I read about natural gas selling around $5.00… So why does my royalty check show less?

November 12, 2009 – 8:21 am

The natural gas price you read in the news is the price paid at what is called “Henry Hub” which is the central gathering point in South Louisiana that establishes the “Base Price” for natural gas sold in the United States. All natural gas is priced at this “Index Price” LESS transportation (pipeline costs) and LESS treating costs such as dehydration (removing water vapor) and compression (pumping the gas through the pipelines). The difference between the Index Price and the price you are paid for your royalty gas is the sum of these charges and is generally referred to as the “Gas Price Differential.” The farther your natural gas is located from its ultimate market, the greater the Gas Price Differential will be and of course, the less you will be paid at the wellhead for you royalty gas.

Additionally, the quality of natural gas produced in the field varies widely from producing area to producing area; the heating value (BTU content), contaminant concentration (N2, CO2 and/or H2S) and natural gas liquid content, all greatly affect the value of the gas that is produced at the wellhead (where nearly all royalties are paid). As with the Gas Price Differential where the location of your royalty gas determines the amount of price deduction you will bear, the poorer the quality of your royalty gas, the less you will be paid for it.

Therefore, due to the many factors that can affect the price you are paid for your royalty gas, the price you see on your royalty check will almost always be less than the Index Price and often, much less!

By Russell T. Rudy | Posted in Headline | Tagged , , , , , , | Comments (0)

Why is the oil price on your Royalty checkstub less than published rates?

October 20, 2009 – 7:39 am

Like most commodities, crude oil is produced in widely differing “qualities.” For example, much of the crude oil produced in the field contains sulfur – sometimes in very high quantities. To refine this high-sulfur crude oil obviously costs more than for what is termed “sweet crude oil” and this incremental refining cost is deducted from the wellhead oil price that your royalty check is based upon.

Additionally, a lot of crude oil is produced relatively far from refining facilities – the cost to transport produced crude oil to the nearest refinery (by truck, barge and/or pipeline) is also deducted from the wellhead price.

Finally, crude oil is produced in widely varying “gravities,” a term that describes the viscosity of the oil – low-gravity oil will be very thick, like tar whereas high-gravity crude oil will be very fluid, like lighter fluid. The price you receive depends upon where your royalty oil is produced, how far it must be transported and its gravity – just hope that your royalty acreage produces high gravity, sulfur-free crude oil immediately next door to a big, oil-hungry refinery!!

By John Pepper | Posted in Headline, Uncategorized | Tagged , , | Comments (0)

Royalty Owner Qualification for State and Federal Benefits – Part 2

June 5, 2009 – 6:49 am

WHAT TO DO WHEN AN APPRAISAL IS REQUIRED?

As compared to an outright sale, this alternative is far more problematic. As I have already discussed, the oil and gas purchasing companies are usually prohibited by company policy from giving out a determination of value of an interest. In most instances, it would merely be an opinion of the particular employee anyway and not necessarily representative of its actual value. To obtain a legitimate appraisal for a producing oil and gas interest, it must be done by a petroleum engineer who is not also potentially engaged in acquiring the interest for himself. Unfortunately, the minimum cost of an independent appraisal will be in the range of several thousand dollars. Of course, this is completely out of the question for small or marginal interests, and should only be used for more substantial properties. However, if you contact Russell T. Rudy Energy, LLC, can tell us that you are being required to provide some type of appraisal in order to qualify for State or Federal benefits, we will be happy to write a brief non binding letter. We would state what we believe the fair market value to be, based upon what we would likely offer to pay if we were to buy it. This has often satisfied agency requirements so that the individuals can keep the small income stream. However, this may not be a wise long term alternative as discussed below.

WHY SELLING COULD SAVE MONEY and MAKE SENSE

In situations where the demise of an individual is imminent, or where someone is at an advanced age, there is clearly only one logical disposition of the small oil and gas asset. Many States require full ancillary probate when any “real property” (royalty and minerals are considered real property in most states) is owned in that state, even if an Estate went through full probate in another state. The result of this is costs that are often vastly disproportionate to the value of the oil and gas interest itself. Even where states have a small estate probate alternative, such as in California, it will require the hiring of a County sanctioned appraiser and local lawyer to handle the submission of inventory and appraisement. Many small estates find themselves in a perpetual state of limbo; where there is not enough money to handle an ancillary probate in another state for a few negligible producing oil and gas interests, yet they cannot fully close the Estate without liquidating the royalty or working interests. Please consider your alternatives carefully and think about the short and long term consequences of retaining a small producing interest for an elderly or infirmed individual.

