Why should I sign for 25% royalties when I could get 100% royalties.

Tags: 100%, 25%, royalties

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So do you believe that it boils down to whether or not there is production?

In other words....if there never is production, then leasing and getting a bonus is better?

If there is production, then buying in for a working interest would be better?

Of course I realize there may be a few wells with "very little" production, in which case the lease with bonus would still be better.
I agree with this. However, my hypothesis is pre-production, namely the point at which the E&P has permitted the first well in the unit and is getting ready to spud. It seems to me that, at that point, a third party investor would pay much more for a 100% working interest acre than it would pay for a 25% royalty interest acre.
I see....so there will be people offering to lease our mineral rights after the company that is drilling has decided they have enough of the section and are ready to start drilling?

I didn't know that....GOOD INFO for the public to have.
The deal with a third party investor probably would be a purchase of your interest, rather than a lease. It's hypothetical, but at least in the current environment there is a ton of $$$ chasing energy assets.

This is also speculation, but I would guess that the E&P that is developing the unit would be willing to discuss converting your 100% working interest to a royalty interest at any time along the way. As long the E&P is convinced you'd be willing to continue to hold your 100% working interest for the long term, I imagine the lease terms would be very favorable.
Kevin, a minor correction. You can never get 100% "royalties". You can get 100% revenue and 100% costs.
I stand corrected, Les. {G}....you are correct, sir!
Will someone show me the living/breathing force-pooled, un-leased mineral owner who can tell the story of 25% vs. partnering with O&G. Until this happens, we are not ever going to pinpoint how speculative these kinds of options are in the O&G business. If we all think of this scenario as betting the farm on more ng underneath your feet than the O&Gs can produce over 20-40 years...then go for it! If you want to sign for the best deal you can get...then go for it!

One thing though, the O&Gs are spending UNGODLY amounts of money here, JUST TO LEASE YOU UP. Do you think they might just know something?????? Do you think the drilling will be increasing/decreasing over the next 20-40 years? Are you a risk taker or not?

Again, think about what you want to be handling 20-40 years down the road, and what your bet today will be providing you with 20-40 years down the same road?

And remember, anyone who is taking 6% from you just for signing you up to a lease, is taking huge liberties with your moneys...not his. I would rather sign a run-of-the-mill oil&gas lease any day then give up 6% to a stranger doing "me" a "favor" by handing me a "pen."

One more thing, the Office of Conservation is NOT ANSWERING this question in a clear and concise manner. They just threw this question back to the questioner by telling him to talk to an attorney...who hasn't seen this elusive "creature" either!

Have a great weekend! 7/9/08
And even if you meet someone with this experience....it still won't be the someone who has been through it with the Haynesville Shale. This is a whole new animal.
Any update on any of these Unleased mineral owners? Anyone getting paid now? Update us please!
Foxie, suggest you contact flatlander because he may be an UMO/CIO.
I've also seen posts by Pam saying she's an UMO.

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