by Richard King

Wow, what a great year!

DJ Basin

After consolidating five clients in the DJ Basin to strengthen our power in negotiating their oil & gas leases in the same unit—we received the nicest testimonial from the Estella Law Firm, a mineral owners’ advocacy in Denver:  “Richard, your team gained the highest bonus and the most favorable oil & gas lease terms for your clients that we’ve ever seen negotiated in the DJ Basin”.

Colorado is a challenging state for mineral owners.  With “forced pooling” that weakens a mineral owner’s leverage to negotiate favorable lease terms, Colorado is also politically adverse to exploration and production—further diminishing income potential and asset value for mineral owners.  In the meantime, mineral aggregators prey on mineral owners who need the income—buying their minerals for the price of a couple months of royalty income. Sometimes I think Texas and Wyoming should take over Colorado to give their mineral owners a break.  With everyone in Denver and Boulder at the local dispensary, it’d be a lay down.

David Hooper

We added to our team an old friend, David Hooper, to provide his unique experience managing and developing minerals for our clients.  A 1985 graduate of University of Houston with a Bachelor of Science degree in Petroleum Land Management—David is the founder of the American Association of Mineral Owners.  He also serves on the the advisory board of ADAM Houston—a private network for members of the oil & gas acquisitions, divestitures and mergers community in Houston. As Manager of Oil & Gas Assets at International Paper from 1998 to 2011, David was responsible for managing and developing 8-million acres of oil & gas minerals.  He also led several business development departments, including Forest Resources, managing 17-million surface acres. From 2011 to 2014, David was responsible for all land and business development at Empresa Energy, a private equity funded exploration and production company. With a 35-year career managing some of the largest and most valuable mineral assets in America, we are very excited to have David join our team and serve our clients.

Permian and Stack/SCOOP Basins

It was a choppy year for our mineral clients in the Permian and Stack/SCOOP as private equity funding retreated while the animal cry of “Drill, Baby, Drill!” softened through the fracking fields.  Smarter, safer, least costly, and more efficient leasing and drilling made a less vigorous climate for our clients. But in the top tier areas, we negotiated leases and transacted sales with high valuations.  Especially from today’s perspective of $20 oil.

Mineral Evaluations—Be Proactive for Acquisitions & Divestitures

One of our largest clients, a publicly traded company in New York, approved our recommendation to perform an evaluation of their minerals and royalty portfolio.  In a dynamic, global energy market with volatile commodity prices and fluctuating liquidity—large mineral owners can benefit by being the expert on the value of their mineral assets.

Should our client receive an offer to acquire part or all of its portfolio, they can now make quick, informed, and profitable decisions.   Once a baseline evaluation is performed, annual updates are quick and easy.

This client has interests in over a thousand producing wells with over a hundred operators and leases, and dozens of fields and units.  It took four months of research to clean up incorrect data, eliminate duplicate well inputs, find missing APIs, and parse leases and units and their production allocations—to get to a clean and correct description of assets—before we could even start the evaluation.

In this fast moving marketplace, we would not have more than 30-days to consider an acquisitions offer.  Now our client is the authority on the value of its assets and can move quickly to protect and maximize its minerals.

European Clients

We were surprised this year to see in our Inbox an email from a brother and sister living in Europe who inherited minerals from their family in America.  They know nothing about minerals, had been referred to us, and wanted to explore an engagement. After a couple months, the brother flew to Texas to meet with us face to face.  We immediately established a report, genuinely liking each other. Working from so far away, we identified the paramount need for clear and full communications. To be open and transparent and create a good working relationship.

We explained our role as advocates:  Our job is to protect and maximize the mineral assets of our clients.  R. King & Co. is not authorized to execute any documents in our client’s name.  Nor advance our interests over theirs at any time. We own minerals ourselves. We explained how to the best of our abilities, we promise to exercise the same level of care for them that we perform in managing our own minerals and business affairs.

In this way, we’re able to serve clients worldwide.  And our backyard.

