Almost three times as much energy is produced in Oklahoma as is consumed there. In 2020, Oklahoma was the fourth-largest producer of crude oil and the fourth-largest producer of marketed natural gas among the states.
Oklahoma is in the heart of the U.S. Mid-Continent oil region, a vast oil- and natural gas-producing area that also encompasses Kansas, Texas, Arkansas, Louisiana, and New Mexico and is flanked by the Mississippi River to the east and the Rocky Mountain states to the west. Natural gas and crude oil wells can be seen across much of Oklahoma, and some of the largest natural gas and oil fields in the country are found in the state. The first oil well discovered in Oklahoma was the Nellie Johnstone No. 1 in 1897 and at one time in 1927, Oklahoma was the largest oil-producing region in the world.
Major sedimentary basins were confined to the southern half of Oklahoma and include Anadarko, Arkoma, Ardmore, Marietta, Hollis, and Ouachita Basins. At the end of 2021, some 60 rigs were drilling in the Anadarko Basin up from about 23 as 2021 began and about 40 pre-COVID, according to analysts.
And to the east, the Arkoma Basin is a peripheral basin that extends from central west Arkansas to southeastern Oklahoma. The Arkoma Basin is Oklahoma’s fourth-largest in terms of natural gas production.
Cushing, Oklahoma, is the designated delivery and pricing point for the U.S. benchmark crude oil, West Texas Intermediate.
Oklahoma has about 5% of the nation’s proved crude oil reserves. Between 2007 and 2019, the state’s proved crude oil reserves more than quadrupled. In 2020, Oklahoma was the fourth-largest oil producer among the states and accounted for 4% of the nation’s total annual crude oil production.
Mary Sudik No. 1 well was developed by the Indian Territory Illuminating Oil Company on the property of Vincent and Mary Sudik. The well, located about 2,000 feet to the southeast of the present intersection of Interstate 240 and Bryant Avenue, to the south of the Oklahoma City center, blew out when the drilling crew underestimated well pressures in the newly developed Wilcox formation, producing 20,000 barrels of oil and 200,000,000 cubic feet of gas per day from the 6,471-foot well. According to the well completion report, it produced 15,441 barrels of oil in a test run for 13 hours and 15 minutes. Once controlled, Mary Sudik No. 1 was the most productive well in the world in 1930. The Mary Sudik No. 1 well was finally plugged on June 22, 1974, by the operator, Cities Service Oil Company.
One of the 100 largest oil fields in the United States, the Sho-Vel-Tum field, is in Oklahoma. That field has continuously produced crude oil since its discovery in 1905, although Oklahoma oil produced there is discounted in the selling process due to the shallow formations producing mostly sour crude oil which causes royalty owners to receive a lower sales price, discounted by roughly $12 per barrel to sweet crude oil, which oil companies, potential buyers, and mineral owners would rather have, as it is the best price between the two and for mineral owners, increases their mineral rights value.
The state’s oil industry experienced a decline in production from the mid-1980s until 2005 when crude oil production in Oklahoma hit its lowest point since 1913. With new drilling activity and the advent of shale plays of which the SCOOP and STACK plays are a part of, production rebounded, and in 2019, it exceeded 212 million barrels, which was 3.5 times more than the state produced in 2005. Production declined again in 2020 as demand fell as a result of COVID-19 mitigation efforts, but annual output remained above 171 million barrels.
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In Oklahoma, we enjoy a broad range of property rights. One such right is mineral ownership which began with statehood in 1907 and ever since then, Oklahoma mineral rights have been in high demand by mineral buyers, who haven’t always been extremely helpful in determining a fair price for mineral or even working interests.
Oil and gas drilling activity on Oklahoma property has been consistent for 120 years, and now in 2022, mineral ownership is more fractionalized and confusing than ever. If you are looking for the best price and multiple offers, make sure you take a look at redriverhub.com, the premier mineral exchange platform for mineral owners in Oklahoma and Texas, where you can buy, sell or lease Oklahoma mineral rights.
