It is already overwhelming enough entering into a mineral estate lease without the possibility of it being a scam, but it is also something anyone with a mineral estate should be aware of and on the lookout for. If you don’t know what you are looking for, you might not be able to determine whether an offer is legitimate or not, but having even a minor understanding of what to avoid can help protect you from getting a bad deal.
Signs of a Possible Mineral Leasing Scam
If you’ve never been through the process of mineral leasing, it can be difficult to know the signs. Here are our tips for avoiding any type of scam when it comes to your mineral lease:
- Research the company – The first thing you should do when you receive a lease offer is to do a little research on that company. Oil projects are generally packaged to raise funds, or they are developed in-house and are typically majority owned by the operator and open to industry deals. Scammers usually market to the public and phone contracts offering deals should be avoided.
- Check records – Another hint that it is a scam is if you examine the operator’s records and they often move from location to location. If the deal comes from someone other than the operator then it is also a good chance it is a scam. You should always verify who owns the majority of the well and check payout records of previous wells in the area.
- Avoid amazing offers – If the deal seems too good to be true, it probably is. If the person claims that it is possible to make an extremely high return for little to no risk then it is a good indication that it’s a scam. Legitimate firms will provide written material that clearly discloses the potential for loss in the investment.
- Ask questions – Any legitimate salesperson will be happy to provide you with as much information as possible and have knowledgeable answers to all of your questions Ask the name of anyone you speak with and keep a record of what they say. Some good questions to ask are where they are calling from, their background in other oil and gas ventures, and what commission or compensation they will receive.
Consult a Professional
After dealing with any company wanting to lease your mineral estate, you should consult a professional. Especially if you are unsure of whether they are a legitimate company or not. This is why it is important to get as much information as possible from the salesperson you spoke with. Covering your bases and doing a little research will almost always point out the red flags of dealing with scammers.
We understand that this process can be difficult, and leasing some of your biggest assets can seem overwhelming. Contact Flat Iron Energy if you have any questions today, and our experts will be happy to help!