Published: Dec 27, 2023 | Updated at: Dec 27, 2023
Navigating land rights and negotiations, the oil and gas Landman, also known as, petroleum Landman is critical to the petroleum industry’s backbone. With a focus on this vital role, this article sheds light on the Landman’s impact in oil and gas operations, from securing leases to managing deals, essential in fueling economies.
An petroleum landman bridges the gap between oil companies and landowners, managing leases, negotiating rights, and ensuring compliance with legal and regulatory standards.
Landmen employ various methods for identifying oil and gas reserves, including seismic surveys and drilling, and they must understand the complexities of mineral rights, leases, and royalty agreements.
With the help of industry-specific software tools like Petrel, Landmark, Halsell, Enverus, and ComboCurve, landmen can enhance efficiency in sourcing deals, managing well data, and performing economic analyses.
Exploring the Foundations: The Oil and Gas Industry
The oil and gas industry, including oil companies, is a powerhouse of the global economy, influencing everything from geopolitics to our daily lives. The oil industry revolves around the exploration, extraction, refining, and distribution, while also addressing environmental concerns such as oil spills.
The exploration and extraction of hydrocarbon resources, namely crude oil and natural gas, are crucial in tapping into the world’s oil reserves, including oil sands. These resources, found deep beneath the earth’s surface, undergo a complex process to become consumable products that power our world.
Petroleum products, derived from crude oil and natural gas, are used in a vast majority of industries, from transportation to manufacturing. Interestingly, the word “petroleum” comes from the Latin words “petra,” meaning rock, and “oleum,” meaning oil, reflecting its origin in the dark recesses of the earth as petroleum oil. The process of extracting these resources is known as petroleum production.
The Journey from Reservoir to Refinery
The journey from reservoir to refinery begins with the identification of potential oil and natural gas reserves using seismic surveys. These surveys utilize shock waves to create a detailed map of the subsurface geology, helping identify potential drilling locations for hydrocarbons. Once a promising site is identified, drilling begins.
Various drilling methods, including cable and rotary drilling, are employed to access the subsurface reservoirs of oil and natural gas. After extraction, the oil and natural gas are transported to refineries primarily through pipelines.
Discovering Deposits: Seismic Surveys and Drilling
Seismic surveys play a key role in identifying potential oil and natural gas deposits. They involve generating shock waves on the earth’s surface and recording their reflections to create an image of the subsurface geology. A variety of tools, such as air guns and seismic sensors, are used in these surveys to generate the required shock waves and capture the reflected signals.
Drilling, on the other hand, involves creating a hole deep into the earth to access the oil and natural gas resources. Several drilling methods like cable drilling and rotary drilling are used based on the specific geological conditions and characteristics of the oil and natural gas deposits.
Extracting the Resources: Conventional vs. Unconventional Methods
Once the potential deposits are discovered, the extraction process begins. This process can be broadly classified into conventional and unconventional methods. Conventional methods involve traditional drilling and pumping for conventional oil, while unconventional methods involve specialized techniques like hydraulic fracturing and mining for oil shale, such as in Canada’s oil sands.
While conventional methods typically incur lower costs due to their simpler drilling processes, unconventional methods often involve higher expenses due to the need for specialized techniques and the potential for greater environmental impact.
From Crude to Consumable: Refining Processes
After extracting oil, the crude oil, including sour oil, undergoes a series of refining processes to transform it into various petroleum products. This involves heating the crude oil, segregating it using a distillation tower based on boiling points, and transforming the material through heating.
These processes yield a multitude of products, including gasoline, diesel fuel, heating oil, jet fuel, petrochemical feedstocks, and various unfinished oils such as naphthas and residuum.
A Brief on Reservoirs in the Permian Basin
One of the major reservoirs contributing to oil and natural gas production in the United States is the Permian Basin. Located in western Texas and southeastern New Mexico, the Permian Basin was discovered in the early 1920s and has been a significant contributor to the country’s oil and gas reserves.
It currently produces approximately 40 percent of the total oil production and nearly 15 percent of the natural gas production in the United States.
What is an Oil & Gas Landman or Petroleum Landman?
An oil and gas landman, or petroleum landman, serves as a pivotal link between oil and gas companies and the landowners who own the rights to the valuable resources these companies seek. Landmen are responsible for:
Managing and negotiating leases for oil and gas exploration and production
Creating, modifying, and interpreting essential documents pertaining to land rights
Conducting ownership reports and title searches
Adept communication and negotiation abilities
Meticulous attention to detail
These skills are essential for a successful career as an oil and gas landman.
Aspiring landmen are generally required to have a bachelor’s degree in land management or energy management, in addition to several years of experience in handling land management tasks.
What does a Petroleum Landman do?
The role of a landman revolves around the management of land rights for oil and gas exploration and production. They perform the following tasks:
Conduct extensive research to identify potential land deals
Analyze property records
Negotiate leases with landowners
Ensure compliance with regulations and legal obligations
Draft lease agreements
Administer rental payments
The Three Types of Landman
There are three types of landmen in the oil and gas industry:
Field landmen: often independent contractors who conduct courthouse research and oversee lease agreements. They interact directly with landowners and negotiate deals on behalf of oil and gas companies.
