Some Potential Risks When Leasing Mineral Rights

http://permicoroyalties.com, mineral rights

Mineral rights owners are often confused about whether to sell or lease their ownership. Leasing seems to be pretty luring as it is assumed by many to be a steady income-generating option. But, in reality, leasing is not as simple and beneficial as it is perceived. Here are some common potential risks when leasing mineral rights; mineral rights

 

Unsteady Royalty Payment

 

It is clear that royalty depends on the value of the production. If you are leasing the rights for the first time, the production will be substantial in the first few months. As the drilling goes on, the producing potential of the good decreases and will affect your royalty payments. Unless you have a good producing well, leasing generally leaves you with an unsteady income.

 

Risk of Depleting Assets

 

It is very difficult to predict the producing life of a well. Sometimes a newly drilled well which produces a substantial amount may suddenly stop producing and become depleted. Once it's depleted, your mineral rights become worthless. You neither receive royalties nor can you sell rights to other companies. sell gas rights

 

Negative Impact on Property's Value

 

One of the biggest drawbacks of leasing does not know the right terms and clauses to include in a lease. This can potentially greatly decrease your income on a property. If you sign a lease but leave in negative or operator friendly lease language you can impact the overall property value. Also in many cases, it's best not to lease to get the greatest value for your rights.

 

 

Complicated Legal Procedures

 

Once two parties agree on the mineral rights lease, both parties have to sign an agreement which is generally prepared and drafted by the leasing company. All legal procedures and documentation with regard to leasing is complicated and can lead to disputes and disagreements during the extraction and production. If you disagree with any of the operations after the drilling commences, as per the agreement, you will be bound by the lease that was executed in most cases cannot stop the operator from drilling. sell oil rights