By John Pepper | Posted in Headline | Tagged , , | Comments Off

Royalty Owner Qualification for State and Federal Benefits Part 1

June 5, 2009 – 6:45 am

At least several times a month, we receive a call from a desperate and exasperated son or daughter trying to figure what to do about qualification of their parent for some type of State or Federal service. Whether they seek Medicaid or some other type Social Security benefit, the problems presented are the same.  

Divestiture or appraisal of one or more small producing royalties, overrides or working interests, from which they continue to receive small periodic or monthly income, may pose a seemingly impassable hurdle to overcome. Although the rules vary depending upon which type of aide is sought, often qualification for financial aid is dependent upon the sale or appraisal of a small fractional interest in what is invariably dwindling marginal production.  Unfortunately there seems to be an uneven application of the interpretation of guidelines, so one person seeking benefits will be able to qualify based on his or her financial disclosures which include mineral or royalty production amounting to $10.00 to $100.00 per month, for interest in a small Texas or Oklahoma oil and gas well.

Conversely, another person seeking help from the same agency but talking to a different agent will be denied based on the uncertainty of the value of the asset.  Often times, the revelation that income, even as little as fifty cents a month is based upon a PRODUCING OIL AND GAS INTEREST, elicit unrealistic expectations from the State or Federal administrative employee. With little experience or reference to guide them, the administrator simply denies the claim for benefits based upon an applicant’s ownership of an income source that is not understood or difficult to evaluate. 

WHAT TO DO WHEN A SALE IS REQUIRED?

When a family member or custodian contacts us, they have usually sought the help from one or more of the companies the applicant is being paid by.  The policy of most oil companies dictates that they are neither able to give a valuation or appraisal, nor offer to acquire the interest themselves. It would be an obvious conflict of interest for them to do so.   The approach of what to do depends upon the aide administrators dictates. If a sale is absolutely required, then short of an administrative hearing and review, there is little else to be done. Time is usually the enemy here, where an elderly or ill person might face eviction or termination from services if the small royalty properties are not immediately sold. Unfortunately, there are so many types of producing oil and gas interests, that finding a buyer for a small fractional interest in Kansas, might pose a problem – particularly where time is of the essence.

Although hesitate to do so, many of the major oil and gas companies will provide a list of royalty buyers for a region of the country.  As with anything, there are good honest companies that have been around for a considerable time and then there are brokers who are simply compiling enough small interests into packages which they can then quickly flip for a profit.  When we (Russell T. Rudy Energy, LLC) acquire an interest, we make certain that all of the paperwork is done appropriately, from the preparation and recordation of deeds to the notification of all oil and gas purchasers, operators and tax appraisal districts. We do not sell the interests, but rather accumulate them into our company and manage them. Both John Pepper and I have been in the business for over twenty-five years and would be pleased to make an offer to acquire any type of producing interest from any state in the country. If an interest is so small that the cost of acquisition would be beyond its value, we can suggest ways in which to liquidate the interest quickly. If fact, I had such a call last week from a Legal Custodian needing to liquidate a small interest in Montana and wondering if that is something we would consider acquiring- in a hurry. The individual owner involved was an 89 year old man with advanced Alzheimer’s in a private nursing home in Ohio. He was about to lose his benefits and possible eviction unless he liquidated all of his assets including a small royalty interest in a very old well in Montana. I explained that whether the interests were producing Texas overrides, non-producing Oklahoma minerals, California Production Payments, Kansas royalties or practically any type, kind or size of oil and gas interests that we were able to make a quick and fair offer and take the full responsibility for all aspects of the transfer of interests.

By Russell T. Rudy | Posted in Headline | Tagged , , | Comments Off

Passing The Legacy Along – Interests in Oil, Gas, & Royalties

June 4, 2009 – 7:52 am

For many people who have inherited producing oil and gas interests and royalties, there is a great sense of continuity and pride of ownership.  They are perhaps the third generation to maintain and manage family oil, gas and mineral interests first acquired by a Grandfather or relative, who accumulated various royalty and overriding royalty interests through hard work over many years. 

Dad or Granddad worked hard in the oil patch, survived a depression and the war years, through times of low prices and high. He proudly passed the rewards of his cunning, intuition, stamina down to his family. His hard work and efforts in acquiring minerals, leasehold interests and a variety of other types of interests that a working oil man might assemble, through a lifetime of work reaped consistent royalties and bonuses for years.  Fast forward fifty years and the progeny of those early oil and gas pioneers still feel a family connection through ownership of oil and gas interests.  In fact, they might feel it a duty to hold onto and maintain all of the properties, diligently track frequent changes made between paying companies, devise a schedule to insure that no ad valorem taxes are missed and properties lost through tax sale and track the activity of any non-producing minerals.

