Oil & Gas Land Terms.

A chain of title is the history of who has owned a piece of property.

Think of it as a chain connecting one owner to the next. Each deed or other recorded document shows how ownership moved from one person or company to another.

Researchers follow this chain to help determine who owns the property or minerals today.

A run sheet is a list of the recorded documents found while researching a piece of property.

The documents are usually listed in date order. The run sheet may include deeds, leases, assignments, liens, releases and other records that affect the property.

A run sheet organizes the records for review. It does not tell you whether the title is legally good or bad, and it is not a legal opinion.

A title opinion is a written report from an attorney who has reviewed the property’s title records.

The attorney explains who appears to own the land, minerals or other interests being examined. The opinion may also point out problems, questions or other matters that need to be addressed.

In simple terms, the title research gathers the records. The attorney uses those records to give a legal opinion about ownership.

A title requirement is something that must be fixed, cleared up or addressed before you can rely on the ownership shown in a title opinion.

For example, an old document may be missing, an heir may need to be identified, or a previous lien may need to be released.

Some requirements can be resolved with additional documents. Others may require help from an attorney or court.

Title curative is the work done to clear up problems or unanswered questions found during title research or listed in a title opinion.

This might include getting an affidavit, release, correction document or ratification. In some cases, an attorney may need to handle probate or court action.

The goal is to clarify the ownership record and resolve the issue found.

An affidavit of heirship is a sworn document that identifies the heirs of a deceased person.

It can be useful when a person owned land or minerals but never fully handled ownership through probate.

In Texas, an affidavit that meets state requirements and has been recorded for at least five years can be used as evidence of who the heirs are. However, other evidence can still challenge it.

A mineral reservation happens when someone sells land but keeps some or all of the mineral rights.

For example, a person could sell a 100-acre ranch but state in the deed that they are keeping the oil and gas rights.

The buyer would own the surface, while the seller could keep some or all of the minerals underneath.

Severance means separating mineral ownership from surface ownership.

This often happens when a deed sells the land but reserves the minerals, or when someone transfers the mineral rights separately.

After that, one person may own the surface while another owns the minerals underneath it.

You can then transfer and research the ownership history of each separately.

Acquisition and divestiture due diligence is the research done before buying or selling land, minerals, leases or other oil and gas interests.

The goal is to ensure the ownership, leases and other key records match what the buyer and seller believe is being bought or sold.

It can also uncover title problems or other issues before the deal closes.

Purchase and sale agreements usually set deadlines for finding and reporting these problems.

The surface estate is ownership of the land itself.

It generally includes the ground and the right to use the surface.

In Texas, the surface and the minerals underneath it can have different owners. Owning a piece of land does not always mean you own all of the oil, gas or other minerals beneath it.

The mineral estate is ownership of the oil, gas and other minerals beneath the surface.

Mineral ownership can include several important rights, including the right to lease the minerals.

In Texas, the mineral estate is generally considered the dominant estate. That means the mineral owner or lessee may have certain rights to use the surface when reasonably necessary to develop the minerals, subject to legal limits.

The executive right is the right to decide whether to lease a mineral interest and to sign the oil and gas lease.

This right can sometimes belong to someone other than the person who receives royalty payments.

Texas law recognizes several rights that can be separated from mineral ownership, including the rights to develop, lease, receive bonus payments, receive delay rentals and receive royalty.

A royalty interest gives its owner a share of the oil or gas produced, or the money received from selling that production.

A royalty owner generally does not pay the costs of drilling and producing the well.

However, some post-production costs may be deducted, depending on the wording of the lease or other document creating the royalty.

A non-participating royalty interest, or NPRI, is a right to receive a share of oil and gas production without owning all of the rights that normally come with the minerals.

An NPRI owner generally does not have the right to sign the oil and gas lease. The owner also generally does not receive lease bonus payments or delay rentals.

That is why the interest is called non-participating: the owner does not participate in leasing, bonus or delay rentals, and shares only in the royalty.

An overriding royalty interest, usually called an ORRI, is a share of oil and gas production that comes out of the leasehold interest rather than the mineral ownership.

The ORRI owner generally receives this share without paying drilling and production costs.

Because the ORRI comes from the leasehold, it normally ends when the oil and gas lease it came from ends.

A working interest is the ownership interest that carries the right to develop an oil and gas lease.

It also comes with costs.

A working interest owner may have to pay its share of drilling, operating and other well-related expenses.

That makes a working interest very different from a royalty interest, which generally does not pay drilling and production costs.

Net revenue interest, or NRI, is the percentage of production revenue that an owner actually receives after royalty and overriding royalty interests are taken out.

For example, suppose someone owns 100% of the working interest in a lease with a 25% royalty.

If there are no other royalty interests, the working interest owner’s NRI would be 75%.

100% working interest
− 25% royalty
= 75% net revenue interest

In simple terms, working interest tells you the share of the costs and operations, while NRI tells you the share of the production revenue.

Net mineral acres, or NMA, show how many mineral acres a person actually owns after their ownership percentage is taken into account.

Here’s a simple example:

A tract contains 40 acres.
You own 1/4 of the minerals.
40 acres × 1/4 = 10 net mineral acres

So even though the property contains 40 total acres, your ownership equals 10 net mineral acres.

A division order confirms how oil and gas money should be divided and paid.

After a well begins producing, the company responsible for making payments may send owners a division order showing each owner’s decimal interest.

The owner reviews the information and signs the document to confirm how payments should be made.

Texas law limits what a division order can require and when payments may be held.

A decimal interest is your share of production from a well, written as a decimal number.

For example:

0.0125 = 1.25%

The decimal can depend on several things, including how much of the minerals you own, your royalty rate, and how much of your tract is included in the unit.

This number is important because it helps determine how much of the well’s production revenue you should receive.

A mineral appraisal is an estimate of what mineral or royalty rights are worth at a certain point in time and for a specific purpose.

Value can depend on many factors, including where the minerals are located, nearby wells, production, current leases, and the type of interest being valued.

Not every mineral valuation is the same. A quick value estimate, a detailed engineering evaluation and a certified appraisal are different types of work and serve different purposes.