ABOUT US
American Mineral Partners is a non-op mineral and royalty acquisition, management, and divestiture group based in Oklahoma City, Oklahoma. We have quickly become one of the leading purchasers of mineral interests in key unconventional oil and gas plays focusing primarily in the state of Oklahoma, while continuing to build our presence in Texas, Kansas, Colorado, Wyoming, New Mexico, Arkansas, and Louisiana.
American Mineral Partners evaluates mineral property, giving mineral owners a chance to understand their rights and explore their financial options. Instead of waiting years to receive their royalty income through monthly or annual royalty checks, American Mineral Partners uses the latest technology and information to provide mineral owners with a very competitive lump sum cash offer for their mineral interests.
By combining years of oil and gas industry knowledge, our team members will guide you through the mineral rights selling process. Our experience along with our thorough but quick evaluation process allows us to offer you a fair and competitive value for your mineral and royalty interests. We are dedicated to making every transaction simple and transparent. We pride ourselves on doing business the right way, the honest way, the American way.
FAQs
A = Net Mineral Acres owned
U = Number of Mineral Acres in the oil and gas drilling unit or pool
R = The Royalty assigned to the mineral right owner by the oil and gas lease covering his or her minerals
P = Participation Factor assigned to the tracts owned by the mineral owner as described in a unit agreement
Y = Additional Ownership Factor assigned to the owner’s mineral rights by any other arrangement or agreement
Revenue interest decimal = (A÷U) × R × P × Y
Immediate Cash: Some owners decide to sell mineral rights because they’d rather have a large up-front payment now than have to wait for years to collect an equivalent amount in royalty or bonus payments. They use the money to pay down mortgages, high-interest credit card balances, medical bills and other expenses. Others decide to sell their mineral rights and invest the money in “non-depleting” assets such as real estate or stocks and bonds. Still others decide to “cash out” so they can take that special vacation or travel the world now, rather than later.
Paperwork Reduction: Some owners, especially those with smaller interests, decide that their mineral rights just don’t justify the hassle of ownership any longer. They would rather spend their free time doing something other than managing mineral interests that may not be making them much money. Eliminating the paperwork associated with mineral ownership can also significantly simplify your tax returns each year.
Tax Considerations: When you sell oil and gas assets that you’ve owned for more than a year, the long-term capital gain proceeds you receive are taxed at rates no higher than 20% (as of 2013), whereas bonus and royalty income is always taxed at regular income tax rates, which can be as high as 39% if you’re in a high tax bracket.
Please check with your tax or investment professional for questions related to tax or investment advice. The information provided on this web site, while believed to be accurate, is not meant to be tax or investment advice.
Oil and Gas Interests are “Depleting Assets”: No matter how good a producing well is, it will eventually stop producing as the field it’s in becomes depleted. Once that happens the mineral rights will be virtually worthless. Since it’s hard to predict exactly when a well or field may become depleted, many people decide at some point to convert some or all of their mineral properties into other assets such as real estate, stocks, bonds and other investments that may hold their value longer, or may appreciate more than their dwindling oil and gas interests.
Some mineral owners in good areas are able to lease their mineral rights many times over the years without a well ever being drilled, and some receive quite a nice bonus every few years from doing so. Eventually however, they too will see a decline in lease bonus rates due to declining opportunities for production in their area. New drilling technologies do occasionally bring an old area “back to life” but once the oil and gas is really gone, it’s gone. This is why mineral rights are classified as “depleting assets.”
Estate Management: Often it is easier to liquidate mineral rights held by an individual while they are still alive, rather than waiting until after their death. If the individual owns mineral rights in more than one state their estate would need to be probated in each of them in order for title to pass to their heirs in most cases. In addition, if the individual resides in one state at the time of their death, but owns minerals in another, their estate would also need to be probated in the state where the minerals are located in order for title to pass to their heirs. This can result in a lot of expense for an estate, and thus the heirs. It is much easier to distribute cash assets to heirs than it is to divide up property after someone passes away. Many individuals decide to sell for this reason, especially those with smaller interests.
