligations specified.
A lessee is the party who purchases a mineral lease.
A lessor is the party who grants a mineral lease.
The initial period in an oil or natural gas mineral lease alloted for the development of the property for the extraction or production of oil or natural gas. Initial periods often incorporate an extension period (as an option) to facilitate any add-on bonus consideration.
The geographical description of a property for the purpose of identifying the property for legal transactions. For example, in Oklahoma, and most other states you will need to anticipate needing the following: County, Section, Township and Range. In Texas you will need to anticipate needing some or all of the following: County, Abstract Number, Survey Name, Block Section/Survey No., or Alternate Name for the legal location.
The Marcellus Shale is a significant natural gas field spanning the Appalachian Basin. It is one of the largest US shale plays. The Marcellus shale is estimated to be the second largest natural gas find in the world. Stretching across New York, Pennsylvania, West Virginia, Ohio and Maryland, the shale formation is estimated to be 95,000 square miles in size.
Mineral acres are stated in one-acre units and represent the full mineral interest of a tract of land.
A legal document that states the ownership of oil and gas mineral rights.
The ownership of all rights to oil, natural gas and other minerals at or below the surface of a tract of land.
A mineral owner is the party owning the minerals or mineral rights under a piece of land along with the right to execute a lease on the property.
A mineral is an element or compound formed by way of geological processes.
Monthly cash flow is the aggregate of all net revenue received on a monthly basis from the net minerals retained for the property to be listed, sold or leased. For all listings, the seller needs to provide evidence of the most recent 6 months of net cashflow.
Any known producing natural gas or oil well in the immediate area surrounding the property (which is to be listed, sold or leased) is referenced as neighboring offset production.
Net mineral acres represent the net acreage possessed by mineral owner, of the total gross acres in a given area of land. Example, if you own one half of the minerals under a 100-acre tract of land, you own 50 net acres out of gross acres.
Net revenue interest is interest in the revenues of a well.
Net working interest is the share in well proceeds attributable to the working interest.
A party who has an interest in a well, but is not the operator.
A non-participating royalty is a royalty interest that participates in any oil, gas or mineral found but does not receive lease bonuses or rentals.
NORM is an acronuym for Normally Occurring Radioactive Material, which may cause environmental issues.
An offset operator is any identified operator of a gas or oil well in the immediate area surrounding the property (which is to be listed, sold or leased).
An offset drilling permit is an application by an operator to execute a new oil or gas well in the localized area surrounding a tract of land.
An agreement outlining such basic terms as mineral royalties, duration and description of the mineral property.
See joint operating agreement.
Operating expenses are the costs of operating a gas or oil well.
Operating interest is a working interest operator who is also the well operator.
An operator is the party designated in the operating agreement to operate the oil or gas well.
An overriding royalty is a payment in excess of the mineral royalty included in the oil or gas lease usually added during an intervening assignment.
A paid-up lease is an oil and gas lease that includes both rental and bonus payments.
A participating royalty is royalty interest giving its owner the right to participate in bonuses received from mineral leases as well as mineral royalties from oil or gas.
The Permian Basin is one of the oldest known oil and gas regions in Texas. It is also one of the highest oil producing areas in the United States. The Permian Basin is a sedimentary basin that is located in West Texas and Southeast New Mexico. The Permian Basin underlies land in Lubbock, Midland and Odessa.
A plat map is a geographical document drawn to scale to show the divisions of tracts of land in a particular area (usually a fairly limited area).
The primary term is the initial period of development in an oil and gas lease.
A producing oil and natural gas well is a well that is producing actively as a flowing or pumped well to extract oil and gas from below the surface, which is then sold to an oil and gas purchaser.
The production decline rate is a measurement of how quickly the extraction is declining from a well, field or group of fields. It is not to be obfuscated with depletion rate, which is how quickly the residual recoverable reserves in a field or region are being procured.
A portion of proceeds from production, specified by contract, and payable to the lessor until total payment has reached a predetermined limit specified by contract.
Each well is designated as either an oil or gas well. In the majority situatons, the division order stub will declare the interest type. Also, a royalty check will indicate the production sold.