Sometimes however, the task of managing often dwindling and naturally depleting assets is fraught with escalating challenges. The ongoing prospect of reconciling all the royalty payments with year end 1099’s, keeping a watchful eye on ad valorem property taxes which invariably seem to be delinquent, negotiating fair and reasonable mineral leases and sorting through the complexities of Operator’s Joint Interest Billings, where working interests are owned, can very easily be overwhelming.

Sometimes the burdens of managing producing and non-producing mineral and royalty interests outweighs the nostalgic reasons a family member continues to hold onto them. This may be particularly true where the interests now produce a mere fraction of what they once did.  If you feel that the time has come to consider divesting yourself and reducing what may have turned into a mountainous workload, or if the time and the effort required seem disproportionate to the income and benefits derived from your oil and gas properties, the time might be right to sell. 

After talking with many heirs and descendants who struggle to keep track of everything, they begin to feel that they are on a continuous treadmill of work and covered up by an avalanche of paperwork.  Only you are capable of determining if the time is right for you to sell your family oil and gas interests. If you are considering the possibility of selling, let us offer you a fair and expeditious way to pass along the burden of ownership, while maximizing the financial benefits not only to yourself,   but your children and grandchildren as well. Ultimately, that is what your father or grandfather worked so hard to achieve.

Russell T. Rudy Energy, LLC, specializes in (among other things) buying scattered producing and non-producing mineral, royalty and overriding royalty interests. We are not brokers and appreciate the sentimental aspect of inherited oil and gas ownership.  We have always believed that royalty and mineral ownership is a particularly valuable long term asset despite periodic downturns such as our recent free fall in oil prices. 

We cannot presume to tell you whether or not the time is right for you to dispose of your family’s oil and gas properties. We are here and happy to discuss the possibility of sale with you or your legal representatives. If you are concerned about the potential costs of multi-state probate, the significant legal expenses that can be incurred by your estate should you own properties in many jurisdictions at the time of your death, then it might be time for you to consider liquidating this valuable asset.

Russell T. Rudy Energy, LLC, is a third generation royalty acquisition company that never resells or brokers out properties that we acquire.  We have acquired many interests owned by proud descendants of oil and gas mavericks and maintain those properties and keep them intact to this day. We do not “cherry-pick” the best properties while auctioning off repackaging the interest for resale like some of our competitors.  I have been buying producing oil and gas interests for nearly thirty years,  and the roots of our company date back nearly 100 years to the founding of a little oil and gas company in the West.  Combined with decades of experience between myself and my partner Petroleum Engineer, John Pepper, we have seen just about every kind of interest in every producing state and county.  If you think it may be time to consider selling, we will sort through your stacks of division orders, mineral or royalty deeds, check stubs, ad valorem tax bills and working interest JIB’s, to determine what is currently producing and what has been plugged, abandoned and depleted.  Let us do the footwork required to evaluate potential title deficiencies, method of transfer, and scope of the work required to divest your interests. 

We will not charge you for our time,  but will advise you if there are title deficiencies requiring the work of a competent oil and gas or probate attorney,  before you can pass good and marketable title to us.  John and I are ready, pleased and excited to be entrusted with your family oil and gas properties and look forward to making you a fair, reasonable and timely offer.  We may be contacted toll free at:  800-880-0940 or dial us direct, for Russell Rudy dial 713-784-9700 or if your interests are primarily working interests call John Pepper at 713-961-4205.  Our primary fax number is: 731-784-9735

You might also like to visit us on the web for further information, instructions or forms at: www.oilandgasminerals.com.

By John Pepper | Posted in Headline | Tagged , , , , , , | Comments (0)

Oil & Gas in Pennsylvania – Finally!!

June 4, 2009 – 7:40 am

Although the modern day oil and gas industry began over 100 years ago in Pennsylvania, mineral and royalty interest owners in the Keystone State have forlornly watched all these years as their fellow mineral interest owners in nearly twenty other states received the royalty payments year in and year out from the various oil companies. 

“It’s just not fair that it all started here in Pennsylvania, but we’ve received so very little from it!” they have collectively moaned!

But that is currently changing – in fact, it is drastically changing as oil and gas companies scramble to develop a gas bearing formation called the Marcellus Shale.  This 200 million year old mass of clay (actually several different clays), very fine grain sand and small bits of broken ancient sea shells has always contained massive amounts of natural gas accumulated over the eons from decayed sea life.  But economically producing this natural gas has always been elusive until recently-developed technology and higher natural gas prices have proved the ability (technology) and the incentive (higher natural gas prices) to unlock this great resource. 

