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Oil/Gas/Royalty interests

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Question
Hi,
I don't know a thing about oil interests that my dad had.  I'm in the process of transfering the rights from him to my brother and I.  I have sent an affidavit of heirship to the Caddo County clerk's office.  We have some interests with Trace Oil and Gas and I think 2 different ones with High Sierra Crude Oil and Marketing.  I was just going to sell the interests because they are very old wells but I was told that there is new drilling in Grady county and now I don't know what to do. The other interests are in Caddo county. I'd like to find out if they are drilling anywhere we have our interests.  Also, what is the difference between having an interest, a well, and a lease.  I don't know my oil terminalogy.  I do know that on the papers I've been able to find that "RI" is the code on them.  If that helps.  If you could help me to know where I should start out I'd really appreciate it. I think I have some coordinates for these interests.  Let me know if you'd like them.
Thank you so very much.

Answer
The affidavit was a good idea, as it will help put anyone searching the area on notice that you have inherited them and that they should now contact you and your brother concerning these rights, rather than your father.

Selling them is of course an option, but as you said some new wells might be drilled and if you sell them you wouldn't benefit from any royalty payments from said well or wells.

As to the "interest, well, and lease" terminology; it sounds as if your father owned some mineral rights based on the "RI" you mentioned seeing. RI stands for "royalty interest" and is usually associated with mineral rights. You were probably looking at an old check stub or division order he had.

An "interest" can be a "mineral interest", a "royalty interest, an "overriding royalty interest", a "non-participating royalty interest" or a "working interest." A less common interest would be a "term" interest, which could be any of the foregoing, but with a "time limit" on it of a certain number of years, after which your ownership would cease.

Confused yet? Don't be, because most of the above won't even apply to you. I think your dad probably owned a simple mineral interest (i.e. some mineral rights), and leased his right to drill and produce them (a right that comes with ownership) to an oil company sometime back, and in return received a "royalty interest" from the company (a share of the production) in the well they drilled. The "RI" you saw referred to a decimal that represented your dad's percentage share of the well.

If you're confused you might check out my leasing tips article on the Mineral Hub's Forum; which will help you understand what an oil and gas lease is, and how it relates to mineral rights ownership. A pretty easy read I think. The National Association of Royalty Owners (NARO) online store also puts out a booklet called "Look Before You Lease" that explains the basics of oil and gas rights ownership pretty well too.

Finally, if you send me the legal description (you can email or phone me from the Mineral Hub's Contact Us page); I'll be happy to email you back and let you know what's going on in the area and estimate what they might be worth.

Hope this helps you out.
Frederick M. "Mick" Scott CMM RPL
www.mineralhub.com
The Mineral Hub  

Oil/Gas

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Frederick M. Scott

Expertise

Oil and gas leasing, lease negotiations, how to best deal with the oil and gas companies or their representatives, buying/selling mineral rights, forced-pooling, correlative rights, deeds and conveyances, and "post-production" costs. I am most experienced with Oklahoma properties and laws, but am able to answer questions concerning other oil and gas producing states in many cases.

Experience

I am a Certified Professional Mineral Manager (CMM) certified by the National Association of Royalty Owners (NARO) in Tulsa, OK. I am also a Registered Professional Landman (RPL) with the American Association of Professional Landmen (AAPL). I have managed my family's oil and gas properties in Oklahoma for over 10 years and have dealt with many landmen, title analysts, attorneys and other oil and gas professionals in the process. I have written several articles which have appeared in various oil and gas industry magazines and newsletters. I have negotiated and drafted leases, prepared deeds, affidavits, and other legal instruments relating to my own minerals, as well as performed title, legal research, and curative work for same. I have acquired a good deal of knowledge on the subjects of oil and gas law, mineral appraisal, and landwork over the past ten years, and also worked as a professional landman and lease buyer for a time. I've seen the business from "both sides" and therefore feel confident I can help out most of the folks who ask questions in this forum.

Organizations
National Association of Royalty Owners (NARO); American Association of Professional Landmen (AAPL)

Publications
National Association of Royalty Owners "Action Report" (ROAR); NADOA Magazine, The Mineral Hub, Landman Magazine, and several royalty owner association group's newsletters.

Education/Credentials
Certified Mineral Manager (CMM), Registered Professional Landman (RPL)

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