Oil and Gas Leasing – a brief

Oil and gas leases are legal documents between the owner of the mineral rights, known as the lessor and the producer, known as the lessee. Once the lessor and the lessee sign the lease it becomes a legal document and thereafter the oil and gas mineral rights are transferred to the lessee for the period of the lease. Oil and gas leases must lay down the bonus amount agreed upon, the period of lease and the amount of royalty to be paid by the lessee to the lessor once the production commences.

Here the period of lease is critical in that production must commence before the lease period runs out. Should that happen the mineral rights are returned to the lessor. It is in the interest of both the parties to ensure that production commences.

Selling Oil and Gas Royalties – Some Essentials to Pay Heed

Leasing mineral rights will entitle you to gas royalties besides signing bonus. However, first of all, it’s worthwhile hiring the services of a geologist who would assess the potential of your property. You would then be in a better position for negotiations later on. The next thing to do is to acquire the consultancy of a good lawyer conversant in local oil and gas laws.

He will be your adviser during the drawing up of the lease agreement and till the finalization of all legal processes dealing with the sale of the mineral rights and your acquisition of oil and gas royalties. The term of lease and the quantum of the royalty are both negotiable though some states have fixed the value of the minimum oil and gas royalties.