A Pugh Clause is a clause limiting non-producing lands or depths beyond the primary term of the oil or gas mineral lease.
A purchaser is the organization authorized by the operator, under an acquistion contract, to transport and market the oil or gas from a generating well. In the majority of cases the purchaser pays the mineral owners for the sale of any oil or gas from a well.
A purchase and sale agreement is a contract utilized in a standard sale of oil and gas producing tracts, for working, royalty or mineral interest.
A qualified buyer as an individual must have personal annual income of $200,000.00 or more in each of the two previous years or joint income with a spouse of $300,000.00 or more in each of the previous two years as well as a reasonable expectation of the same future income or higher. A qualified buyer can also be any individual whose net worth or joint net worth with a spouse, at the time of purchase is $1,000,000.00 or greater. In addition, a qualified buyer can may be a business entity, not formed for the specific purpose of acquiring properties, with total assets greater than $5,000,000.00, that can be validated by it’s most recent financial statement perparation.
The Recorder of Deeds is a public officer who records documents that pertain to ownership of properties, mortgages and similar rights.
Reserves are estimated amounts of extractable oil and natural gas located in a varying geographical regions, fields or basins. This oil or natural gas must have the potential of being produced with real-time technological limits.
Revenue checks are the checks mineral or royalty owners receive from producing oil or gas wells. Revenue Checks contain a gross dollar amount, as well as a net dollar amount, less taxes (or simply called net).
Royalties are ownership of a portion of the revenue produced from an oil or natural gas property.
Royalty interest is the share of well production for the mineral or royalty owners–net of transportation and expenses incurred in the process of production, when oil or natural gas is produced on a property. This is usually treated as a value in 1/8 units or another fraction of the production value. This the royalty interest share amount can also be defined as a percentage of the production value, net expenses.
Stub attached to a check showing month of production, whether it is from gas or oil, price received and total volumes produced.
A salt water disposal is a well where oil and gas field salt water is disposed. Salt water is used in the oil and gas drilling process (usually a type hydraulic fracturing or horizontal drilling).
Severance tax is a tax paid on oil or natural gas that is produced, i.e., “severed” from the earth.
Severed minerals are mineral rights that have been severed from the surface title.
Shale is sedimentary rock formed from mud and clay (silt). Many of the underground formations below which oil and natural gas remain trapped are shale formations, hence many of the most productive natural gas and oil regions contain shale in the region’s name: Barnett Shale, Haynesville Shale, Marcellus Shale, Eagle Ford Shale, Bakken Shale and Fayetteville Shale are some of the better-known shales formations.
A shut-in is an inactive oil or gas well.
State permits are applications for drilling, recompletion, re-entry or completing of a well. These are filed by well operators. This is also inclusive of other documents submitted to state agencies that pertain to the sale of an oil or natural gas property.
Surface rights are those rights owned in a area or parcel of land that refer solely to the surface (above ground) portion of the property. These are rights that are separate of mineral rights or rights to what exists below the land surface or below ground. One can own acreage while not being the mineral owner in the owned land, as mineral rights can be contractually severed from land ownership, which may only entail surface rights.
Surface use agreements outline the location, limits and requirements regarding possible gas and oil production or any other mineral extraction or the development of the surface property, usually as a means to balance the surface owner’s interests with the mineral owners’ interests (should the surface and mineral rights owners differ).
Pooling is the combination and consolidating of leased land with adjacent leased areas. The unitized land is called a pool or a unit. Pooling is beneficial to the operator of unitizing multi-properyowners’ leases into a aggregate pool, as per state approved regulations, combining one common underground geological reservoir’s limited drainage capacity.
Mineral rights or interest not subject to an oil lease.
Working interest, is Interest in an oil or gas well, which includes drilling and operating expenses.
Wellbore direction refers to the orientation of well drilling, either vertical or horizontal.
Wellbore only interests can be sold by operators for a single well to include only the production and reserves, from the spacing unit of the single well given assignment, and no other mineral or royalty interests beyond the single well spacing unit.