primary term
The fixed period of a lease, commonly three or five years, during which the lessee must drill or the lease expires.
The oil and gas terms that show up on your lease, your division order, and your check stub, explained the way we would explain them at your kitchen table.
65 terms. Type to filter, or just scroll.
Plugging a well and restoring the surface when it no longer produces in paying quantities. Once abandoned, the lease usually terminates as to that well, and if it was the only producing well, the lease may expire entirely.
All the acres in a tract or unit, regardless of how much of it you own. A 640-acre section is 640 gross acres whether you own all of it or a sliver.
The acres you actually own, calculated as your fractional interest times the gross acres. Owning 1/8 of a 160-acre tract is 20 net mineral acres.
A county property tax assessed on the value of producing minerals. Common in Texas and several other states; Oklahoma taxes production instead through the gross production tax.
On a multi-unit horizontal well, the share of the well assigned to your section, usually based on how much of the lateral lies under it. Your decimal is multiplied by this factor.
A unique 10 to 14 digit identifier assigned to every well in the United States by the American Petroleum Institute numbering system. The first two digits are the state, the next three the county.
A transfer of a lease or interest from one party to another. Your lease may be assigned several times over its life without your consent or even your knowledge.
The upfront, per-acre cash payment a lessee pays you for signing an oil and gas lease. It is yours to keep whether or not a well is ever drilled.
Barrel of oil equivalent. A way of combining oil and gas into one number, conventionally six thousand cubic feet of gas equals one barrel of oil.
Gas produced along with oil from an oil well. Your lease language determines whether and how you are paid on it.
Lease language giving the operator a window, often 60 or 90 days, to restore production or begin new operations after a well stops producing, before the lease terminates.
The detail attached to your royalty check showing wells, volumes, prices, taxes, deductions, and your decimal. Most states require specific items to appear on it.
Combining production from more than one well, lease, or formation before measurement. Requires regulatory approval and can complicate royalty allocation.
Light hydrocarbon liquid that drops out of gas as it comes to the surface. Usually sold at or near oil prices and paid as a separate line on your statement.
Any document that transfers an interest in real property, including mineral deeds, royalty deeds, and assignments.
The work of fixing gaps and defects in a chain of title, using affidavits, corrective deeds, probates, and court orders, so an interest can be marketed and paid.
Your share of revenue from a well, expressed as a decimal, usually to six or eight places. Net acres divided by unit acres, times your royalty rate, times any allocation factor.
Costs an operator subtracts from your royalty for gathering, compression, dehydration, processing, and transportation after the wellhead. Whether they are allowed depends on your lease language and your state's law.
A payment under older leases that kept the lease alive year to year without drilling. Largely replaced by paid-up leases, which pay the full primary term upfront.
A federal tax deduction recognizing that minerals are a wasting asset. Royalty owners commonly use the percentage depletion rate; confirm your situation with a CPA.
Also called a Pugh clause vertical. Lease language releasing formations below or above the producing zone at the end of the primary term, so the operator cannot hold everything by one shallow well.
A document from the operator stating your decimal interest and directing how revenue should be paid. It does not amend your lease, and in several states it legally cannot.
A well that fails to find hydrocarbons in commercial quantities. Under most leases, the costs are the operator's, not yours.
The process by which unclaimed royalty money is turned over to the state after a statutory dormancy period. It can usually still be claimed by the rightful owner.
An agreement where a leasehold owner lets another party earn an interest by drilling a well. Common between companies; it does not change your royalty.
Lease language suspending obligations during events beyond the operator's control. Overused in practice, and courts read it narrowly.
A state process compelling unleased or unagreed mineral owners into a drilling unit so a well can be drilled, with the owner electing among bonus and royalty options or participating. Oklahoma, Texas, New Mexico, North Dakota, Colorado, Wyoming, Louisiana, Arkansas, and Montana all have some form; Kansas does not.
Oklahoma's severance tax on the value of oil and gas produced, withheld from your royalty and remitted for you.
