PETRO 4300 S 11 CLASS 2

PETRO 4300 S 11 CLASS 2 - PET 4300 LECTURE 2 MINERAL RIGHTS...

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Unformatted text preview: PET 4300 LECTURE 2 MINERAL RIGHTS AND ROYALTIES IN TEXAS Private title to all land in Texas emanates from a grant by the sovereign of the soil (successively, Spain, Mexico, the Republic of Texas , and the state of Texas). Under the laws of Spain and Mexico, mines and their metals or minerals did not pass by the ordinary grant of the land without express words of designation. In one of the earliest acts of the Congress of the Republic of Texas , this rule was adopted, and it was continued in force after Texas had become a state. A grantee of land before 1866 therefore had no interest in the minerals in the land unless that interest was expressly granted. By a provision of the state Constitution of 1866 , which was carried over in substantially the same language into the constitutions of 1869 and 1876, qqv the state released to the owner of the soil all mines and mineral substances therein. This constitutional provision had retrospective effect; the landowner was given complete ownership of the minerals in all lands that passed from the sovereign before the effective date of the Constitution of 1876. A similar relinquishment to the landowner of the sovereign's retained interest in minerals was made in the revision of the Texas Civil Statutes in 1895, though it has not been litigated in the courts. Since 1876, it has been assumed that a grantee of land from the sovereign has received all minerals unless they are expressly reserved. SOURCE: http://www.tshaonline.org/handbook PETR 4300 3 PETR 4300 4 OIL AND GAS FINANCIAL TERMINOLOGY MINERAL INTEREST IS THE BASIS FOR THE DEAL STRUCTURE IN OIL AND GAS INVESTMENTS TOTAL GROSS TG 100 % OF PRODUCTION OR EXPENSES, ACTUAL COST OF SERVICES, ACTUAL PRODUCTION FROM LEASE WORKING INTEREST WI REPRESENTS THE SHARE OF THE MINERAL INTEREST YOU ACQUIRED AND BECOMES YOUR SHARE OF COST OR PRODUCTION T 18N R 35W SECT 5 JED CLAMPET INHERITED THE LAND FROM HIS GRANDFATHER MINERAL RIGHTS HAVE NEVER BEING SEVERED HENCE JED CLAMPET OWNS THE MINERAL RIGHTS YOU WANT TO LEASE THE RIGHTS TO EXPLORE AND PRODUCE OIL AND GAS MAKE A DEAL WITH MR. CLAMPET DEAL: IN EXCHANGE FOR A BONUS $, A ROYALTY (3/8) AND SOME ADDITIONAL CLAUSES YOU GET 100% OF THE LEASE RIGHTS YOU NOW OWN A WI = 100 % EXAMPLE OF AN ACTUAL DOCUMENT ..\CLASS 1\8th ave[1].-west lease template PETR 4300 5 MAIN FEATURES OF A LEASE DOCUMENT Description of Oil Lease.docx PETR 4300 6 PETR 4300 7 TYPICAL PROVISION IN AN AGREEMENT THAT GOVERNS THE LEASE OF A MINERAL INTEREST PRIMARY TERM: GOVERNS HOW LONG THE LEASE LASTS IF NO PRODUCTION USUALLY LEASE ARE HELD BY PRODUCTION THEREAFTER LESSOR WANTS AS SHORT AS POSSIBLE LESSE WANTS AS LONG AS POSSIBLE LEASE BONUS : SIGN UP $ TO ENTICE THE LESSOR ROYALTY INTEREST = PORTION OF THE FUTURE REVENUE WHICH WILL BE GIVEN TO THE LESSOR BY THE LESSEE DELAY RENTAL : ANOTHER FEE THAT THE LESSOR WANTS TO RECEIVE IF OPERATIONS HAVE NOT BEGAN BY THE END OF FIRST YEAR. IT ALLOWS THE LESSE TO DEFER THE HAVE NOT BEGAN BY THE END OF FIRST YEAR....
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This note was uploaded on 07/12/2011 for the course PETR 4300 taught by Professor Watson during the Spring '11 term at Texas Tech.

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PETRO 4300 S 11 CLASS 2 - PET 4300 LECTURE 2 MINERAL RIGHTS...

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