Answers to Frequently Asked Questions About Gateway Royalty and Other Mineral Buyers
Posted June 30, 2020
At Gateway Royalty a big part of our job is answering questions. Almost all the landowners who partner with us have never sold mineral rights or royalties before, so they come to us with a lot of questions. And we pride ourselves on answering those questions in the most clear, honest, and straightforward way possible.
So what are some of the most common questions we get asked? Here are a handful of things landowners frequently want to know about the oil and gas industry, how mineral rights buyers work, and what we have to offer.
How much can I expect my royalties to be?
A lot of landowners who either have not sold their mineral interest or have not started receiving royalties will ask us, “What can I expect per acre a month on royalties?” That’s typically a question we’re hesitant to answer because there are so many variables involved.
First of all, there’s the operator themselves. Royalties tend to look different depending on the operator. Second of all is what your lease looks like. Is it a cost free royalty lease versus a net royalty lease? Third of all is how good is that well going to perform. Some wells tend to perform much better than other wells due to the location and operator. The fourth thing is how big is the unit going to be. Is it diluted? Is it fully developed? Is their interest diluted?
The other thing you never know is what gas prices are going to be at that time. Are they going to be up or down? The price of the commodity itself is going to completely affect your royalties. Many people in the oil window who just started receiving royalties saw their checks drop 50% overnight when oil prices plummeted recently. It’s that simple, unfortunately.
That’s why when a landowner wants us to predict royalties before it’s coming close to production, it’s hard for us to give them a precise answer.
What are you paying?
This is the big question on the minds of many landowners. How much can you offer me for my mineral rights or royalties? It’s also a question we need to get additional information from each individual landowner before we can accurately answer.
If you have leased your mineral rights to an E&P company, we need to see a copy of your lease. This is very important to us in the evaluation process. We need to understand the terms of your lease—if it’s a net lease or gross lease, if it’s a cost-free lease, or what deductions are going to be taken out by the operator.
If you are receiving royalties already, we’ll also ask to get copies of your last three-to-four months of royalty checks. That’s so we can evaluate what your royalty payments have looked like so far.
Once we have that information, we can calculate the value of your minerals and make you an offer.
Are you a broker?
For those who don’t know, a broker is a person who gets paid a commission for arranging a deal between a buyer and seller. They basically act as a middleman. And, no, that’s not who we are and that’s not what we do.
Other people want to know if we’re going to hang onto their mineral rights or royalties or we’re going to flip them to another buyer. The answer to the first part of that question is yes, we are long-term buyers. And, no, to date we have never sold any mineral interest that we have purchased.
When we buy a deal, we go to the bank personally and pay for the deal with a cashier’s check. From there, we will monitor and manage the minerals we’ve purchased going forward. We are looking at a long-term revenue stream that’s going to develop from the minerals we’ve purchased.
What do you need to get started on a mineral sale?
To get the ball rolling on a sale, we’re going to ask the landowner for some additional information. Things like marital status (to determine joint ownership of the minerals), if they have an outstanding mortgage, or if there are any liens on the property. As mentioned above, we’ll also need a copy of your oil and gas lease.
Once we agree to terms, we will get together to go over the conveyance documents (as you would expect with any sale transaction). But overall, we make the process simple and easy for the landowner.
Why aren’t you interested in buying my minerals?
Every situation is different. Sometimes we have to explain to landowners that we’re currently not interested in acquiring their mineral interest because it just doesn’t make sense for us at that particular moment. The reason could be a number of things—what’s going on with development in that area, certain situations or trends in the oil and gas industry, or other factors our data is showing us.
But we always hold onto and keep track of landowner information. That way whenever development picks up in your area or we get a better understanding of development, we can revisit it at a future date.
Are you an Eastern Ohio landowner with questions about selling your mineral rights or royalties, or oil and gas development in general? Ask them to our experts at Gateway Royalty and get an honest, straightforward answer.