How to Buy Oil Company Royalties
When a person buys a piece of land or estate with an oil reserve, he or she will hopefully become beholden to the investment return in the form of oil royalties. Paid by oil companies for rights to extract and sell the oil, the owner of the land or estate receives a percentage of the oil campany's profits as royalties.
- Establish an investment vehicle known as a royalty trust. This trust will give you the legal right to collect royalties from oil and gas reserves. The income that can come from a royalty trust can come from a variety of sources, including rights sales and business capital.
- Research various pieces of land, oil reserve properties or estates that are currently available on the market. You may want to consult some property agencies or data vendors for a database of land. They may also be able to tell which land owners are willing to offer mineral rights for sale.
- Decide which property or rights you are interested in buying. Make an official offer to purchase the oil royalties by sending a letter of intent to purchase to the owner with your quoted purchase amount. Be sure to do a good deal of preliminary research and studying so you can offer a reasonable offer that will entice the owner, but one that is still competitive and suitable for your situation. You will likely make your offer directly to a land owner and not a business.
- Negotiate if necessary. Keep in mind that this process may take some time and quite a bit of reviewing before the deal is finalized. Keep in mind that a very small fraction of a percent of all purchase offers actually end in a deal.
- Close the purchase deal.
- Go to the courthouse and file the appropriate purchase papers. You may need the assistance of legal counsel.