Frequently Asked Questions
MINERAL ACQUISITION SPECIALISTS
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Unfortunately this is no small undertaking and cannot be done without a good amount of expertise and capital. Consultants with a specialist degree in geology can analyze historical data from old wells in your area to determine if there are any oil and gas reservoirs present. This may prove the presence of hydrocarbons, but it does not guarantee how much are in place or if they currently have the technology to drill the well.
There are many variables involved when gauging the selling price of minerals, such as the amount of current drilling activity in your area, the production decline rate, the cash flow history of your well(s), and commodity market prices. Because of this, your selling price will fluctuate not only with time but also as you negotiate with different companies.
An oil and gas lease outlines a number of different provisions and restrictions applied to both the lessor and lessee. You the mineral owner, being the lessor, have two main provisions, and these are the term and the royalty. For the purpose of this question we will focus on the term provision. The term outlines the amount of time that the oil lease is active and the oil and gas company may proceed with drilling operations on your minerals. This time period is typically three to five years and will occasionally come with an extension clause where the oil company may pay you an additional fee to extend the term for a defined amount of time. Once the term has expired, and possibly the extension if it was agreed upon, and the oil and gas company has not begun operations to drill a well, then the lease as defined in the agreed upon terms has expired. At this point the mineral owner should request with the oil company a release of the oil and gas lease, which you should then file with the county clerk. At this time your minerals will be free of a lease and if you choose to do so may engage in a new lease to any willing oil and gas company.
The first step that a company will take when they are beginning a new project is to go in and lease the mineral rights in that specific area. These oil and gas leases will range from a 3 year lease up to a 5 year lease. Also, the operator may add a clause to your lease to extend the lease for a specified number of years at their choosing and only a small bonus will be paid to the mineral owner. In addition to the length of time on the lease, the operator is required to pay the mineral owner a royalty for the oil and gas that may be produced from the minerals. This royalty percent can range from 12.5% up to 25%. This percentage, and the amount of mineral acreage you own in the well unit will be multiplied against the produced oil and gas to determine your monthly royalty payment.
The risks involved in leasing your minerals compared to selling them are as follows:
1. The operator may decide that it is not in their best interest to drill a well and you receive little or no value for your mineral rights.
2. The operator drills a well and it is a poor well, which results in little or no revenue from your minerals.
3. The operator can hold your minerals in a lease for up to 10 years in some cases without having to drill a well.
4. When they drill one well under your minerals, they have you locked in to the terms of that lease for the life of the well. This is referred to as being "held by production" and can last 30 years or longer.
The oil and gas industry is filled with risk. We can place a real, guaranteed value on your mineral rights if you choose to sell. Selling your minerals takes the chance of a poor performing well out of the equation and guarantees you money for your asset.
Find an end user to purchase your minerals--- There are thousands of mineral brokers across the country who might want to string you along until they can find a third party buyer to resell your minerals and make a profit. They may not have the funds to purchase your minerals or give you full market value for your mineral interest. It is important to make sure you sell your interest to an end user like Shepherd Royalty to ensure a quick transaction and full market value for your minerals. Shepherd Royalty is not a mineral broker, we are a fully funded buyer and end user of mineral interests.
Concerns for mineral owners--- Mineral interest can be severed from the actual land on the surface. Some things that may cause concern could entail the landowner not allowing an operator the right to come in and drill the minerals. Many operators require a pad site on the surface in order to drill and produce the minerals under the surface. There are certain land owners who are not interested in allowing drilling to take place on their land. Operators usually can negotiate deals with these landowners or take legal action to be able to produce the minerals but this process can drag out for long periods of time before you would see any revenue from production.
Make sure to sell to a Reputable Company--- Shepherd Royalty strives to be an advocate for the mineral owner. We have a team of experienced oil and gas professionals that make the selling process very simple to understand. Mineral owners should be very careful to make sure they feel comfortable with the person they are selling their minerals to and make sure that the company has a clearly defined system of payment. Shepherd Royalty has a proven track record of satisfied clients, and we can answer any questions you may have about the evaluation process we use to find a fair market value of your mineral interest.
Shepherd Royalty can accommodate you in your preferred method of payment.
Shepherd Royalty has two standard methods in which we distribute payments at closing.
1. Cashiers Check- this can be delivered overnight via Fed Ex, or we can use a third party to hold the Cashiers check and mineral deed in escrow until all legal documents have been executed.
2. Wire Transfer- once we have received your executed mineral deed or the third party has received all necessary executed documents, we will then directly wire transfer your payment into an account of your choosing.
We look at a number of factors including the production history, type of mineral interest, the reputation of the operator and geology of the area.
Absolutely not. Shepherd Royalty LLC will respect your decision to sell and your privacy. We will not give your information to brokers or other buyers who will hassle you into selling your minerals.
• Fluctuations in oil and gas prices
• Oil and gas wells by their nature produce less and less every month, so the checks will do the same.
We buy minerals, royalties, and overriding royalty interests in all of the oil and gas basins in the continental US. For a more specific description visit our “Areas of Interest” page.
Absolutely, selling a part of your mineral interest greatly reduces your risk of having a bad well while giving you an up-front payout and still keeping some skin in the game. We will accommodate you with any type of sale you are interested in.
Shepherd Royalty LLC will prepare all documents, pay all filing fees and contact all oil companies and tax entities to ensure a timely and accurate transaction. Selling your mineral rights will actually save you money when it comes to taxes because selling minerals is taxed at the capital gains rate of 15% while income from minerals is taxed at your individual income tax rate which could be as high as 35%. ( Tax rates through last year, expected to rise soon )
To start, you should fill out our no-obligation “Request an Offer” form. We will evaluate your minerals based on a number of factors and send you an offer within one week. Once you receive an offer from us that is agreeable to you we will file some paperwork and get you paid in a maximum of 30 days. However, the vast majority of our transactions close within 10 days.
With the fluctuations of oil and gas prices along with the uncertainty of drilling regulations, now is a great time to liquidate your mineral holdings into cash to mitigate these risks.
Take advantage of the low 15% capital gains tax rate on the sale of your minerals before it returns to 30%. Royalty payments are taxed at your normal tax rate of 25%-30%. Selling now could save you tens of thousands of dollars. ( Tax rates through last year, expected to rise soon )
• Clear up estate issues
• Liquidate for other investment opportunities
• Get away from the struggles of managing your own royalty interests
• Selling royalties is a great way to avoid going to the bank for liquidity needs
Why does Shepherd Royalty want to buy oil and gas minerals? We believe that if we buy enough, spread out over different areas, that we will make money in the
long run. We view mineral rights as a long-term investment, so we can afford to wait 20 years
for the minerals to realize their full value that we are paying today.
8214 Westchester Drive, Suite 740 Dallas, TX 75225
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