The silver state. [volume] (Winnemucca, Nev.) 1909-1925, 1919-07-31
EXPLAINS WORKING
Of OIL FINANCING
CONTINUED from First Page)

they recognize.
Production and royalty are nearly
the same, but with this difference
Production is an interest in the oil
produced from just one certain well
while royalty is an interest in the OIL
that is produced from all the weiis
drilled on any certain piece of land
from one acre to one hundred thou
sand acres in the tract.
When an oil company leases a piece
of land from a man for the purpose
of drilling an oil well they pay the
owner so much an acre in cash and
also agree to pay him a certain part
of what oil may be produced from the
tract of land. This is usually one
eighth (1-S) of the total production
and is known as royalty, Sometimes
the royalty that the company agrees
to pay the owner amounts to one-half
Of the total production. and the owner
of the land may not have to stand a
cent of the expense Oh drilling the
we'll.
The owner of a royalty in a certain
tract of land may need money for
some purpose and decide to sell a
portion of the royalty. If there are
no wells producing oil or being drilled
near this land, the royalty may sell
for as little as $50 or 800 IN acre;
but If there is a producing well within
half a mile or so and several more
wells being drilled even closer to 1t
than that. it may bring around $500
an acre.
Royalty ON property adjoining a big
producing well may bring any price
up to $500, 900. One well of the Texas
Pacific Coal & Oil Co. has produced
s1,680,000 in six months. Figure out
what a o~ne-eihgth royalty in that well
would be worth! They could put down
ten wells like that in ten acres II
they wanted to crowd them. Numbers
of companies in both Burkburnett and
Desdemona are drilling on one-acr
tracts.
The way royalty is cut up into
shares equivalent to one acre is this:
If a man owned 100 acres of land and
leased it at one-eighth royalty and
then wanted to sell you the royalty on
one acre, he would divide his one-
by 100 and sell you 1900 in
the total production of the 100 acres.
In other words, you would get-if you
owned a 1900 royalty-one barrel of
oil or its equivalent, $2.25. out of
every 500 barrels of oil that might be
produced from all of the 100 acres of
land.
You would not get all OF the roy
atty (One-eighth) on any particular
acre of land in that tract, but would
get a 1900 interest in all the oil
the 100 acres.
Some chances for profit if you buy
in a good location. When
here are a number of drilling wells
the land ON which you own
and one of those wells hits
Dill, your share. for which you might
rave paid at the rate of 500 an acre,
nay jump to $500 to $1,000 an acre
n twenty-four hours, depending upon
he amount of oil the new well pro-
iuces.
II you pay a very low price-$10 to
'25 an acres-you may wait a year for
to drill a well near your hold
but If you pay from $500 TO
500 an acre you are buying closer
o producing wells and get quicker
one to three months. II
'ou pay a high price-up to $500 an
will probably get action in
'ide Of a month.
When anyone starts even putting
lp a rig near your holdings the price
# the royalty will advance, and when
ONE well near you strikes oil and
in producing from 1000 to 1000
'arrels a day. people will be follow
ng you around trying to buy your
hare of the royalty. II you hold on
i'll some company drills a well on
he land your royalty covers, you will
ave chances to sell out for five to
wenty times what you paid for your
interest.
If you want to play safe you may
ell a part of your share of the roy
lty before the we'll gets deep enough
D hit oil. then hold the balance until
be well comes in. II 1t comes in n
dry hole" you should worry-if you
old part Of your holdings for enough
D pay back what it cost you in the
rst place. If it comes in a big pro-
ucer, all you have to do is sit back
nd count up the coin as it rolls in.
Royalty is transferred by a deed
IL. 1