Two Client Testimonials

1)  “Our family had the pleasure of being introduced to Richard and David after the patriarch of our family, my grandpa, passed on. Like a lot of oil and gas families there wasn’t a lot of training or “handing off” all the pertinent info to the next generation. We were completely overwhelmed with trying to get our arms around everything. David helped aggregate all the information (chain of title, leases, and mineral inventory) we lacked, but also helped explained the who/what/where/why behind it. Richard’s wide network of SME’s in the oil industry has really accelerated achieving what our family needed in a timely manner and at a fair and equitable cost.  With their help we have transitioned from a reactive position to a more dynamic approach in our oil and gas business. I highly recommend their services and will continue to use them as a resource. If you have any further questions please don’t hesitate to reach out.”

2) “I am happy to share my thoughts about working with R. King & Co.. My grandfather assembled a portfolio of mineral rights in Texas, Oklahoma and Louisiana in the 1920’s under the name Metropolitan Royalty Corp.  My father then was responsible for managing those assets for the family until he reached the grand age of 95, and then the responsibility passed on to me.

I have always had the feeling that we (up here in New York) would benefit from having real expertise in the field and for years was frustrated in the ability to find a good, honest resource to help us.

We then came upon R. King & Co. and over the past several years have developed a strong relationship with Richard and David.  Among other things they have helped us with:

1. Identifying and negotiating strong leases on some of our non-producing acreage.
2. Helping us evaluate and consummate attractive sales of some of our acreage.
3. Understanding what acreage has future potential
4. Helping us to monitor that we are receiving the right amount on our acreage.
5. Overall assistance with our mineral management

I rate the advice and support we have received very highly.  I have come to trust Richard and David and give them an unqualified reference.”

Summary

I firmly believe we have the finest minerals management team in the country.  Please call us and we’ll help protect and manage your minerals, too.

R. King & Co. grew at its fastest pace in 2018, protecting and maximizing its clients’ oil and gas interests.

Our mineral managers—David Nolen, Steve Cranford, and Richard King—expanded services in 2018 to new clients in Wyoming, Utah, Montana, and Colorado with a stable of expert landmen, legal counsel, bookkeepers, and reservoir engineers.

The Permian in West Texas and Oklahoma’s SCOOP/STACK shale basins proved to be the most active for our clients. Although culturally averse to selling minerals, we negotiate purchase offers at the request of clients and, in one case, doubled the offer on a 50-acre track to a $1MM sale.

We did a lot of work in the Permian performing chain of title runsheets on clients’ unleased minerals. After defining each tract’s mineral ownership, we proactively marketed them for lease, generated competitive interest, and negotiated favorable lease terms with new income streams for our clients.

It’s very rewarding to improve lease terms and generate significant income for families. We also negotiated lease ratifications and reviewed and corrected Division Orders. And we are always watchdogging operators to ensure our clients receive correct payments.

The DJ Basin in Colorado also proved to be an active area. We consolidated four neighboring clients to strengthen their power in proactively marketing and negotiating the most favorable lease terms for them. This proved to be a winning strategy in a challenging state with “forced pooling laws” that favors operators over mineral owners. This results in less competitive lease terms and bonus payments to mineral owners. However, we prevailed. One of the most respected oil and gas law firms in Denver who advocates for mineral owners, described R. King & Co.’s leases negotiated on behalf its clients—as the most favorable lease terms and highest bonus payments it has every seen in the DJ Basin. We think our Texas experience translated well in this challenging environment.

We always hear interesting stories on how clients received their mineral ownership. Often they are inherited from grandparents. Many times we hear how royalty income “Saved our family from the poor house”, “Saved the ranch”, “Paid our college education”, or, “Started the family business”. In the chain of title records in many county courthouses in America, it’s not unusual for us to see tiny conveyances of family minerals during The Depression and Dust Bowl of the 1930s. Farmers and ranchers paying their grocery bills to local merchants in mineral parcels.

We often wonder how America would have fared the past 100-years had minerals been state-owned, rather than privately owned? The United States and Canada are the only two countries in the world that allows its minerals to be privately owned. And permits its citizen mineral owners to receive income from leasing and extraction activities. Certainly our middle class emerged with the help of this enormous income to our private citizens and families.

