See What Happens Larry? Oil and Gas Mineral Rights in the News.

Oklahoma Oil and Gas Mineral Owners,

The Federal Bureau of Investigation (“FBI”), announced that LAWRENCE H. WOLF, a/k/a “Larry,” was arrested yesterday for defrauding banks and financial institutions around the country. Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged, Lawrence Wolf swindled and attempted to swindle banks around the country out of millions of dollars while masquerading as an oil and gas tycoon.  Now, thanks to the dedicated work of our partners at the FBI, Wolf’s alleged scheme has finally run dry.”

A tale as old as time. A slick huckster in cowboy boots will convince a number of yield-starved investors that he has a deal for them. We saw it in "Stealing from the Rich" and "Funny Money" and we will continue to see it as long as there are mineral rights to exploit and people walking the earth (so another 73 years...?).

Do you see what happens when you commit fraud by claiming ownership in others' mineral rights?

Berlin's favorite part of the story though is that four banks lent Larry money and only the "global investment firm" actually ran title to the oil and gas properties in Wyoming that Larry was claiming ownership in. 

While Berlin has claimed in the past that some title is difficult, it is less difficult that explaining to your boss why you lent Larry millions without checking the records.

H/T to Matt Levine for the news and Special Agent Justin Rowland for putting the pieces together.

Bankers of the world, please advise Berlin if you are planning to lend on oil and gas mineral rights, royalties, or leases without running title and we can prevent you from being identified as a "Victim Firm."

More to follow,

Berlin 

Types of Oil & Gas Interests

All,

Berlin has received a number on inquiries recently about the types of oil and gas interests one can buy/sell/trade. While these are detailed in the FAQ, they are re-posted below:

WHAT KINDS OF OIL AND GAS INTERESTS ARE THERE?

All oil and gas interests share in the revenues from producing oil and gas wells. Often you will find the terms “mineral interests” and “royalty interests” are used interchangeably. However, there are important differences between these interest types.

ROYALTY INTERESTS AND NON-PARTICIPATING ROYALTY INTEREST IN OKLAHOMA

A royalty interest owner is the person who owns the revenue interest of the producing oil and gas well. Often, the mineral interest owner is a royalty interest owner and a royalty interest owner is the mineral owner. However, in some cases, a royalty interest could also be defined as a non-participating royalty interest (NPRI). This means that the owner does not own the actual mineral rights Rather, the NPRI owner is entitled only to a revenue interest of the oil and gas produced. NPRI owners do not have executive rights, which means the right to negotiate or execute a lease or receive lease bonuses. An NPRI interest is created when a mineral owner chooses to sell the income they are receiving from a property to an investor without selling their mineral rights. In Texas, NPRI owners will be asked to ratify the oil and gas lease executed by the mineral interest owner by the oil company.

OVERRIDING ROYALTY INTERESTS IN OKLAHOMA

Overriding Royalty Interests are interests created from the Leasehold Estate. The Lessee can assign or retain a royalty interest from the oil and gas lease which is free from the costs of drilling and production.

WORKING INTEREST IN OKLAHOMA

The working interest owner is the person or company who owns the right to drill and produce oil and gas. When the mineral owner leases his mineral interest to an oil company, he is leasing the working interest. Working Interest owners are obligated to pay a proportionate share of all costs associated with leasing, drilling, producing and operating a well. After royalties are paid, the WI owners share in the production revenues based upon the percentage of the working interest owned.

More to follow.

Berlin