With all of the recent activity and completion announcements, it almost appears as if they are desperately trying to make up for lost time!  Many recent Marcellus Shale wells, nearly all drilled as mile-long horizontal drain holes, have tested in excess of 5 million standard cubic feet per day – a very good well in any state!  And best of all, at least for the long neglected Pennsylvania mineral and royalty interest owner – time to begin reaping some financial reward from their mineral ownership!

By Russell T. Rudy | Posted in Headline | Tagged , , | Comments (0)

My Minerals Include Oil & Gas Rights – But what about Gold, Silver, & Coal?

May 18, 2009 – 4:03 pm

Ownership of minerals is ordinarily limited to that which does not require the destruction of the surface to accumulate.

Some states, such as Texas, use what is called the “surface destruction test” to determine if getting down to the minerals would destroy the rights, full use and enjoyment of the surface owner.
Ordinarily the surface owner retains the rights to hard minerals such as lignite, coal or uranium which require open pit excavation . If the surface owner of the entire “fee” interest (meaning he owned 100 percent of the land from the surface to the center of the earth) wanted to, he could in theory assign his mineral interest and include the rights to mine for hard minerals, coal, gold, silver and the like. In areas where there is even a mere possibility of hard mineral surface mining, such a conveyance would place a permanent cloud over the surface ownership, in that it would be perpetually subservient to the right to mine and in always at risk for surface destruction and loss of use.

If you own a mineral interest and do not own the surface it is more likely that you own rights to the hydrocarbons and not any hard minerals.

Having acquired all types of minerals, royalties and even gold claims over the last thirty years, we have seen and owned practically every type of mineral, royalty, override, production payment, working interest, including interests in salt dome gas storage rights and Minnesota gold mining rights. Interestingly, Minnesota is among the states that tax mineral interest owners who own severed mineral interests whether they are producing or not.

Every year we re-evaluate to determine whether or not it is worth paying the annual taxes on non-producing Minnesota minerals or allowing title to lapse back to state ownership.

In researching Minnesota mineral activity, we discovered that there is a resurgence of Gold Mining currently being undertaken through a coring method of mining. In fact, in that land of a thousand lakes, there has been recent activity from a few major gold mining companies actually prospecting off of barges. They are able to conduct all of their coring and mining activity on top of the water and extract rock samples and ore down through the water from beneath lakes and ponds. Fortunately, our mineral ownership includes any hard mineral rights. The possibility that a company might offer to lease our minerals is reason enough to keep paying mineral taxes for yet another year.

In contrast, an oil and gas producing state like Texas, primarily taxes only producing mineral interests. However, there are a few counties in Texas with minimal oil and gas production that now tax severed minerals on a per acre basis. Although paying fifty cents or a dollar per acre seems reasonable on its face, holding non-producing minerals in these usually unproductive counties for an indefinite time makes questionable economic sense.

By Russell T. Rudy | Posted in Headline | Tagged , , , , , | Comments Off

Mineral Ownership on the Moon?

May 18, 2009 – 12:15 pm

As if mineral and royalty interest owners didn’t already have enough to worry about with declining oil and gas prices, high ad valorem taxes, delays in royalty payments and bankrupt oil and gas Operators, now comes the Romanian scientist Virgiliu Pop, with his latest scholarly work on who owns the land and minerals on, in and under our heavenly bodies… particularly on the Moon.

Personally, I have enough to worry about with mineral management and royalty ownership, negotiating Oil, Gas and Mineral Leases here in Texas, Oklahoma, Kansas and each of the other oil and gas producing states. For instance, today a small oil company offered to lease our minerals in which I hold the Executive Lease Rights by offering to send the “standard producer’s 88 Lease If you own minerals, you’ve probably seen a version or two of this lease form. In fact, I have seen about fifty versions of the so called “Standard Producer’s 88” and each is different. If you are going to lease your minerals, pay attention to what you are signing. Don’t let the title of the lease mislead you, as it may have very different substantive changes between the last lease you signed, even if it is with the same broker or company.

If you own a substantial amount of acreage or if you are in a very hot area such as the Barnett Shale play, you might want to consult with a competent Texas Oil and Gas Attorney. With some experience, I find that I can effectively negotiate a fair royalty, bonus payment and term of years for my minerals. Remember, take the time to understand what you are signing, it may affect your property rights and could make a substantial difference in not only how much royalty (money) you receive yourself, but also for your heirs and descendants who follow you.