What are oil and gas royalties?
Oil & gas royalties are the mineral owner’s share of income from producing wells.

What is a Division Order?
A Division Order is a document issued by the operator drilling your minerals that with the legal description of the oil and gas property, and the mineral owner’s address, tax ID, and decimal interest in the property. The mineral owner is asked to sign and return the Division Order. The operator uses this information to pay oil & gas royalty income to the mineral owner.

What is the purpose of my Owner Number?
Your owner number is specific to you and is tied to every well connected to you by the operator. Always use your owner number when corresponding with your oil and gas lease operator.

What happens if I change my address or marital status?
Most operators have a change of address form on their website for you to fill out and email back. Include your owner number, old address and new address with zip code, and be sure to include your signature or the signature of your appointed agent. For your protection, address changes are not accepted by telephone. Send a copy of your marriage certificate to update your name as a result of marriage.

What happens when the interest owner of an oil & gas property dies?
Once notified, the deceased owner’s revenue will be held in suspense until the proper heirs can be determined. Upon notifying your operator’s oil and gas landman department, they will send you information describing what must be provided to transfer the interest to the proper heirs.

Can I set up Direct Deposit?
Yes, most oil & gas operators provide an electronic funds transfer (EFT) option. EFT payments are only available for accounts drawn within the United States. If you elect to receive electronic payments, you will no longer receive your payment detail by mail. To set up direct deposit, return the enrollment form provided by your operator with a voided check to the address provided on the form. If you have enrollment questions, please email or call the land department of your operator.

When are royalties paid?
Once clear title of oil and gas minerals are established, most royalty owners will be issued a monthly check, unless the amount due is less than $100. Smaller amounts are accumulated and paid when $100 has accumulated. Most operators generate and mail revenue checks on the last week of each month. If your account is in a pay status and if the account has reached your minimum pay status, a check should be issued. If you have not received your check by the 15th of the following month, call or email your operator’s land department.

What is the difference between a royalty owner and a working interest owner?
A royalty owner shares in production revenues, while a working interest owner shares in both production revenues and expenses.

What type of annual statements will I receive?
Royalty interest owners receiving more than $10 and working interest owners receiving more than $600 annually receive IRS Form 1099. This summarizes your total payments and tax withholdings for the previous year.

What do I do if my check is lost, stolen or becomes outdated?
Contact your operator’s accounting department to stop payment if your check is lost or stolen. Please have the following information ready when you call: your name, owner number and check date. Your operator will stop payment on your check and usually issue a replacement within 10-days. If your check is outdated, void the check, and send it back with a written request for a new check.

Why does my monthly payment sometimes vary?
Many factors contribute to your payment, including: market conditions, oil and gas minerals development, fluctuating commodity prices, regulatory or contractual changes, production volumes, seasonal conditions and well downtime.

Why does my payment differ from others in my family?
This occurs because ownership between family members may not be not equal, or because one party has not provided their operator with a Taxpayer Identification Number (TIN), or because some family members may own interest in other properties in addition to those commonly owned.

Why are the decimals on my Division Order and check detail different?
This occurs due to special marketing arrangements or other contractual agreements. The value is still proportionally correct.

How do I clear the title to my mineral rights? How long does it take?
To properly manage and develop your mineral assets, it’s imperative you define your mineral ownership and legal standings subject to previous conveyances and oil and gas leases. Researching your two chain of titles—ownership and leases—is done by researching through the county abstract company and courthouse where the minerals reside. Before an oil company will lease you or drill your minerals, they will need to complete your chain of title (if you cannot provide it to them) so they know their legal rights and your legal rights to enter into an oil and gas lease and drill your minerals. Finally, your lessee’s attorney will examine title to all mineral rights and submit a Title Opinion reflecting current ownership. This process can take several months to complete.

Taxpayer Identification Number
Federal law requires that individuals and partnerships provide a certified Taxpayer Identification Number (TIN) for the owner account. For individual owners, your TIN is your Social Security Number. Other entities should provide Employer Identification Numbers. If the appropriate TIN is not received, your operator is required to withhold 28 percent from your payment for federal income taxes.

