Absolute Ownership: The theory that minerals such as oil and gas are fully owned in place before they are extracted and reduced to possession.

Abstract of Title:  A chronological history of ownership of a tract of land.

Acre:  The most common of land measurement in the United States. 1 Acre = 43,560 ft

Acreage Contribution: Acreage owned in the vicinity of a test being drilled by another party and contributed to the driller of the well in return for information by drilling.

Affidavit:  An instrument wherein an individual swears to certain facts.

Affidavit of Heirship:  A sworn statement providing genealogical information that may be used in support of facts but is not, standing alone, legally admissible as evidence.  It is used when someone dies without a will and the estate is small.

Assignment:  The sale, transfer, or conveyance of all or a fraction of ownership interest or rights owned in real estate or other such property.  The term is commonly used in the oil and gas business to convey working interests, leases, royalty, overriding royalty interests, and net profit interests.

Assignment Clause: A clause in a legal instrument that allows either party to the contract to assign all or part of their interest to others.

Basic Lease Provisions:  The main parts of a lease which identify-

Effective Date

Parties to the Lease (Lessor and Lessee)

Specified Term

Delay Rental or Paid-Up Provision

Royalty Amount for the Lessor

Bonus Consideration: A cash payment by the lessee for the extraction of an oil and gas lease by the mineral owner, usually given in dollars per acre.

Bundle of Sticks: Refers to the complexity of property ownership and the rights that go along with it. When referring to land title the main two entities are Royalty and Executive Rights.

Community Property:  Property jointly owned by a married couple.

Conveyance:  A written contract between and grantor and grantee, used to transfer title and rights to real estate or property.  Typical conveyances include oil, gas, and mineral leases, assignments, deeds, and rights of way.

Decedent:  A deceased person.

Deed:  A written document by which the title to a property is transferred from one party (the grantor) to another (the grantee).

Deed of Trust:  A deed conveying title to a trustee made to secure a loan.  Deeds of trust are widely used by banks to secure real estate loans.

Division Order Title Opinion (DOTO): An opinion, generally written by an attorney, stating the names and decimal ownership interests within a producing oil or gas well, unit, or lease.

Executor:  A person or entity named in a will to carry out the terms of the will.

Executrix:  The term for a female executor.

Farm In: The acquisition of part or all of an interest from a third party.

Farm Out: The assignment of part or all of an interest to a third party.

Fee Lands:  Privately owned, non-public lands.

Fee Simple: The most complete form of ownership. The fee simple owner has land without limitation. A single company or person owns all land rights.

Gift Deed:  A deed conveying an interest for which the consideration is “love and affection” or similar.

Grant:  To give title or ownership by deed or other instruments to another.

Grantee:  The person to whom the grant is made.

Grantor:  The person making the grant.

Habendum Clause: In an oil and gas lease, this clause fixes the duration of the lessee’s interest in both a primary and secondary term. Also referred to as a “Term Clause”.

Held By Production (HBP):  Refers to an oil and gas property under lease, in which the lease continues to be enforced because of production from the property.

Intestate:  The condition where a person dies without a will.  The property then passes by the laws of descent and distribution.

Joint Operating Agreement (JOA):  A contract in which two or more co-owners of the operating rights in a tract of land join together to share costs of exploration and possible development.

Joint Venture: The most common business arrangement between oil and gas properties. Parties in the agreement share control, profit, losses, and liability.

Lease (Oil and Gas):  A legal document by which the owner, of the mineral rights to a property (lessor), conveys to another party (lessee), the exclusive right to explore for and develop minerals on the property during a specified primary term and as long thereafter as oil, gas or other minerals are produced in paying quantities.

Lease Acquisition Costs:  Bonus payments to acquire a specific oil and gas lease.

Lease or Sublease:  Any transaction in which the owner of operating rights in a property assigns all or a portion of these rights to another party.

Lessee: The person who receives the lease.

Lessor:  The person giving the lease.

Letters Testamentary:  A document issued by the Court authorizing the executor to transfer title to estate assets and to carry out the will of a deceased person.

Memorandum of Lease:  A document placed on record with the county clerk acknowledging that a lease has been entered into and the property described.  It is signed by the lessor and lessee and is done to avoid putting the entire lease and its terms in the county record for all to see.

Metes and Bounds:  A type of description that sets out the boundary of a tract beginning at a boundary marker and tracing around the tract to the place of beginning.

Mineral Deed:  A deed conveying only an interest in the minerals.

Mineral Estate:  The ownership of minerals lying below the surface of land and considered to be “real property”.  The mineral ownership can be tied to surface ownership or can be severed from it.

Mineral Rights:  The ownership of all rights to oil, gas or other minerals as they naturally occur in place at or below the surface of a tract of land.