In-house landmen: work directly for oil and gas companies and handle all aspects of land acquisition and lease negotiations.
Title landman: title landman or title examiner is responsible for performing a title opinion on mineral interests to confirm the ownership in property and ensure marketability of the asset. A title landman doesn't usually interact with mineral owners and more so specializes in examining title opinions.
In contrast, in-house landmen are employed by oil and gas companies and handle internal duties, including managing contracts, records, titles, and leases. Lease brokers, on the other hand, work independently or under a brokerage, managing land work contracts, records, titles, and leases.
What are the Benefits of AAPL?
The American Association of Professional Landmen (AAPL) is a professional organization that promotes ethical standards, career advancement opportunities and provides resources and materials for land professionals. The AAPL facilitates networking opportunities through educational programs, workshops, and regional institutes, providing a platform for members to connect and engage with one another.
It also offers a wide range of educational opportunities, including support for event fees and accreditation assistance for university land programs, thus contributing to the professional development of individuals in the oil and gas sector.
What's the Salary and How to Get a Job as a Landman
The earnings of a petroleum landman can differ considerably based on their level of expertise. The typical annual income for a petroleum landman is around $99,812, although salaries can rise substantially for senior roles, with Senior Landman positions averaging $224,188 annually.
To become a petroleum landman, an individual generally requires a bachelor’s degree in business, energy management, land and resource management, or a related field. Acquiring prior experience through internships or positions such as law clerk or agent can also be beneficial.
How to Identify Land Deals
Landmen’s responsibilities include:
Identifying potential land deals
Searching public records databases
Utilizing land search solutions
Conducting thorough mineral rights searches to investigate property records for land transactions.
Geological data is also analyzed through geological surveys, which help in identifying potential land deals.
Understanding Mineral Rights
Mineral rights pertain to the ownership and control of underground resources. These rights can be extremely valuable, especially when they contain resources like oil or gas. In many cases, mineral rights can be separated from surface rights, leading to a situation known as a ‘split estate’ where the ownership of mineral rights and surface rights is held by separate parties.
In the U.S., it is common for landowners to hold both mineral rights and surface rights, unless they have opted to sell them independently.
Mineral Rights vs Surface Rights
Mineral rights and surface rights are two distinct types of property rights. The owner of the mineral estate has the exclusive right to all minerals located beneath the land’s surface. On the other hand, the owner of the surface estate has the right to use and access the land’s surface but does not have any entitlement to the underlying minerals.
This distinction can lead to legal disputes, which are usually resolved through legal concepts such as:
the dominance of the mineral estate over the surface
the requirement for the mineral owner or lessee to act non-negligently
liability for surface damages caused by negligence.
Net Mineral Acres vs Net Royalty Acres
Net mineral acres and net royalty acres are two metrics used in the oil and gas industry to measure the ownership stakes in oil and gas properties. Net mineral acres represent the ownership share within the total gross acreage, whereas net royalty acres represent the total acreage owned that qualifies for royalty payments within the gross total.
These measures are used to calculate the royalty payments due to the mineral owner based on the production and sale of oil and gas resources.
How to Calculate Net Mineral Acres and Net Royalty Acres
Net mineral acres and net royalty acres are calculated by dividing the total acreage owned by the gross total acreage. This gives the proportion of ownership interest within the gross acres.
Net royalty acres, on the other hand, are determined by the royalty interest of a holder in an oil and gas lease. This represents the monetary value associated with leasing one acre of mineral rights.
Working Interest vs Overriding Royalty Interest
Working interest and overriding royalty interest are two types of ownership interests in oil and gas properties. A working interest refers to an investor’s obligation for expenses associated with the exploration, drilling, and extraction of natural resources, while an overriding royalty interest represents a percentage stake in the production or value generated from the extraction of oil and gas, typically without the obligation to cover any expenses related to the exploration, development, and production of the resources. Both interests expire when the lease term ends.
Performing a Title Opinion
A title opinion is a legal document confirming the ownership of mineral rights. It is typically conducted by law firms or a title landman commissioned by exploration companies and includes a thorough assessment of the property’s abstract of title to ascertain whether the seller possesses marketable or good title to the property.
This ensures that the correct parties are receiving the royalties from the production of oil and gas.
What is an Oil & Gas Lease?
An oil and gas lease is a contractual agreement granting a company the right to explore and extract oil and gas from a particular tract of land in return for royalties, as part of a gas leasing program. The lease outlines the rights and obligations of both the company and the landowner, including the duration of the lease, the royalty rate, and the operational requirements.
The duration of an oil and gas lease is determined by a specific term of years, typically ranging from 3 to 5 years. However, if there is successful production or ongoing exploration, a secondary term may commence, lasting for the duration of the well’s production.
The Role of Lease Sales and Public Lands
Lease sales play a significant role in the leasing process. These are auctions where oil and gas companies bid on the rights to explore and produce oil and gas on public lands. The Bureau of Land Management (BLM) oversees these lease sales following a land use planning process, which includes:
Land nomination by companies
Oral bidding at the sale
Currently, roughly 90% of public lands are allocated for lease to oil and gas developers.
