Mineral Owners Helpful Definitions

The terms cited on this page are commonly used in lease negotiations and agreements.

Bonus

The cash consideration paid by a lessee to the owner of the leasing rights, usually upon execution of an oil and gas lease. May take other forms than cash, and some lessors, for tax reasons, may request partial payments the following year(s).

Certificate of Title

An abbreviated type of abstract wherein the abstractor reports his opinion as to the present owner(s) of the land, unreleased oil and gas leases, mineral or royalty conveyances, and outstanding liens or encumbrances.

Cloud on a Title

A claim or encumbrance that, if upheld by a court, would impair the owner's title to the property.

Co-Tenancy

Ownership under which two or more persons or corporations have joint title to a property. Governed by state laws.

Forced Pooling

The right granted under the state regulatory body for a company to include adjacent tracts in its unit, even if the company owning the lease on that tract does not want to be included or the individual owner of the tract does not want to lease. This is only granted when the regulatory agency deems it is in the best interest of conservation, and certain payments are due the owners of force pooled tracts.

Gross Acres

The total number of acres in a tract or unit for either surface or mineral acres.

HBP - Held by Production

An oil and gas property which remains under lease past the primary lease term as long as there is production in "commercial" quantities from the property.

Horizontal Drilling

A drilling technique used in certain formations where a well is drilled vertically to a certain depth and then drilled at a right angle within a specified interval. Horizontal drilling is widely used in the Austin Chalk formation in South Central Texas.

Lease

(1) A legal instrument executed by a mineral owner granting exclusive right to another to explore, drill, and produce oil and gas from a piece of land; (2) Used in conjunction with the actual location of a well(s) or unit. Separator installed to serve a single lease.

Legal Description

An adequate description of land which enables a surveyor to locate a tract of land. A legal description is essential in deeds, land contracts, mortgages, wills, and leases. Two systems of land surveys exist in the United States: (1)The metes and bounds system describes the boundaries of parcels of land. (2) The rectangular survey system describes land parcels using equal-sized townships, sections, and fractions thereof.

Lessee

The person who receives the lease, sometimes called the tenant.

Lessor

The person giving the lease, sometimes called grantor or landlord.

Mineral Acre

The full mineral interest and rights in one acre of land. Example: If mineral owner A had 100 acres and owned all the minerals, he would have 100 mineral acres; if he owned 50% of the minerals, he would have 50 mineral acres. Also see "net acres."

Mineral Deed

A deed conveying only an interest in the minerals.

Mineral Interest

An ownership of the minerals underlying a tract of land. If the surface ownership and the mineral ownership are different, the minerals are said to be "severed."

Pooling

Frequently used interchangeably with "unitization" but more properly the combining of small or irregular tracts into a unit large enough to meet state spacing regulations for drilling permits. Unitization is a term used to describe the combined operations of all or some portion of a producing reservoir.

Producer

Any party owning, controlling, managing, or leasing any gas well and/or any party who produces in any manner natural gas by taking it from the earth or waters.