If an unleased mineral interest owner participates as a working interest owner in the drilling of a well, and subsequently leases his interest in the unit to a third party, does that affect his working interest in the well that was previously drilled?
As an unleased mineral owner, you are both the working interest owner (lessee) and the royalty interest owner (lessor). If your minerals are 10% of the acres in the well, then you pay 10% of the costs and receive 10% of the revenues. If you were leased for 25% royalty, then the lessee would pay 10% of the costs and receive 75% of 10% = 7.5% of the revenues and you as lessor would receive 25% of 10% = 2.5% of revenues as royalties. So if you now sign a lease to XYZ with a 25% royalty, then XYZ would pay 10% of costs and receive 7.5% of revenues and as the leased mineral owner, you would receive 2.5% as royalties. You should have an attorney review the lease as it should address (1) how any previously underpaid costs or overpaid costs will be handled and (2) how any revenue/royalty adjustments for prior period adjustment will be handled. There may well be other issues that need to be addressed, some dependent on state law.
1 Like
Everything depends on the terms & wording of the lease.
This topic was automatically closed after 90 days. New replies are no longer allowed.