Below is a list of some of the most common services we provide our growing list of clients:
This page has common industry terms in our field. To get your question answered, please contact us today.
There are two kinds of ownership.
1) Surface – ground soil and up. They are also called the land owner.
2) Mineral ownership is the ground. You own the surface to it: the land you live in. Back in the 1920s and 1930s people were preserving mineral rights.
By preserving their mineral rights – they were holding on to their mineral rights. Now if they wanted to sell 100 acres of surface to person “X” – the new owner would then have half the mineral rights and 100% surface.
So when clients hire Razor Resources, they want us to do title work and find out who owns the mineral rights to an area of land that they are interested in for exploring. The way you first start doing this is going to the:
Mineral ownership rights
- Right to explore
- Right to develop the minerals and the obligation to pay the cost for that development
- Right to use the surface
- Right to ingress & Egress
- Right to lease
Economic benefit right
- Bonus (consideration for granting a lease)
- Rentals (payment for deferring drilling)
- Royalty (share in production or free of production cost)
Minerals & Royalties are different:
Minerals - oil and gas on in or under
Royalty – oil and gas produced and saved
Land can be severance in many ways. There are 5 main ways that the owner could do this.
1. Surface severance – Dividing out and conveying tracts of your land with fee simple title.
ex. John Doe (as a fee owner) owns 100 acres and conveys 50 acres of his property to Brian Smith and with this conveyance he conveys fee simple title. So now Mr doe has 50 acres fee simple and Mr smith has 50 acres fee simple
2. Mineral severance – owner of a fee simple property conveys the minerals and reserves the surface for himself. Now there are two separate fee estates; surface and mineral
ex. John Doe (as a fee owner) owns 100 acres and conveys the minerals to Brian smith. and reserves the surface. Now mr doe owns the surface and mr smith owns the minerals
3. Royalty severance- This is when a fee simple owner conveys their property (surface and minerals) and reserves a fraction of a royalty interest for them.
ex. John Doe conveys his surface and minerals to Brian smith; and retains a ¼ of royalty interest in production
4. Working interest severance (only with a lease severance) – This is when a lessee buys a lease from a mineral owner. The working interest shares in the cost of producing minerals on that given tract of land. This last for the life of the lease and can also be assigned out.
ex. Oil and Gas Co. X buys a lease from John Doe. Oil and gas co. X now own 100% of working interest.
5. Overriding royalty severance (only with a lease severance)- this is when a lessee sells of their working interest and retain an override. (overrides assume no cost of producing the minerals and receive a royalty if there is production. This last the duration of the lease)
Ex. Oil and Gas Co. X buys a lease from John Doe. Oil and gas co. X now own 100% of working interest. Oil and Gas Co.X now assigns 100% of their working interest to Resources Drillers and retain a 50% override.
In the state of Texas, for example, an individual could own the land 100% outright and sell the surface, while at the same time still holding onto the mineral rights associated with that tract of land.
John Doe bought 100 acres in 1935. There were no previous mineral reservations whereby he can convey his land and retain any mineral interest.
John Doe sells his 100 acres in 1940 to Brian Smith and retains in the deed 50% of the minerals (the deed must state how much you are going to retain – or if not, was everything given away?)
Now, if an oil and gas company wanted to find out who owned the mineral rights in 1940, they would run title and see that John Doe and Brian Smith have one-half interest.
In this scenario, since John Doe owns that 50%, it is left for his heirs and successors.
What is left as in the previous box, example; John Doe still has his 50% interest.
But in 1963 Brian Smith Sells the land along with his mineral rights to Tom Ford.
Tom Ford now owns 100% of the surface land and 50% of the mineral rights to the land.