Frequently Asked Questions
- What is the difference between oil and gas mineral
interests, royalty interests, and overriding royalty interests?
- Why would anyone sell their oil and gas royalties?
- What type of interests does MPH Production Company
buy?
- How do I start the process to receive an offer
for my oil and gas royalties?
- Am I obligated to sell if I ask for an offer for
my oil and gas royalties?
- How do you determine the value of my oil and gas
royalties?
- How do I transfer my oil and gas royalties to
my heirs before my death?
- How do I calculate my oil and gas royalty interest?
- What does the future hold for oil and gas prices?
- Why does the amount I receive on my oil and gas
royalty checks vary month to month?
- My oil and gas royalty checks have stopped coming.
What could be the problem?
- 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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