“Fractionalization”: As mineral rights are passed from one generation to the next they are often divided into such small amounts that their economic value to each succeeding generation diminishes exponentially. Keeping track of the minerals at that point can become more of a headache than they are worth to the heirs. This is often referred to as the “fractionalization problem” and is one reason many owners end up selling their mineral rights while they are still alive rather than letting them be split into smaller and smaller pieces with each passing generation.
Owning mineral rights is somewhat of a gamble most of the time: Some mineral rights owners for various and sometimes merely sentimental reasons decide not to sell their mineral rights under any circumstances; and it is certainly possible that keeping them will produce more income over the long run than selling them would; however it is somewhat of a gamble to count on that as a sure thing.
The value of your interest is determined by a myriad of factors, including:
- Production History – Decline Curves and Water Rates of the field and/or leases
- Operators Reputation – Every operator is different. To ensure you get the most from your interest, make sure to use a reputable operator.
- Reservoir Formation – Some reservoirs have longer production histories than others
- Commodity Price Risk – As the price of gas and/or oil change, so will the price of your interest
- Future Production and Development
- Interest Type – The type of interest, whether royalty, overriding royalty, mineral rights/interest, non-participating royalty interest, or working interest will factor into determining the value.
- Tax Rates – Tax Rates for purchase and severance may be too high, low, or non-existent pending your state of where the interest is located, which affects a property’s value and offer rate.
- Geographic Location and Basins – Some geographic locations and basins are preferred to others (For Example: The Permian Basin would score higher than the Gulf Coast Basin, which is known for potential water issues).
Property Types:
All oil and gas interests share in the revenues from producing oil and gas wells. Often you will find the terms “mineral interests” and “royalty interests” are used interchangeably. However, there are important differences between these interest types.
Mineral Interests
- A mineral interest owner is the person or group of persons who owns the mineral rights to the minerals being produced. These owners share in the revenue from producing oil and gas wells but do not pay for drilling expenses or ongoing operational expenses associated with well production. There can be many mineral owners in a producing well, each with a different percentage of the producing well’s revenues. Generally, mineral interest ownership ranges from 12.5% to 25% of the net income produced.
Royalty Interests (RI) and NPRI
- As previously noted, because of their similarities the terms for mineral interests and royalty interests (RI) are often used interchangeably. However, in some cases, a royalty interest could also be defined as a non-participating royalty interest (NPRI). This means that the owner does not own the actual mineral rights in, on, or under the ground. Rather, the NPRI owner is entitled only to a revenue interest of the oil and gas produced or stored and sold. Consequently, NPRI owners do not have the right to negotiate or execute a lease or receive “paid up front” lease bonuses or rental payments. They are bound to the lease terms executed by the actual mineral rights owner. An NPRI interest is created when a mineral owner chooses to sell the income they are receiving from a property to an investor without selling their mineral rights.
Overriding Royalty Interests (ORRI)
- These are interests similar to NPRI’s but are typically not bound to minerals or mineral rights assigned by a mineral owner. Instead, these interests are bound to a specific well or lease and establish ownership only of a portion of the revenues generated from oil and gas production. For this reason, when a specific well or lease expires due to cessation of production, the ORRI expires.
Working Interest (WI)
- The working interest owner is the person, group of persons or company who owns the right to extract the minerals under the surface via a lease with the mineral owner. It is not uncommon to have multiple WI owners in a well, but in almost all cases, the largest working interest owner is the operator. Working Interest owners are obligated to pay a proportionate share of all costs associated with leasing, drilling, producing and operating a well. After royalties are paid, the WI owners share in the production revenues based upon the percentage of the working interest owned.
Some people take the position that they will just hold on to all mineral rights they own. If they have no cash needs, that can be a valid decision. On the other hand, if enough cash can be enjoyed from a sale, we could argue that it would be foolish not to sell, in view of the tremendous risks involved in the oil and gas industry and the speculative nature of many offers. Point being, only the mineral owner can determine whether they should sell. In areas of oil and gas production, many times, offers are made and mineral owners elect to hold on, and months or years later, they are sorry that they did not sell, as the reason the offer was made did not pan out. And they will likely never again enjoy a cash opportunity for those mineral rights. So, it can be a tough decision.