HBP. A lease that continues past its primary term because a well is producing in paying quantities. A single marginal well can hold a large lease indefinitely.
A recorded sworn statement identifying a deceased person's heirs, used to move mineral title without a full probate in states that recognize it.
A well drilled vertically and then turned to run laterally through the target formation, often for a mile or two, which is why modern units cross multiple sections.
Ownership of the minerals themselves, including the rights to lease, receive bonus, and receive royalty. Distinct from surface ownership.
NPRI. A right to a share of production revenue with no right to lease or to bonus. Common in family conveyances and often confusing on the check stub.
ORRI. A royalty carved out of the leasehold rather than the mineral estate, so it ends when the lease ends. Often held by landmen and geologists from deals they worked.
The operating interest that pays its share of drilling and operating costs in exchange for a larger share of revenue. Non-operated working interest owners receive JIB statements.
Taking your royalty share as physical oil or gas rather than cash. Rare for individual owners.
Joint interest billing. The monthly invoice a working interest owner receives for its share of well costs.
The professional who researches mineral title, negotiates leases, and puts drilling units together. Not a lawyer, though the good ones read title like one.
A contract granting the right to explore for and produce minerals for a primary term and as long thereafter as production continues, in exchange for bonus and royalty.
The party who takes the lease, usually an operator or a leasing company, and holds the right to drill.
The mineral owner who grants the lease. That is you.
One thousand cubic feet of natural gas, the standard sales unit. MMBtu measures heat content instead, and gas contracts often price on MMBtu.
NRI. The share of production revenue an interest actually receives after royalties and other burdens. A working interest owner with 100 percent WI and a 25 percent royalty burden has a 75 percent NRI.
NRA. One net mineral acre leased at a one-eighth royalty. Because buyers quote in NRA, ten net mineral acres leased at three-sixteenths equals fifteen net royalty acres.
A lease where the entire primary term is paid at signing, with no annual delay rentals to track.
Production sufficient to yield a profit over operating costs. The test for whether a lease is held; it does not require recovering drilling costs.
Combining tracts to form a drilling unit. Voluntary when owners agree, forced when the state orders it.
The fixed period of a lease, commonly three or five years, during which the lessee must drill or the lease expires.
The court process that transfers a deceased person's property, including minerals, to the heirs or devisees. Minerals in another state may require an ancillary probate there.
A share of production limited to a set volume or dollar amount, after which it terminates. A contract instrument more than a property interest.
Lease language releasing acreage outside a producing unit at the end of the primary term, so one well cannot hold thousands of acres.
The share of production revenue reserved to the mineral owner, free of drilling and operating costs. Commonly one-eighth historically, three-sixteenths to one-fourth in modern leases.
One square mile of the Public Land Survey System, 640 acres. Sections are numbered 1 through 36 within a township.
The legal separation of the mineral estate from the surface estate, after which they can be owned and sold independently.
A state tax on the value or volume of production, withheld from your royalty.
A payment that keeps a lease alive when a well is capable of production but is not selling, usually for lack of a pipeline or market.
The acreage the state assigns to a well, which determines how production is shared among owners in the unit.
Section, township, and range: the legal description grid used in most producing states outside Texas and Louisiana. Written like 14-14N-25W.
An account where an operator holds royalty money it cannot pay out, usually because of a title question, an unsigned division order, or a bad address.
A mineral or royalty interest that lasts for a fixed period and so long thereafter as production continues, after which it reverts to the grantor.
An attorney's written examination of the chain of title, telling the operator who owns what and what curative is needed before payment.
A recorded deed that passes minerals automatically at death without probate. Available in Oklahoma and several other states.
Combining an entire field or reservoir into a single operating unit, usually for secondary recovery like a waterflood.
A written invitation to participate in a well, sent to working interest owners, with an election deadline and an AFE estimating costs.
Remedial work on an existing well to restore or improve production. Costs are the operator's, though they may affect whether a well remains economic.
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