The term royalty is being bandied about in the U.S. gas and oil industry that average Americans take it for granted. But what do oil royalties really mean? Simply put, royalty gives the owner the right to get a share of whatever revenues the product earns. This principle cuts across different fields from mineral production, toys, music, movies, or publishing.
In the oil industry specifically, royalty is a pre-agreed price for a fixed term asked by the property owner from an outside party to give the leasee or buyer the right to utilize the resources. Although, it must be pointed out that there's another kind of royalty when the state is the owner of the property-in this case, the government offers to withhold its share to the barest minimum until the investor recover its costs.
Do you remember when as a child you allow your friend a ride on your new bike around the backyard for a penny? Royalty is a bit like that. Just consider your bike as a metaphor for oil, substitute your friend for corporate executives, and your penny for millions. And now you're ready to do business.
What most Americans don't probably realize is that selling oil royalties is a booming industry in the United States. You can choose to sell all your royalty interests or a portion of it and some company is bound jump in and take notice because, believe it or not, competition is fierce and resources are getting scarce.
With a little bit of research, you will find that some companies sweeten the deal by offering to shoulder half of your cash needs upfront, or offer to provide you consultation sessions for free so you can arrive at an informed decision on whether you will sell or hold on to your property. Bidding out your royalty interests will yield you with the best dollar package.
More often than not, interested companies also offer to handle all the paperwork and payments for processing of documents in the county with no hidden costs or charges. That will either save you on legal fees or give the company an opportunity to trick you into signing a contract that will prove to be disadvantageous to your interests. However, a quick visit to your own lawyer will address this concern.
Bidding companies will initially ask for some kind of evidence to weed out the speculators so it's a good idea to keep around any information and pertinent documents regarding your property.