mineral sales. overview current state of oil and gas industry primary areas of operation inside the...

Mineral Sales

Overview• Current state of Oil and Gas Industry

• Primary areas of operation inside the U.S.

• Common terms used in the industry

• Gaining experience and education

• Opportunities in the O&G industry

• Questions and Answers

• Closing

State of the Oil & Gas IndustryDespite reports from the gold standard (Baker Hughes) rig counts stood still during

November and December, with no measurable gains after a steady incline throughout the year. Decreasing natural gas rig counts offset rising oil counts through years end and caused the industry to show year-to-year declines in U.S. drilling permits of 5 to 10% for the months of October & November. So, is the party over? Definitely Not…!

For the third straight year companies project sizeable increases in drilling for the coming year. Following a 13.8% increase in well completions during 2010 and a 21.3% year-to-year increase in 2011 as of October, according to the counts from the U.S. Energy Information Administration, Independent operators say they plan to increase drilling in 2012 by another 37.6%.

In a survey that was just reported to the American Oil & Gas Reporter, 78.9% of large size drillers and 72.2% of medium size drillers say they will drill more wells this year than last year, compared to only 50.0% of the Small drillers (reporting to drill 0-4 wells projected in 2012). The outlook is very positive for the O&G industry leading into 2012.

• U.S. Rig Count (2012)– Jan 6th, 2012 thru Feb 10th, 2012

State of the Oil & Gas Industry

• U.S. drilling permits approved in December 2011

State of the Oil & Gas Industry

State of the Oil & Gas Industry

Primary U.S. Areas of Operation

• (RI) Royalty interest: – A share of production or the value or proceeds of

production, when and if there is production. Royalty is normally expressed in a fraction (e.g., 1/6th). A royalty interest owner has no right to operate the property and no right to lease the property. Different types of royalty (land owner’s Royalty; Non-Participating Royalty; and Overriding Royalty).

• (ORRI) Overriding royalty interest:– A share of production free of the costs of production,

usually carved out of the lessee’s interest under an O&G lease. Normally used to compensate parties who have helped structure a drilling venture. Overriding royalties usually terminate when the lease terminates.

Common Industry Terms

• Lease vs. Sale• Open for lease• (NMA) Net mineral acres vs. Gross mineral acres• (HBP) Held by production• Gross lease vs. Net lease• Bonus or (Lease Bonus): a payment to induce a

lessor to execute the lease• No deductions clause• Commencement clause• Depth clause• Pooling or Unitization clause

Common Industry Terms

• Read and study the industry

– American Oil & Gas Reporter magazine

– Oil and Gas Law in a Nut Shell (5th edition, by John S. Lowe)

– Independent Oil and Gas Association of (name of state)

– (NARO) National Association of Royalty Owners

– (IPAA) Independent Petroleum Association of America

– (NAPE) North American Prospect Expo * The World’s

Largest Prospect & Property Expo in Houston, TX. Held

twice per year.

Gaining Experience and Education

• Outright sale of mineral interest

• Outright sale of oil & gas companies

• Outright sale of oil & gas equipment

• Mineral lease marketing and negotiations

• Mineral rights and lease auctions

Opportunities to make revenue in the Oil & Gas Industry

Questions and Answers

Shawn TerrelVice President

United Country Auction Services

The End