Minerals 101

Mineral interests are real-property interests that are typically perpetual and grant both ownership of the oil, natural gas and NGLs under a tract of land and the right to lease development rights to a third party. When those rights are leased, usually for a three-year primary term, the mineral owner typically receives an upfront cash payment, known as lease bonus, and retains a mineral royalty, which entitles the owner to a percentage of production or revenue. Finally, mineral owners can also freely sell, lease or gift the rights to individuals and corporations.

Companies who acquire oil and gas mineral rights will typically purchase the mineral interests from the mineral owner for a negotiated amount expressed in dollars per net royalty acre. With an actively managed, diversified portfolio of interests, the company is able to mitigate some of the risks of individual, concentrated ownership.

There are many advantages of the mineral acquisition model, including no development capital expenditures or operating costs, no exposure to fluctuating oilfield service costs and higher margins than E&P operators without associated operational risks.

To learn more, please view and download our Minerals 101 Presentation.