For those in the mineral business, especially in Oklahoma and Texas, understanding how mineral ownership works is second nature. For those new to mineral ownership, it can be a difficult problem to understand what they own as there isn’t much transparency or liquidity in the marketplace. Unlike inheriting stocks or real estate which can be more easily understood and valued and then divested, inherited mineral rights are much more difficult to deal with and manage for those without any understanding of mineral rights.
Let us walk you through some of the terminology and concepts you may come across as mineral rights owners in Oklahoma, whether as a mineral owner or as royalty owners (many mineral owners don’t know the difference).
Leasing mineral rights to oil companies by mineral rights owners on Oklahoma minerals has been going on since the early 1900’s. Before a well can be drilled, a mineral owner must first be leased by an oil company. A mineral lease gives oil companies the right to drill for oil and gas. Typically oil companies will offer a 3 or 5-year oil and gas lease. The oil and gas lease will also include a royalty percentage which is your share of the oil and gas income. The higher your royalty percentage, the more money you will make as oil and gas is produced. The statutory minimum is 1/8th or 12.5%, but it may be as high as 1/4th, or 25%. Since the 1990s, Oklahoma royalties have typically been at least 18.75 percent, but 20 to 25 percent is not unheard of for Oklahoma mineral owners. Another option in lieu of leasing your minerals is to access a deal through the forced pooling process available thru the Oklahoma Corporation Commission.
In addition, the company that leases your minerals will also pay you a lease bonus for signing this agreement. A lease bonus could range anywhere from $25/acre to $7,500+/acres (in the shale plays) – make sure you negotiate for the best price. Contact us if you need help or have questions.
Many mineral owners with oil and gas mineral rights in Oklahoma receive monthly royalty payments from wells that produce oil or gas. If you have questions about division orders, calculating your decimal interest or understanding your royalty checks (which sometimes can have an enormous amount of detailed information) go check out our FAQ page for answers to these and other oil and gas questions.
Often, people do not know that they may own any Oklahoma mineral rights. Every state provides searchable online records of unclaimed oil and gas royalties that you can search to see if you have any royalties of which you are unaware. Each state may also have a statutory provision that sets a time limit on unclaimed mineral rights, ranging anywhere from 3 to 10 years. If no one claims the unclaimed royalty interests within the prescribed time limit, those interests will “escheat,” which is a formal way of saying that those unclaimed royalties will go to the state. In Oklahoma, you can search the Mineral Owners Escrow Account to see if you have any funds from lease bonuses or royalties due to oil and gas production from an oil company by entering the name of a mineral owner.
Free half-hour phone call where you can ask questions about your particular situation regarding your oil and gas mineral rights.
Since mineral rights are treated as real estate in Oklahoma, mineral rights in Oklahoma are considered real property.
There are basically two ways to become a mineral owner; first through a conveyance or the transferring of mineral rights by a legal instrument, such as a Warranty Deed or Mineral Deed, and secondly you can inherit mineral rights. In order to be a valid and recognized mineral owner, these documents and sometimes supporting documents such as probates and affidavits, much be recorded in the County Clerks’ office where the mineral rights are located.
If you want to confirm the number of mineral acres you own or confirm the documentation that is filed of record regarding your ownership, you will need to visit the County Clerk’s office of the county where the mineral rights in Oklahoma are located or hire a landman or attorney to perform a search for you.
People sell mineral rights for different reasons, and selling mineral rights isn’t right for everyone. Selling Oklahoma mineral rights is really neither right nor wrong, just like selling any asset you own, such as stocks or real estate, it is about your individual circumstances. Each seller is different.
You might want cash to improve your home, pay off debt, finance your children’s education or simply realize the cash value of your assets today and invest in something you better understand, as most people today who inherited minerals would rather invest in something they know and understand, perhaps buying more stock in a great company they are already familiar with. By selling your minerals, you’ll receive a lump sum upfront, rather than the traditional smaller monthly royalties paid over a long period of time.
The most common method to convey your mineral or royalty interests is by deed. This can be accomplished by filing a mineral deed form with the local Recorder of Deeds. The Recorder of Deeds will notify the grantee to whom you are granting your rights, and there will be a record of the transfer of ownership. This allows you to convey your interests to your chosen beneficiaries during life, without the expense and delay of probate proceedings.
For any conveyance of mineral rights to be effective, the conveyance must satisfy five required formalities:
– The conveyance must be in writing.
