THE STORY ABOUT GROSS VERSUS NET ROYALTY PAYMENTS.
BY THE STAFF AT MERCER COUNTY GAS LEASE
IT IS VERY IMPORTANT THAT YOU NEGOTIATE A FULL GROSS ROYALTY FOR YOUR GAS LEASE. MANY OIL AND GAS COMPANIES DEDUCT THEIR DRILLING, SEPARATION, PROCESSING, TRANSMISSION AND MARKETING COST FROM YOUR ROYALTY. THIS IS A BAD THING. THE OIL COMPANY MAKES MORE MONEY THAN YOU OFF YOUR GAS. THEY SHOULD PAY THE COST OUT OF THEIR PORTION.
THERE IS A LOT OF MONEY IN YOUR ROYALTY PAYMENTS. THE ROYALTY PAYMENT WILL BE A LOT MORE THAN YOUR SIGNING BONUS. THE OIL COMPANIES KNOW THIS. THAT IS WHY THEY OFFER YOU A FAVORABLE SIGNING BONUS. THE MORE OF A SIGNING BONUS THEY OFFER, THE MORE TRICKS THEY PUT IN YOUR LEASE.
BE AWARE OF THE FOLLOWING TERMS IN YOUR LEASE. IF YOU SEE THE FOLLOWING TERMS; THEN YOU ARE PROBABLY NOT GETTING A GROSS ROYALTY PAYMENT.
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REVEVUE RENDERED
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REVENUE REALIZED
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NET ROYALTY PAYMENT
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REVENUE AT THE WELLHEAD MINUS COST TO BRING GAS TO MARKET
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ANY TERMS CONTAINING THE WORDS POST PRODUCTION COST
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ANY TERMS CONTAINING THE WORDS BRINGING GAS TO MARKET.
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MODIFIED GROSS.
IF YOU SEE ANY OF THESE TERMS, YOU ARE PROBABLY GETTING A NET ROYALTY PAYMENT. THIS CAN COST YOU THOUSANDS IN THE END. IT DOES NOT MATTER HOW MUCH THEY PAY YOU FOR THE SIGNING BONUS IF YOU ARE LOOSING MONEY FROM YOUR ROYALTY PAYMENT. IF YOU HAVE A NET ROYALTY PAYMENT, YOU MAY LOOSE THOUSANDS OF DOLLAR IN ROYALTY PAYMENTS.
BEWARE OF COMPANIES OFFERING A HIGHER SIGNING BONUS THAN EVERYONE ELSE. GENERAL, THIS MEANS YOU HAVE FINE PRINT AND A NET ROYALTY PAYMENT. THIS IS BAD. IF YOU GAIN $200 AN ACRE NOW IN SIGNING BONUS AND LOOSE $1000 IN ROYALTY PAYMENTS DOWN THE ROAD, THEN YOU ARE LOOSING $800 AN ACRE. READ MORE>
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