With inflation escalating and consumer prices, is it conceivable to ask the oil companies for a higher ROYALTY percentage above 1/4 or 25%. I know this will raise prices at the pumps but we as owners need to look out for “US”. I know this is probably not realistic but something to think about. other ways to negotiate and increase our revenue’s. Mike East, Ward County, Sec1
Nice to dream about, but not realistic. You signed a contract and that is what will stand. You may be able to increase your revenues by having a good oil and gas attorney review the draft lease and make edits that are more favorable to the mineral owner. But once you sign, you are held by the clauses you agreed to.
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No. You agreed to the deal. If prices go to $50/barrel should the oil companies ask to renegotiate the lease to 1/8 royalty?
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But what about future leases. In my lifetime the standard lease has doubled from 1/8 to 1/4. What made it double? Could it double again? The oil companies are making a fortune. A few big mineral owners could make a huge difference. Are you listening State of Texas?
I doubt that royalties will every double as it is not economic for the operators and wells would not get drilled. 1/4th royalty is the highest I have ever seen although there may be a few random ones higher out there. The reason is that the operator and working interest partners bear the cost of the leasing, seismic, geology, geophysics, office overhead, seismic, drilling costs, fracking, insurance, plug & abandon, workovers, long term maintenance, etc. on the wells. They may not break even with the costs versus returns at keeping 75% and giving mineral owners 25%. Some companies do well and some struggle, so not not everyone is making the big bucks.
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If you believe all that then you should start your own oil company and make your own fortune.
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Inflation will be already at work. If inflation causes oil to increase in price, then your 1/8 or 1/4 of the sales price will also increase.
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As an operator this is like asking for the moon! The operator has all the risks and you want to burden the lease more. You should jump into my shoes and run an oil company!