Low Crude Prices=Lower Royalty Payments

by Elizabeth Alford on September 16, 2015

Not that long ago, mineral owners with stakes in the shale boom could garner a substantial income by leasing their property to oil and gas producers. But as crude prices have crashed and production dipped, this income is slowly drying up.

Related: Oil Glut Causing Prices to Dive

As low crude prices and a difficult international political climate have oil and gas companies scrambling to survive and the trickle down means lower royalty checks for some mineral owners.

The Dallas News says that “every time a barrel of oil drops a dollar, that means about 19 cents less for the royalty owner. Multiply that by the more than 190,000 oil wells in Texas, each producing more than 4,700 barrels a year on average, and that adds up to almost $170 million less in annual royalty checks for each tick of the oil market.”

In May, Bloomberg reported that the increasing number of oil and gas bankruptcies are leaving mineral owners out in the cold, often forcing them to stand in a long line of other creditors looking to be paid. Others are simply confused by reduced royalty checks that don’t make sense anymore. 

“Royalty payouts from bankrupt operations have shrunk to a fraction of the rates paid before the crash, sometimes more than can be explained by the drop in oil price. In the worst cases, landowners can be left with no one to take responsibility for abandoned waste, spills and other hazards, say industry experts who have past experience with oil busts.”

The flood of natural gas in the U.S. shale drilling boom means their gas now sells for a third of what it did a decade ago.

Are you a mineral owner affected by low crude prices? Join the conversation. 

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