MPH Production Co.
361.572.3051
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MPH Production Co.

Frequently Asked Questions

  1. What is the difference between oil and gas mineral interests, royalty interests, and overriding royalty interests?
  2. Why would anyone sell their oil and gas royalties?
  3. What type of interests does MPH Production Company buy?
  4. How do I start the process to receive an offer for my oil and gas royalties?
  5. Am I obligated to sell if I ask for an offer for my oil and gas royalties?
  6. How do you determine the value of my oil and gas royalties?
  7. How do I transfer my oil and gas royalties to my heirs before my death?
  8. How do I calculate my oil and gas royalty interest?
  9. What does the future hold for oil and gas prices?
  10. Why does the amount I receive on my oil and gas royalty checks vary month to month?
  11. My oil and gas royalty checks have stopped coming. What could be the problem?
  12. What if my question wasn't answered here?

 

1. What is the difference between oil and gas mineral interests, royalty interests, and overriding royalty interests?

The term royalties is used interchangeable to mean either oil and gas mineral interests, royalty interests, or overriding royalty interests. These three interests are similar in that they all receive revenue from the production of oil and gas from a well. They do not pay for drilling or the monthly operating expenses of the well. There is a small difference between mineral interests and royalty interests, and a greater difference between mineral interests and royalty interests and overriding royalty interests.

Mineral interests and royalty interests both involve ownership of the minerals under the ground. The main difference between the two is that the owner of a mineral interest has the right to execute leases and collect bonus payments and the owner of royalty interests does not execute leases or collect bonus payments. They both receive a portion of the income once the well is producing, but only the mineral owner receives an up-front bonus payment.

Overriding royalty interests do not require ownership of the minerals under the ground. They require ownership of a portion of the revenues generated from the production of oil and gas from a well. Like mineral interest and royalty interest owners, the owner of override royalty interests also receives a portion of the income from the production of oil and gas. The main difference is the owner of an overriding royalty interest does not own the minerals under the ground, only the proceeds from the production of minerals. Once the lease has expired and production has ceased, the overriding royalty interest expires. The owners of mineral interests and royalty interests maintain their ownership after production ceases.

An example of this would be: Bill Smith, a geologist, assisted securing leases for a well that XYZ Oil and Gas Company is going to drill. Instead of receiving a cash payment for his services, Bill may choose to receive a 1% overriding royalty interest in the well. This means, if the well is successful, Bill will receive 1% of the revenues generated from the sale of the oil and gas from this well.

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2. Why would anyone sell their oil and gas royalties?

People sell oil and gas royalties for a number of reasons. Inheritance is the most common reason oil and gas royalties are sold. The heirs prefer cash instead of owning the oil royalties, the heirs are not familiar with the management of oil and gas royalties, or the oil and gas royalties are too small to divide among the heirs are some of the problems encountered through inheritance. Some owners sell because they need the cash for something immediate. And some people just want to simplify there investments because they no longer have the desire to manage their royalties.

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3. What type of interests does MPH Production Company buy?

MPH Production Company buys producing and non-producing mineral interests, royalty interests, and overriding royalty interests. We purchase single or multiple well interests. The oil and gas royalties can be located anywhere in the United States.

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4. How do I start the process to receive an offer for my oil and gas royalties?

It’s easy! We must determine the current value of your oil and gas royalties to start the process.
You can fill out our online form to receive an offer or call us at 361.572.3051.

Once we have your information we will evaluate your holdings and make you a quick, fair, and competitive offer. If you decide to sell your oil royalties, we take care of the details by preparing the mineral deeds needed to complete the transaction. We assume all costs associated with the completion of the sale, including deed preparation and filing fees.

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5. Am I obligated to sell if I ask for an offer for my oil and gas royalties?

Absolutely not! Asking for an offer or receiving an offer in no way obligates you to sell your oil and gas royalties.

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6. How do you determine the value of my oil and gas royalties?

A registered professional petroleum engineer will analyze the production data, calculate the production decline rate, and review the cash flow history of the well. Using this information he will forecast future performance, calculate the remaining reserves, and predict future revenues. We will base our offer on this critical information understanding future risks. Our goal is to offer you a fair price for your oil and gas royalties.

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7. How do I transfer my oil and gas royalties to my heirs before my death?

We can probably prepare the documents for you. Please contact our office at 361.572.3051 and let us answer your questions and explain your options, so you can make the right decision regarding your oil and gas royalties.

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8. How do I calculate my oil and gas royalty interest?

Take the number of mineral acres you own in a well’s producing unit, divide that number by the total acres in the well’s unit, and multiply this by your royalty interest as listed in your oil and gas lease.

For example, if you own 10 acres in a 640 acre unit, and your oil and gas lease states that you signed for ¼ royalty, then your interest in the unit would be 0.003906, this would be on both the division order you received from the operator and on your monthly check.

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9. What does the future hold for oil and gas prices?

There is no way to predict the future. There is a saying in the oil business, "The only thing for sure in the oil business is....Nothing is for sure in the oil business!" Just like the stock market, there are highs and lows depending on what is happening globally. Experts will tell you that production is up so prices are going down, and others will say the exact opposite. MPH Production Company understands that it is impossible to predict the future or oil and gas prices and our practice is to stay away from either extreme.

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10. Why does the amount I receive on my oil and gas royalty checks vary month to month?

The amount of oil and gas production and oil and gas prices vary from month to month. The amount you receive for your oil and gas royalties each month is based on this information. Oil and gas wells experience a decline in production over time. Each well is only capable of recovering a certain amount of oil and gas. As each month passes, there is less oil and gas remaining to recover. This leads to reduced production which would be reflected in the amount you receive each month. There are also times when a well is down for mechanical problems. If the well is down for mechanical problems, production ceases. The lack of production would be reflected in the income you receive for that time period.

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11. My oil and gas royalty checks have stopped coming. What could be the problem?

There are 4 reasons why oil and gas royalty payments stop: 1. The company responsible for paying your revenues may have changed and the new company is processing your oil royalties for payment. 2. The amount due is less that the company’s minimum disbursement amount. It will be disbursed once the minimum is accrued. 3. Your account has been placed in “Legal Suspense” due to a change in address, change in ownership or if the company responsible is unable to disburse the revenue to you. 4. The well may have stopped producing.

The quickest way to find out is to call the phone number on the last check you received. The last person who paid you is the best source for this information. If you do not have this information, contact us or call us at 361.572.3051 and we will provide you with the phone number you need.

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12. What if my question wasn't answered here?

Please feel free to contact us MPH Production Company or phone 361.572.3051. We are happy to try to answer any questions you may have.

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