RUSSELL T. RUDY ENERGY, LLC – BUYING OIL AND GAS PROPERTIES FOR NEARLY THIRTY YEARS
It was that very process of lease negotiation that sparked an interest in my Grandfather to begin acquiring producing and non-producing minerals, royalty, overriding royalties and working interests over 65 years ago. Following in his footsteps, and in those of my father Ellis Rudy (an icon in the royalty and mineral acquisition business), Russell T. Rudy Energy, LLC, acquires producing and non-producing oil and gas interests from every state in the country, and has been doing so for nearly thirty years. If you are looking to sell your mineral or oil and gas interest, and wish to receive a fair offer in writing made in a reasonable time, please contact me. In the meantime, when you gaze up at the stars you may want to ponder on the confusing inter-stellar legal ramifications of extraterrestrial mineral ownership – or not.

Russell T. Rudy, or my partner John Pepper, at Russell T. Rudy Energy, LLC, 5701 Woodway Dr., Ste. 222, Houston, TX 77057-1505. If you would like to fax copies of your recent check detail please use the following fax number: 731-784-9735. You might also like to visit us on the web for further information, instructions or forms at: oilandgasminerals.com. To speak directly to Russell Rudy dial 713-784-9700 or if your interests are primarily working interests call John Pepper at 713-961-4205.

By Russell T. Rudy | Posted in Headline, Uncategorized | Tagged , , | Comments Off

Got Royalties? Here’s Your Market Snapshot

May 3, 2009 – 9:25 am

oil-rigThe final Crude Oil and Natural Gas Prices are in for April 2009 and continue to look pretty scary!   The effects of the world wide recession (some still use the “D” word) on energy consumption coupled with excess supplies, especially of natural gas here in the United States, continue to drive down current and futures prices. 

Here’s a rundown:  NYMEX Crude Oil finished at $50.00/Bbl. with June 2009 Futures trading at $51.57/Bbl.  The final week of April DOE report on crude oil inventories was also bearish, as inventories increased by over 4 MMB.  Crude Oil demand continues to languish at or near the trailing five year average and the Fed’s recent comments that the current depressed economic environment will take longer than originally anticipated to turn around, hasn’t helped prices.

NYMEX Natural Gas finished at $3.39/MMBTU with June 2009 Futures trading at $3.35/MMBTU.  The EIA Weekly U.S. Storage report indicates that U.S. storage is currently 23% above the five year trailing average.  Demand continues to be muted by the economic slowdown, particularly in the industrial sector which accounts for 29% of total demand, and the EIA currently forecasts that demand may fall an additional 7.4% this year!  With such a grim demand forecast and higher than historical average gas storage volumes, the natural gas pricing forecast remains extremely bearish.

So what does all this mean?  Given this pricing environment, producers, especially natural gas producers, are cutting their capital expenditure budgets, postponing non-essential projects and in general, conserving cash.  The long-term effect of this should be lower supply in the fourth quarter 2009 and beyond depending upon the speed of the economic recovery.  For royalty owners, this price forecast is also important.  The Checks that will be received in 2009 will undoubtedly pale in comparison to 2008 checks received during the historical high prices.  With crude oil and natural gas futures also continuing to trade down, in subsequent years, checks will also be lower.  This is probably not what royalty owners want to hear (any more than the producers), but that’s the reality and it’s what we need to budget for in the near term.  And this is precisely where we can help. 

Russell T. Rudy Energy, LLC is a privately owned oil and gas producer, specializing in the acquisition of mineral, royalty and overriding royalty interests from individuals, Estates and Trusts.  We have experience in the acquisition of nearly any type of oil and gas interests, ownership situation and/or record title problem; we don’t charge for our time and will spend the time necessary to understand each particular situation and need in order to make you a fair offer.  We are always glad to visit with potential sellers, even if our recommendation is that selling might not the preferred option.  We may be contacted toll-free at 1.800.880.0940 or through our website oilandgasminerals.com.

By John Pepper | Posted in Headline | Tagged , , , , | Comments (0)

What items or information do you need to process my offer?

April 2, 2009 – 10:59 am

We will need a copy of the following in order to make you an offer

  • Check Stub attached to your (monthly, quarterly, or annual) revenue check from the oil and gas Purchaser(s).
  • Division Orders from the Oil and Gas Purchaser(s)
  • Transfer Orders
  • Mineral Deeds and/or Assignments under which you obtained your interest
  • Correspondence from the oil and gas Purchasers, Operators or Taxing Authorities
  • Authorization Form that allows us to contact the Oil/Gas Purchaser for information on your interests. Russell T. Rudy Energy L.L.C. Authorization Form Signed and dated.
By admin | Posted in FAQ | Comments (0)