Mineral Owner

Definition - What does Mineral Owner mean?

A Mineral Owner, also known as a mineral interest owner is an individual who is entitled to receive monthly or annual royalty income from operators producing crude oil, natural gas as well as other minerals from the mineral leases on which they own mineral interests. The owner only owns mineral interest in a mineral lease and has the right to exploit a piece of lease to extract hydrocarbons.

Petropedia explains Mineral Owner

Mineral interest is a property interest that is created when the sale of minerals such as hydrocarbons is executed by the mineral deed or an oil and gas lease. The owners mentioned on such deeds are mineral interest owners and have the right to enter or exit to the property. However, since these owners do not have expertise of exploring minerals themselves, they can lend their mineral ownership rights to oil operators who have working interest rights and in turn they receive monthly payments.

Royalty interest is created when mineral rights are leased out. So when a mineral owner leases out the mineral rights to an oil and gas entity who has working interest to develop and produce oil and gas from this lease, they intent to receive monthly payments on the sales of these minerals. Such people tend to be called as royalty interest owners.

The chart below clarifies more differences between all the type of ownership in mineral leasing business:

Mineral InterestRoyalty InterestOverriding Royalty InterestWorking Interest
Owns Minerals undergroundYesYesNoNo
Ownership continues after completion of oil well or when the production stopsYesYesNoNo
Generates revenue from well productionYesYesYesYes
Collect upfront bonus paymentsYesNoNoNo
Remains in effect after the lease term expiresYesNoNoNo
Investment made to develop an oil or gas wellNoNoNoYes
Participates in lease operating expensesNoNoNoYes

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