When are oil and gas royalty payments suspended?
For your protection, payments are suspended upon a title dispute, the assignment of interest, notice of death, transfer of property, or in the event of no known address. Keeping your contact information current in your county records and with your operators can prevent this inconvenience.

This was a transformative year for our mineral management service company as we bid adieu to long valued employee, Gaylan Pinkerton, who returned to her calling in the human resources industry. We will forever be grateful for her help in growing R. King & Co. these past 11-years.

It also proved to be one of our busiest years serving twelve new family clients, managing and developing their oil and gas minerals in Texas, New Mexico, Oklahoma and Louisiana. But most importantly, two of the most experienced petroleum landmen in the country joined R. King & Co.—David Nolen and Steve Cranford.

As you may have read in About Us, David Nolen is recognized as one of the top oil & gas landmen by two of the most renowned organizations in our industry: The American Association of Professional Landmen and The Independent Producers & Royalty Owners Association. Over his 40-year career, David has negotiated oil and gas leases covering over 250,000 acres in thousands of transactions across a dozen states. He is an invaluable resource for our clients, “seen it all”, and fun to work with.

Steve Cranford is the quintessential Texas oil man. He grew up roughnecking, acquired his degree in Petroleum Land Management at the University of Texas, and managed extensive leasing and drilling projects across five states for 25-years. For 12-years he led JPMorgan Chase Private Bank Oil & Gas Group through several boom-bust cycles where he supervised their oil and gas operations in New York, Houston, Dallas, and San Antonio. Responsible for acquisition and divestiture of oil and gas properties worldwide, Steve brings a depth of leasing, banking, and A&D experience to R. King & Co. clients.

Our twelve new clients this year all proved to have challenging projects to solve. Nearly every one involved clearing title on mineral tracts to establish their legal standings in a current lease, watchdog royalty payments, or help them develop new income from their unleased oil & gas minerals.

Like all clients, each has an interesting origin story to their family’s mineral assets. One client’s grandfather was a professional gambler in North Dakota in the 1950s and ‘60s who took his winnings in mineral and royalty interests from farmers riding the train from Minot, North Dakota, to vacation winters in Seattle, Washington. Fast forward 50-years, his grandchildren now own producing minerals in all 12-counties of the Bakken Basin.

Another client is a publicly traded company in New York whose founder / grandfather acquired hundreds of mineral and royalty interests in four states beginning in the 1920s, eventually founding Republic Pictures in the 1930s where he invented the western film genre in Hollywood. Roy Rogers, Gene Autry and John Wayne were Republic’s first cowboy stars. In nearly 100-years, these assets have undergone a lot of transactions leaving many gaps in their chain of title. R. King & Co. is methodically creating updated runsheets of their ownership and leasing histories to define each mineral tract going forward.

In this way, we’re able to discover which tracts are leased, producing, and unleased. The leased and producing tracts we watchdog to protect our clients from incorrect royalty payments. And watch for any violations of lease terms related to our client’s surface and mineral rights. The unleased tracts we proactively market to competing oil companies to negotiate new leases with favorable terms. In this flow of service, we transform our client’s dormant minerals by maximizing their assets with new bonus and royalty income.

We also enjoy serving many small clients which we take particular care to meet their budgetary constraints with the highest quality results. One client was a single mom working at McDonald’s who inherited a section of land from her grandmother in Ohio. When she received an offer to lease her minerals, she googled for a minerals management consultant to help her. She found R. King & Co. and asked if we could negotiate on her behalf, but she couldn’t afford to pay us. So we agreed to be paid from part of the bonus we negotiated for her. As a result, we increased her royalty by 25%, tripled her bonus payment, and secured a more favorable and protective lease. All our clients are treasured, but clients we make big positive impacts make us feel the best.

2017 was also the year OPEC implemented production cuts to raise the price of oil. Combined with a growing world economy, strengthening demand for oil and gas worldwide, and the U.S.A.’s ingenuity to lower costs and “drill, bay, drill”—we expect the rest of this year to see more of the boom-bust cycles inherent to the oil & gas industry.