Whether you have recently inherited a family legacy or strategically purchased assets, owning mineral rights should be a source of financial freedom, not a source of stress. However, the oil and gas industry is complex, and for the uninitiated, it can feel like navigating a minefield.
At Valor, our mission is to provide peace of mind. We see many owners losing significant revenue simply because they lack the “back-office” resources that major operators use every day.
Here are the most common ways we see owners losing money and the simple steps you can take to secure your interest through proactive mineral management.
1. Know Your Mineral Rights (The Information Gap)
The biggest “Villain” in this story is the information asymmetry between the owner and the operator. Oil and gas companies, landmen, and professional buyers have entire departments dedicated to well production data and drilling activity.
To level the playing field, you must be well-versed in:
• Your Exact Ownership: Do you own the surface rights, executive rights, or just the royalty interest?
• Drilling Activity: Are there new permits being filed in your section or the neighboring “offset” sections?
• Production Data: Are the volumes reported on your check stubs matching the volumes reported to state regulatory agencies?
Without this knowledge, you are essentially flying blind, leaving your financial future in the hands of the very people who are looking to minimize their payout.
2. Watch Out for Common Scams and “Leaked” Revenue
Those looking to cash in on an owner’s lack of experience can “take a little off the top” in ways that are difficult to spot without professional oil and gas back-office support.
We frequently see owners get taken advantage of in the following ways:
• Blind Leases: Not knowing the “market rate” for bonuses or royalty percentages in your specific county, leading to signing “below-market” leases.
• Unauthorized Activity: Wells being drilled across your acreage without a proper pooling agreement or notice.
• The “Shadow” Deduction: Excessive post-production costs (transportation, gathering, and compression) being deducted from your check that may violate the terms of your lease.
• Incorrect Decimal Interest: Being paid on an outdated or incorrect Division Order that doesn’t reflect your true share of production.
3. Strategic Data Optimization & Revenue Recovery
Data will set you free, but only if it is professionally audited. Many mineral owners receive royalty checks and assume the operator’s calculations are correct; however, without a technical review, you may be missing out on significant revenue recovery opportunities.
To protect your interests, you must look beyond the check stub and focus on Strategic Data Analysis:
• Production Reconciliation: Cross-reference your payout data against state regulatory records to identify discrepancies in reported volumes.
• Revenue Auditing: Conduct a forensic review of past payments to identify “suspended funds,” escheatment issues, or chronic underpayments.
• Market Benchmarking: Compare your lease terms and royalty percentages against current basin averages to ensure your assets are performing at peak market value.
We recommend partnering with a trusted advisor, such as Valor, whose entire business model is built on providing mineral management for the owner. Utilizing a dedicated team for your oil and gas back-office needs ensures that every barrel produced is a barrel paid.
4. Don’t Be Scared; Be Prepared
Inheriting or purchasing mineral rights is a major milestone, but it requires active stewardship. If you feel you could fall victim to these pitfalls, seek expert guidance immediately.
At Valor, we understand that managing mineral rights and associated royalties can be complex and fraught with potential pitfalls. Our team of experts specializes in navigating these complexities to help mineral owners avoid common mistakes that can significantly hinder the value of their assets. From ensuring accurate and comprehensive title searches to providing strategic guidance on oil and gas leasing and negotiations, Valor acts as a guardian for your assets. We meticulously monitor regulatory changes and market conditions to ensure compliance and capitalize on opportunities, enhancing both the security and profitability of your assets.
By partnering with Valor, mineral owners gain peace of mind and a proactive ally dedicated to maximizing their returns and protecting their interests.
FAQ: Protecting Your Mineral Rights
How do I know if my royalty checks are accurate? The most reliable method is to reconcile your check stub data against production volumes reported to state agencies like the Texas Railroad Commission.
Can I negotiate post-production costs? Yes. Depending on your lease language, many deductions for gathering and processing can be capped or eliminated through professional negotiation.
What is a Historical Audit? It is a forensic review of several years of payment data to find underpayments, incorrect decimal calculations, or funds held in suspense by the operator
Contact Valor Today
Contact us today if you need managing minerals support.
The information provided by Valor in this blog is for general informational purposes only, not to provide specific recommendations or legal or tax-related advice. The blog/website should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.
