RC Michael Company Inc.
1212 Raintree Drive Suite A-5 Fort Collins, Colorado 80526
4.8 stars - based on 24 reviews
Phone: (970) 484-2737
Our 27th year of client service.
R.C. MICHAEL COMPANY, INC.
GEOLOGICAL CONSULTANTS

Oil and Gas Royalties Questions

Find answers to oil and gas royalties questions from RC Michael Company
  1. IF OIL COMPANIES WANT THESE LEASES, WHY DON'T THEY JUST BUY THEM AT THE AUCTIONS?
  2. Oil companies do want these leases; each one we acquire is through bidding against their landmen. We are, occasionally, outbid. It's no secret that Exxon et al. have deeper pockets than we do. However, they also go to the auctions with budgets; and companies often exhaust their entire budgets in fierce bidding wars for ultra-pricey leases. This gives us an "opening" to outbid them and acquire other highly desirable top-quality oil and gas leases for our clients. After the dust settles from the auction, we can then solicit and entertain purchase offers for these leases on our clients' behalf.

  3. MAY I ATTEND THE AUCTION AND BID MYSELF? WHY DO I NEED YOU?
  4. Certainly you may do it yourself. All American citizens, or corporations in good standing, have the legal right to participate and bid for oil leases. However, the leases are offered with no indications of their value or geologic potential; the offering agencies do not concern themselves with this. The agencies simply offer parcels of land they control (described by township, range, section and subdivision), whether naked granite, studded with dry holes, or undrilled land bordering a new wildcat discovery. The bidding itself can be fast, aggressive and confusing. That's where we come in, with our decades of Rocky Mountain oilpatch experience and attendance at over one hundred of these auctions.

  5. ISN'T THE “LOWER 48” A DRILLED-OUT, TAPPED-OUT, OVERMATURE PETROLEUM PROVINCE?
  6. Our backyard is without a doubt some of the most heavily drilled real estate on earth. It's safe to say that no giant field like East Texas or the Permian Basin remains to be discovered here. It's also a fact that new oil and gas reserves are being found right here at home with new exploration technologies, new geologic thinking, and the powerful incentive of high prices; and, ever-evolving production technologies are rendering formerly “unconventional” reserves economic, especially when it comes to gas. When we began this business, the vast coalbed methane plays in several Rocky Mountain basins did not even exist. The Niobrara horizontal drilling boom was years in the future. And, the U.S. is “home”; a lot of global oil supply is found in very nasty places that seem to be getting nastier every month.

  7. IF I ACQUIRE A GOVERNMENT LEASE, IS IT MINE TO DO WITH AS I WISH?
  8. No, it remains public land. You only acquire the subsurface rights to explore for, extract, and market any oil and gas underneath the acreage, and to make such improvements to the surface as are necessary for this. You may not build a cabin on the lease, or, if the surface is in the public domain, prevent access by the public for hunting, fishing, birdwatching, etc. except to the actual drilling/producing facilities.

  9. SO I CAN DRILL FOR OIL MYSELF?
  10. Of course; this is the right you have purchased from the government through us. However, because of the enormous expense of a modern drilling operation, the idea in actual practice is to sell your rights to an oil company and let them do it – reserving for yourself a percentage royalty (usually 3-5%) on all production from the lease.

  11. HOW LONG MAY I KEEP MY LEASE?
  12. Federal leases have an initial tenure of ten years before production must commence. State leases have a five-year time fuse. The law does not provide for extensions.

  13. WHAT AM I OBLIGATING MYSELF TO WHEN I ACQUIRE A LEASE? ARE THERE PROPERTY TAXES ON THE PARCEL?
  14. There are no “taxes” per se. There is an annual rental obligation, payable in advance beginning with the second year of the oil lease's tenure, on the “anniversary” date of the lease – the date on which the lease went into legal effect. This rental is your exclusive responsibility. It is $1/acre/year for Wyoming state leases; $2.50/acre/year for Colorado state leases. For federal oil leases, it is $1.50/acre for the first 5 years and $2/acre for the second 5 years.

  15. YOU GET A “CUT” OF THE PROCEEDS FROM THE LEASE, RIGHT?
  16. Absolutely not. Like all businesses, we have overhead, and we do make a profit. However, this is all taken care of out of the initial acquisition fees. We feel it is only fair that the client have full enjoyment of any and all profits from his lease ownership, and we take no percentage whatsoever of any proceeds or royalties from any client leases.

  17. CAN I DEDUCT THE COST OF ACQUIRING A LEASE AS A BUSINESS EXPENSE ON MY TAXES?
  18. We are not tax experts or advisors, but it is our understanding that lease acquisition expenses may be deducted against any income derived from future production on the lease.

  19. WILL YOU STICK AROUND AND HELP ME IF I NEED IT?
  20. Yes, if you so wish. The lease will either be purchased in your name, or assigned to you immediately upon issuance by the government agency. At the time of lease issuance, you have the option of contracting with us for consultation, advice and assistance in marketing your lease.

  21. WHAT ARE YOUR CREDENTIALS?
  22. Our Principal, Robert C. Michael, is a licensed Professional Geologist with the State of California Board for Geologists and Geophysicists. He is also a licensed Mineral, Oil and Gas Broker with the California Department of Real Estate. He is a member in good standing of the Rocky Mountain Association of Geologists, the Coast Geological Society, and the Pacific Section of the American Association of Petroleum Geologists. He graduated Cum Laude in Geology from Pomona College and did graduate work at Yale University and the University of Wyoming.

  23. DO YOU OFFER A GUARANTEE?
  24. We can only guarantee that we will work with all due diligence to get you the most favorable lease possible based on availability, competition, and funds available.

  25. CAN I SPEAK WITH SOME OF YOUR SUCCESSFUL CLIENTS?
  26. We are very sensitive to our clients' personal and financial privacy, and would prefer not to prevail upon them for “testimonials”. Your business with us will be treated with the exact same discretion.

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