The future is bright for landowners who own mineral rights in the U.S., thanks to the historic boom in oil and gas exploration and production (E&P) that’s currently underway. With energy companies paying top dollar for drilling rights, now is the time for property owners to partner with a mineral management firm and begin maximizing income from their mineral assets.
Mineral management, especially for landowners who lack experience in the energy industry, is not for the faint of heart, given the need to understand complex mineral contract law, changing government regulations and rapidly evolving drilling technology. That’s why most landowners are better off using mineral management firms to manage their mineral assets – and thereby avoid entering into a poorly negotiated lease agreement that could cost them dearly in lost revenue and additional expenses. Here are three tips to help landowners find the right mineral management partner:
1. Seek experienced managers with varied skills.
Mineral management requires a deep and varied skill set, with lease negotiation being at the top of the list. Negotiating a lease agreement – the most important document for a mineral owner – is a complex process. Mineral owners not familiar with lease forms and their clauses, such as Pugh, warranty, post-production costs, depth and gross vs. net – and how those terms affect how royalties are calculated and acreage is held – should let experienced mineral professionals handle these negotiations.
While lease negotiation and understanding is incredibly important, it isn’t the only sensitive portion of the leasing process. Lease bonus terms are highly competitive and often secretive. Connections and experience are key. Seasoned mineral professionals should have access to valuable research tools and an abundant inventory of acreage under management to negotiate the best lease terms available. An experienced team should also offer additional services that most mineral owners don’t have access to, such as tax organization, royalty payment audits and suspended funds retrieval.
Simply put, a mineral management company whose team has extensive E&P, financial and tax reporting, compliance and property management experience can save the mineral owner time, money, and headaches.
2. Look for mineral management companies that operate in multiple markets.
Mineral ownership is spread among millions of royalty owners throughout the U.S., primarily in major oil-producing states such as Texas, Oklahoma and Louisiana. In Texas, for instance, more than 600,000 households receive billions of dollars in oil and gas royalties each year.
Mineral management companies with operations in different states can add value to landowners in at least two important ways. First, their management teams will understand the differences and similarities in government regulations and taxation, as well as the economics and geology of well production. That market knowledge helps significantly during both lease negotiations, as well as ongoing management of production. Second, the oil and gas industry is a close-knit community. Don’t underestimate the importance of the business relationships that mineral management companies have within their in-state and out-of-state networks. Those connections can accelerate decision-making if landowners run into challenges with their current lease or if new opportunities arise for further development of their mineral assets.
3. Search for partners who excel at administrative services
Mineral management involves a lot of moving parts, and managing the flow of information is a daunting challenge for most mineral owners. Monthly production and accounting reports, for example, can be difficult to understand and may not even exist at all. Proper reporting allows owners to follow industry trends and better understand the status of their owned acreage.
The best mineral management companies have efficient management information systems that allow for data to be easily tracked and shared across the multiple departments. Royalty payment processing, property tax payments (where applicable), customized reporting and royalty audits are just a few of the functions that mineral management companies should provide landowners when managing their mineral assets.
The history of the oil and gas industry is marked by boom and bust cycles. One constant, however, is the need for landowners to safeguard their mineral assets by partnering with mineral management experts. Argent Mineral Management has worked with clients representing millions of acres in 30 states.