Royalty Payments and Mineral Owners
Royalty payments are an integral part of oil and gas leases. These payments are made to the mineral owners based on the production and sale of oil and gas resources. The royalty interest pertains to a share of the production derived from an oil and gas lease, which is allocated to the mineral rights owner without accounting for drilling and production expenses.
The royalty payments are calculated by multiplying the gross production revenue by the royalty rate specified in the lease.
Terms of an Oil & Gas Lease
An oil and gas lease includes several terms that outline the rights and obligations of both parties. These terms include:
The duration of the lease which typically ends when the well is no longer producing and plugged.
The royalty rate, typically twenty-five (25%) percent.
The operational requirements, such as the maintenance of records for all operations, acquisition of essential permits and approvals, and compliance with time limits for both competitive and noncompetitive leases.
Negotiating an Oil & Gas Lease
A landman’s responsibilities include negotiating oil and gas leases. It involves understanding the value of the property, the interests of both parties, and the current market conditions. A well-drafted lease can yield long-term benefits, while a poorly negotiated lease can result in legal complications and affect land rights for generations.
When negotiating royalty rates, it’s important to consider the depth of permitted drilling, the potential future profits, and the immediate cash needs.
Software Tools to Become a Better Landman
In the digital age, technology has become an indispensable tool for many professions, including landmen. Software tools can assist landmen in optimizing their work, enhancing efficiency, and making well-grounded decisions. Some of the primary software tools used for exploration and production include:
These tools are specifically designed to aid in tasks such as geological modeling, simulation, data and production optimization.
Using Halsell CRM to Source Mineral Deals
Halsell CRM is an all-in-one workspace software tool specifically designed for sourcing mineral deals and managing landowner relationships. With every mineral owner, county appraisal district (CAD) records, in the state of Texas in it's database, it is the best landman crm out there for calling and texting landowners and managing the entire acquisition process directly in the sales CRM.
Using AI for human and voicemail detection to speed up the calling process, this tool enhances sourcing efficiency by enabling users to discover and assess more leads, nurture and convert more prospects, and efficiently manage and interact with prospects. It includes functionalities such as sales CRM, project management, task management, calling & texting, calendar scheduling with landowners, electronic signature solutions, forms builder, and contacts storage. Landmen and portfolio fund managers use Halsell to manage their acquisition and divestitures.
Enverus to Identify Oil and Gas Well Location and Economics
Enverus is another valuable tool for landmen. It provides data on oil and gas well locations and economics, which can inform a landman’s decisions. Enverus obtains its data through the procurement of vendors and the extraction of information from public sources to acquire and convert well log images into digital format.
Engineering Oil and Gas Well Economics with ComboCurve
ComboCurve is a petroleum engineering tool specifically designed for analyzing oil and gas well economics and production forecasts. It simplifies the process from forecast to economics, enabling the creation of type curves and efficient execution of complex economics.
Conclusion of Being a Oil and Gas Landman
The career of an oil and gas landman is challenging but rewarding. With a thorough understanding of the industry, sound negotiation skills, and the ability to seamlessly navigate the intricacies of oil and gas leasing, landmen play a pivotal role in the oil and gas industry. They are responsible for:
Identifying potential oil and gas properties
Negotiating leases and contracts with landowners
Conducting title research and due diligence
Managing relationships with landowners and stakeholders
Ensuring compliance with regulations and environmental standards
Landmen are the conduit between the untapped resources beneath the earth and the companies striving to harness these resources.
Through the use of technology and continuous skill enhancement, landmen can efficiently manage land rights, negotiate profitable deals, and make substantial contributions to the exploration and production of oil and gas.
In conclusion, an oil and gas landman plays a critical role in the oil and gas industry, managing land rights and negotiating leases for oil and gas exploration and production in improve land sales. They require a diverse set of skills, knowledge of the industry, and the ability to keep up with changes in the sector. With the help of technology, landmen can streamline their work, improve efficiency, and make informed decisions that can have a significant impact on the industry.
Frequently Asked Questions
What does oil and gas do?
Oil and natural gas are essential in the global energy market and are used for powering vehicles, heating buildings, generating electricity, and manufacturing products like plastics and solvents. They are major contributors to the global economy.
Is there money in oil and gas industry?
Yes, the oil and gas industry can be highly profitable, especially during periods of high energy prices such as during geopolitical tensions.
How much income is in oil and gas?
The global oil and gas industry's profits in 2022 reached around $4 trillion, a significant increase from previous years, as reported by the International Energy Agency (IEA) and market research by IBISWorld. These figures reflect the substantial income generated by the sector.
What is a sales CRM?
A sales CRM, or Customer Relationship Management, is a software system that enables businesses to manage and analyze customer interactions, improve relationships, and drive sales growth. It helps track communications, nurture relationships, and gain insights into customer data for better interactions.
What is the role of an oil and gas landman?
The role of an oil and gas landman involves managing and negotiating leases for oil and gas exploration and production, including creating, modifying, and interpreting essential documents pertaining to land rights.