I have some mineral royalties that were passed down to me about 7 years ago that are located in Blaine County and Kingfisher County and i have two companies that are interested in them. One company (Highpoint Energy) is interested in doing a 3 year lease in which i retain my monthly mineral income plus a percentage of whatever Highpoint drills with a bonus payment up front. The second company (BEP Royalty) wants to buy my minerals outright.
My current monthly income not changing anything is only about $200 a month on this specific well and im told that with the lease and allowing Highpoint to do a horizontal drilling in the same well could have monthly payments upwards of $10,000 a month. And my selling option with BEP Royalty is approximately $160,000. These are obviously very big numbers and i am trying to do my due diligence and make sure that i make a good decision here. I am looking for some advice on how i should handle this so any and all information would be appreciated. Thank you.
The Highpoint Energy, or is it Highpointe Energy, with or without LLc, rings some bells. If you already have a lease and royalty, be careful that what you are being offered is NOT a Royalty Lease, where they pay you a set sum for 75% of the royalty you are already receiving and for 75% of all future royalty until production ceases.
What really rings warning bells is that you keep your royalty you already have? As far as I can tell with a brief search Hipointe or High Point LLc doesn't drill wells. If you are already leased, what precisely are you leasing? If it's unleased deep rights? Who is the driller/operator?
https://www.linkedin.com/company/high-point-energy
Website
http://www.highpointenergy.net From the same page. Be very cautious.
I believe you inherited mineral rights/assets, not royalties. In a standard lease, you do retain the mineral rights after they pay you handsomely for the right to lease, and if they do not drill in the term, their rights expire with you still owning the minerals. In west Texas, most royalties are 25% of gross, and you need to try to limit what costs they charge you after the gas is out of the ground.
The second deal is a straight sale of an asset, and you will have a taxable gain on that amount that the sales price exceeds your basis (what cost was assigned at the time you inherited them).
If they dig a well and you get $10k per month, the well needs to produce only about 15-1 months to be better than selling the property. You stand the risk they don't hit that good a well, and you have to wait for the production to be paid, as opposed to the second offer, but if you don't need the money NOW, don't sell the rights.
Hello, thank you for the response. The lease offer is with Highpoint Energy, LLC. After digging deeper, the lease if for one section number that i currently get a royalty from a company named Newfield Mid-Continent, and Highpoint says they are under utilizing the land so Highpoint wants to drill their own well and do a horizontal dill which they say could amount to considerably higher income than Newfield pays out, and says what they do will in no way affect Newfield so my checks with them will remain the same.
as far as the buy out option, BEP, Royalty says they are buying up royalties like mine as an investment for mutual funds. Im not really sure how that all works though.
It seems to me that before i entertain any ideas of leasing or selling i should know exactly what all i own and where its located and what its potential is. Do you know how i may go about doing that? is there any state agency for Oklahoma that protects people like me and helps them figure out what all i do in fact have and what its all worth? Any information on that would be very helpful. I hope this information helps. Thank you.
Hello, and thank you for your reply. You are correct, i inherited mineral rights, not royalties. And i agree choosing a lease like Highpoint has offered is a gamble, if it doesnt produce what they think it will then my only gain i guess is the bonus upfront. I am very interested in learning more about all of this, im just not sure how to go about it. I would love to figure out exactly what i do own as far as mineral rights and what my options are for selling or leasing. It seems to me that its better to never sell but leasing may very well be a good options. I just dont know what any of this is worth and i just have to take these company on their word, unless i do my own research to help me better. Thank you for your time. I appreciate all the help.
Alan, did they give you a website? What little checking I did, they appear not to have a website. This raises warning bells. Dealing with a larger company that has web presence is no guarantee of a good outcome but it's better to have a track record you can check.
I am always suspicious because of the names companies choose. High Point, Highpoint, Highpointe, you need to know exactly which one you are dealing with to even check them out. In my opinion some companies want to masquerade to make people think they are some well known, established and successful company of a similar name. If they don't even have a website, you may want to take that into consideration.