Abandoned Well (ABAN) - A well that is not being used either because it was a dry hole (see below), or because it ceased to produce in commercial quantities.
Abstract Of Title - Document(s) of mineral ownership, including significant historical events like sales and inheritance, to prove who owns the minerals associated with a particular piece of property. This document is typically prepared by an abstract or title company.
Assignee - The person or company who has been assigned an Oil and Gas Lease or Overriding Royalty.
Assignment - A legal document which assigns or conveys Oil and Gas Leases or Overriding Royalties.
Assignor - The person or company who has conveyed an Oil and Gas Lease or Overriding Royalty to an Assignee.
Bonus - Cash settlement paid to a lessor (ie. mineral owner) by the lessee (ie. operator) after signing a lease. The amount is defined in the lease.
Check Stub - Once a well is producing, a statement (or stub) which documents the name of the well, production month, the volume produced, price received, and net interest of the payee.
Clear Title - Absolute and unquestionable legal ownership of specific minerals, free of lien or levy from creditors or other parties. Without 'clear title,' the minerals carry risk of future lawsuits and claims, and reduce their value.
Conveyance - A legal document, usually a deed, which transfers property title from one party to another.
Depth Rights - Mineral rights for a specified range of depth. As an example, mineral owner 'A' can retain the Depth Rights for the first 3000' below the surface, and sell the Depth Rights for everything below 3000' to mineral owner 'B.' If a well produces at 5000', mineral owner 'B' would get the associated royalty.
Division Order - A list of all parties with a revenue interest in a given well, along with their associated decimal share of the revenues from the sale of produced oil and gas. This list is circulated, reviewed, and approved prior to drilling the well.
Dry Hole - An unsuccessful well which didn't result in sufficient quantities of oil and gas to make it economically viable to operate.
Executive Rights - The rights to negotiate an oil and gas lease. These rights are not always tied directly to ownership.
Extension Bonus - An additional cash payment made after the expiration of the primary term to extend the lease. The amount is defined in the original lease agreement and applied only if that lease grants the lessee the option to extend the Oil and Gas Lease.
Grantee - The party in a conveyance receiving the land, minerals, etc. from the current owner (Grantor).
Grantor - The party in a conveyance who currently owns the land, minerals, etc., who is conveying (ie. granting or selling) them to another party (Grantee).
Gross Mineral Acres - Total number of acres in a given tract of land. (e.g. if the family ranch is 100 acres, the gross mineral acres is 100 acres). If the ranch is owned equally by 10 family members, each family member is said to own 10 net mineral acres of 100 gross mineral acres.
Held By Production (HBP) - A common condition in a lease that extends an operator's exclusive right to operate the lease as long as they are producing a commercial amount of oil and gas.
Landman - A person who negotiates with mineral owners for the sale or lease of their minerals, typically on behalf of another party. A Landman is also typically responsible for performing preliminary title research in the local courthouse.
Lease (also ‘Lease Agreement,’ ‘Mineral Lease’) - A legal document between a mineral owner and an operator (typically) which defines the legal location of the minerals, the term length, possible extensions, bonus, and royalty.
Lease Bonus - An upfront cash settlement given to a lessor (mineral owner) by the lessee (operator) for signing a lease and providing the operator an option to develop the minerals. This bonus is in addition to any royalty paid if/when a successful well is producing.
Legal Location - The geographical description of the property (minerals) for the purpose of a legal document or transaction.
Lessor - The party who gives the lease (ie. mineral owner).
Mineral Deed - A legal document (conveyence) which declares the transfer of ownership of specific oil and gas minerals rights. This document is executed, notorized, and recorded in the local county courthouse whenever minerals are sold or transferred.
Mineral Owner - A party who owns the minerals at or under the surface of a specific property, and has associated rights to those minerals.
Mineral Rights - Rights to oil, gas, and other minerals at or below the surface of a tract of land. Any or all of these rights may be conveyed by the owner. They include:
1. the right to develop
2. the right to lease the mineral rights
3. the right to receive lease bonus consideration
4. the right to receive delay rentals and
5. the right to receive royalty payments
Minerals - Primarily crude oil and natural gas, but may also include any element or chemical compound that has been formed as a result of a geological process such as gemstones, coal, ores of metals, etc.
Net Mineral Acres (NMA) - The net acreage owned by a mineral owner of a specific tract of land. For example, if a 200 gross acre tract of land is owned by ten equal partners, each with 10% ownership, then each would be said to own 20 net mineral acres.
Operator - The party responsible for the development, management, and day-to-day operation of oil and gas wells on a specific property, governed by the terms and conditions of a Lease agreement.
Producing Well - A well that is actively producing oil and gas.
Purchase and Sale Agreement (PSA); similarly, Letter of Intent (LOI) - A contract between a mineral owner and a mineral buyer which defines that terms of purchase, including a description of the minerals, the offer price (or price per acre), and the amount of time allowed for due dilligence (title research) and funding.
Revenue Check - A check mailed to the mineral owner (usually monthly) for the applicable share of revenue, net taxes, after the sale of production from an oil and gas well.
Royalty - A contractual arrangement within a lease which defines the fractional share of revenue to be paid to the mineral owner if/when there are producing wells.
Surface Owner - A party who owns the surface rights of a specific property, but not the mineral rights at or below his property.
Surface Rights - Rights typical of a land owner including building a dwelling, farming, raising livestock, etc. Surface rights do not include mineral rights, and must make certain allowances to the mineral right's operator to access and transport the minerals.
Unit - The combination of leased land with adjacent leased areas by an operator, performed either because of state regulation or because of an operational consideration. Once unitized, the mineral owner's division of interest is calculated by dividing their net mineral acres by the unit acreage and multiplying it by their royalty percentage.