How are the oil and gas companies getting more money from the land than the family that owns the land?
The land owner hasn’t invested anything into the exploration for oil & gas. In return, the mineral owner receives revenue from the well.
Ok. So is it common for the oil and gas companies to get more money than the mineral owners?
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Yes. Typically, a royalty ranges from 1/8 to 1/4th depending on the lease or pooling order. The royalty owner is not required to invest money to drill the well, pay geologists, etc. It is possible for a royalty owner to participate in a well which requires an outlay of hard cash with no guarantee of a return. But most owners either do not have the resources to invest and/or do not have the oil industry savvy to understand and deal with the multitude of people, governmental agencies and companies in order to develop a successful oil well.
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What is an estimated price to participate in a well?
Yes it is very common.
Yes. As an example, say you have 1.0 acre that you lease for a 1/4th (25%) royalty. If productive, you receive 25% of the revenue attributable to your 1.0 acre and the lessee receives 75% of the revenues attributable to your 1.0 acre, LESS the associated costs of drilling, completing & operating the well. The lessee took the risk and is rightfully rewarded if productive. If the well is a dry hole, the lessee loses that investment.
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no easy answer to this question. depends on whether the well is onshore or offshore. depends on depth of well. depends on pressures at depth. depends on whether drilling through depleted zones. depends on rig rates; which float up and down with oil price. it’s a very wide range. an offshore well can cost $250MM. an onshore well could be $5 to 10MM. but again, there’s a very wide range.
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