Hidden Costs of a Mineral Ownership Report


Jan 01, 2018

Hidden Costs of a Mineral Ownership Report

The hunt for prime acreage culminates in the title process. Oil & gas companies looking to lease a tract of land must first identify the current mineral and surface owners through the complicated process of running title. It is a moving target as mineral rights continuously change hands, are divided, and purchased. Murky processes, lack of standards, and redundancies create a minefield of hidden costs with a mineral ownership report often costing thousands in legal fees.

Running the Maze: Courthouse to Mineral Ownership Report

When trying to acquire acreage in the hot plays, like the Permian Basin, courthouses can be standing room only. Resulting in a frenzy that leaves E&P companies and land brokers throwing money and people at the problem often sacrificing accuracy for speed. Indeed, recent research reveals the number of title defects companies are willing to accept in favor of closing the deal.

Starting at physical and digital courthouses, land managers task field landmen with data mining vast volumes of land records. Key ownership data is extracted from title instruments and often recorded on physical note cards then manually collated in spreadsheets or legal pads. Chain of title and ownership calculations are usually done inside of a spreadsheet. Moreover, adding new data to the mix often requires landmen to backtrack and build reports again by hand.

Running title is a murky and manual process, in which provides little insight to the in-house landman on what's happening in the field. It is a process devoid of standards and inherently prone to human error and duplication of effort, resulting in significantly more time being spent on title than is truly necessary. These hidden costs amount to a billion-dollar problem for an industry that spends billions annually on title.

Consider an example in which 8,000 acres are under consideration in West Texas. The tracts involved cover hundreds of surface and mineral owners who must be chained back to sovereignty. Billable time skyrockets as legal staff plow through thousands of instruments, manually perform calculations and prepare mineral ownership reports by hand. The most significant hidden cost of all is the risk companies assume through error-prone manual processes.

Bringing Transparency, Standards, and Accuracy to Title

Fundamentally, running title and generating a mineral ownership report is a data management problem. As such, land departments will benefit from the right technologies that allow for optimal management, validation, and governance of title information. Centralizing and standardizing the way ownership data is collected and managed brings much-needed transparency to the title process, allowing land brokers and in-house landmen to drive new efficiencies across title projects.

As much as 75% of the title process is manual and repetitive. Armed with the right tools, E&Ps can now accelerate title projects while increasing title accuracy by automating much of the process, including these steps:

  • Centralized Workflow
  • Flowchart Generation
  • Instant Runsheet and Ownership Reports
  • Accurate and Instant Calculations

By automating these steps, you can reduce the title process to just three phases: 1) landmen pull instruments, 2) input title data, and 3) verify mineral ownership report using the work product already built by the landman. Title management software will automatically generate the run sheet, chain of title and mineral ownership report for you. Combined with standardized data input, data validation, and a real-time view of title projects, E&P companies can run title faster, more accurately, and at significantly lower cost.

The Tracts Solution

Through its cloud-based title management software, Tracts provides land departments with a simple and effective way to generate mineral ownership reports. The software-as-a-service (SaaS) is designed to orchestrate title projects at every level, enabling field landmen to focus on pulling and recording instruments through a standard digital note card while giving in-house landmen the oversight they need to control their title process. Importantly, Tracts automates manual tasks, reduces project time, and reduces legal fees associated with title by 50%.

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