Net Revenue Interest (NRI):  The percentage of revenues due to an interest holder in a property, net of royalties or other burdens of the property.  If a landowner leased his mineral interest for a One-Fifth / Twenty Percent Royalty then his NRI would be 20%.

Non-Executive Mineral Interest (NEMI): An interest in a mineral estate but does not have the power to execute leases.

Non-Participating Royalty Interest (NPRI):  A party’s interest who owns a severed portion of royalty interest but does not execute leases, participate in bonuses or rentals, or have rights of exploration and production.

Offset Well:  A wellbore that is close in proximity to a proposed well. It provides information for planning the proposed well like behavior and reactivity to different techniques.

Operator:  The individual or company responsible for the drilling, completion and production operations of a well and the physical maintenance of the leased property.

Overriding Royalty Interest (ORRI):  A Revenue Interest in oil and gas created out of a Working Interest.  Like the Lessor’s Royalty, it entitles the owner to a share of the proceeds from Gross Production free of any operating or production costs.

Paid-Up Lease:  An oil and gas lease in which delay rentals for the entire primary term are paid in advance with the bonus consideration.

Patent:  A deed or conveyance out of the Sovereignty of the Soil (such as the Republic of Texas) to the first owner.  A government grant of public lands.

Pooling:  A term frequently used interchangeably with “Unitization” but more properly used to denominate the bringing together of small tracts sufficient for the granting of a well permit under applicable spacing rules.

Power of Attorney:  The appointment of one person to act on behalf of another (agent) for all purposes or for very limited purposes.

Predeceased: To die before another person, usually related by blood or marriage.

Primary Term:  The period of time during which an oil and gas lease will be in effect, in the absence of production, drilling, or other operations specified by the lease.  The oil and gas lease can be perpetuated past the primary term by production in paying quantities, drilling, operations, and/or the payment of shut-in royalties specified by the lease.

Probate Proceedings:  The collection, filing, and authentication of documents of an estate such as the Will, Order Admitting the Will to Probate, Letters Testamentary, and appraisals.

Production Payment: A cost-free percentage of the working interest that ends when a specified amount of money or number of barrels has been reached.

Quitclaim Deed:  A document by which one party (grantor) conveys title to a property by giving up any claim, which they may have to title (although they do not possess that claim is necessarily valid).

Recording:  The act of placing an instrument of record in the county records.

Release:  A document in writing executed and delivered by the lessee indicating that a lease has terminated or expired or has been surrendered or forfeited.

Reservation:  The portion of a conveyance of the grantor’s property that he is retaining or not conveying.

Example: “All my right, title and interest in the above-described property save and except a 1/16th royalty interest herein reserved to Grantor…”.

Retained Interest:  A fractional interest reserved by the owner of a whole interest when the balance of the whole interest is transferred to another party.

Reversionary Interest:  An interest in a property that becomes effective at a specified time in the future or on an occurrence of a specified future event.

Rod: A surveyor’s tool that is also a unit of measurement that is equal to 16.5 feet. Older legal descriptions usually use Rods as their unit of measurement.

Royalty:  A payment to a Landowner or Mineral Rights Owner by a Leaseholder on each unit of resources produced.  A percentage share of production, or the value derived from production, paid from a producing well.

Royalty Deed:  A deed conveying a royalty interest.

Separate Property:  Property in a community property state which is owned by only one spouse.

Sherriff’s Deed:  A deed resulting from default under a Deed of Trust or as a result of taxes being overdue and the taxing authority ordering a sale of the property to pay the back taxes.

Special Warranty Deed:  A deed that contains a covenant in a clause, the effect of which is to guarantee title against all defects arising out of claims of the grantor and of all persons claiming by, through, and under or from the grantor.

Surface Estate:  Surface ownership of a tract of land.

Surface Rights:  Surface ownership, of a tract of land, from which the mineral rights have been severed.

Testate:  Having made and left a valid will as opposed to an intestate where no will is present. Describes the distribution of all of the assets of the estate in accordance with the terms of the will.

Title:  The combination of factors that together constitute legal ownership of property.

Top Lease:  A conditional type of lease that may be granted by the mineral rights owner while a pre-existing recorded lease of that property is nearing expiration but nonetheless is still in effect. The top lease would become effective only if and when the existing lease expires or is terminated.

Township:  A square tract of land six miles long on each side.  It consists of 36 sections of one square mile each.

Tract: The smallest area of land that has common ownership.

Warranty Deed (WD):  A deed given with a full warranty or guarantee of the ownership of the interest being conveyed.

Will:  An instrument spelling out the disposition of a party’s property after their death.

Working Interest (WI):  An interest created by the execution of an oil and gas lease.