Definition - What does Bank Draft mean?
A Bank Draft is a payment option that is executed by oil and gas organizations when dealing with oil and gas leases. The draft acts as a form of bonus payment while executing an oil and gas lease. It looks very similar to a pay cheque and has a 30-day period. It is also known as a bank sight draft, oil and gas bank draft or sight draft.
Petropedia explains Bank Draft
It is a common practice in America and Canada for people to check their emails for oil and gas lease proposals sent by oil and gas operators or royalty acquisition organizations along with a bank draft or sight draft as payment. Bank drafts guarantee payment to the lease holder within the time window as long as all the requirements between the lease holder and the operator are met. In the case of oil and gas leasing, the condition is based upon whether or not the oil organization confirms that the mineral title to your property is sufficiently sound. The organization does what it can to minimize its exposure to paying a lease bonus on minerals to which title is not 100% sure. It’s a reasonable business practice from their perspective; however, there are other different alternatives that are often agreeable to all parties.