– The writing must express the intent to grant or convey rights.
– The instrument must adequately describe the rights being granted.
– The instrument must identify the grantor and the grantee.
– The instrument must be properly executed.
The mineral rights will pass to the heirs, assigns or devisees, based on the type of planning (or lack of planning) orchestrated by the owner prior to their death. Typical estate planning tools would be trusts and wills which would designate to whom the assets are distributed per the decedents’ wishes.
A few of our readers have asked us about subscribing to the Oklahoma Mineral Owner Registry and we do not have anything against their service, but skip the annual fee; the best practice is just to make sure your most current address is recorded with the county clerk records in the county where your minerals are located. When an oil company decides to lease your minerals, the company will contact you by either attempting to call you or will send a letter to the last registered address of mineral owners.
The answer to this question is “yes”. Here are some typical terms to know when someone dies owning mineral rights in Oklahoma and the processes through which the mineral interest can be inherited. If you have a legal question about inheriting mineral rights, it is highly recommended that you contact a lawyer, as it may be the most important thing you do in determining your rights and ultimately your mineral rights worth.
“Testate” – Used when the person died with a will.
“Intestate” – Used when the person dies without a will. The property is divided among the person’s heirs. Laws that dictate intestate succession vary by state. Probate is often required.
“Probate” – Generally, probate is required when an estate’s assets are solely in the name of the deceased. This process is required in order to transfer the property into the name or names of any beneficiaries, heirs or devisees. Some states offer a simplified process for small estates when the deceased’s assets are worth less than a certain amount.
“Ancillary Probate” refers to a probate proceeding that is required in addition to the primary probate that takes place in your home state, say Oklahoma. So if you inherit mineral rights that are in another state from where your relative died (say they owned Texas mineral rights), you may have to go through ancillary probate in that other state. Some states make this easier than others and may only require you to file certain documents from the first state along with the will.
“Trusts” – Some estates can bypass the probate process through the creation and use of a revocable living trust. This is because when the trustee dies, the assets or mineral interests remain in the trust which still lives on. Sometimes assets like mineral interests are overlooked and not conveyed into the trust, and in that instance, you may have to go through probate.
“Affidavit of Heirship” – this is sometimes a quicker way than probate to substantiate and transfer ownership of Oklahoma mineral rights when your family member dies without a will and has a small estate. State intestacy laws dictate who inherits the decedent’s property. This affidavit of heirship document will outline the heirs and how they are related to the decedent. It must be filed in the land records with the county recorder where the property is located in order to establish ownership of that property. Check with your attorney to see if this is an option for you.
“Stipulation of Interest” – Sometimes used when there is a conflict or confusion around ownership of fractional interests associated with a mineral estate. Usually, it will consist of multiple conveyances that have created ambiguity regarding your minerals in Oklahoma. An operator or broker company may require this if in the process of preparing a title opinion they determine that there are title issues. Sometimes they will prepare it and send it to you for execution so you can get into “pay status” for your royalties.
As we have mentioned before, the mineral rights market historically in Oklahoma has not been transparent or liquid. Typically mineral owners wishing to sell needed to have a relationship in the industry or contact someone at an Oklahoma company that could introduce them to several mineral buyers who may buy mineral rights. Finding mineral buyers or a company that will be open and transparent, telling you what your minerals are worth is another thing and most want your oil and gas minerals to have current production and be receiving royalties. To sell mineral rights, some mineral buyers have basic websites which ask you to fill out an offer form, and then if interested, they will contact you.
As mineral rights owners in Oklahoma and as mineral buyers and investors, we saw a need for an online platform where mineral owners could buy, sell or lease their mineral rights Oklahoma. We created redriverhub.com for just this purpose. More than a website with an offer form, you can list your Oklahoma mineral rights for free to lease or sell, and receive multiple offers and the whole offer and transaction process is performed within the platform.
There is also an escrow process with Valliance Bank, located in Oklahoma City with offices in Oklahoma and Texas which helps to protect the mineral buyers as well as the sellers in the transaction process. If you want to learn more, contact us for a FREE Consultation where we can answer any questions about your oil and gas royalties.
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