Oil Well
An oil well is the structure built at a specific location to extract crude oil from an underground reservoir or formation, using a drilled wellbore. It begins as a wellbore (the hole drilled through the earth) and becomes a well once casing, cement, tubing, and a wellhead are installed.
The wellbore is the foundational hole drilled into the earth, while the well is what is constructed inside it to allow oil and gas extraction.
Owner-First View
Every royalty payment you receive comes from a well that is producing oil or gas on your lease. Understanding the components of a well and its status gives you the foundation to interpret operator notices, royalty statements, and when to ask questions. The well is the physical asset your minerals depend on.
What Makes Up a Well
Once the wellbore reaches its target formation, construction steps transform the open hole into a functioning well ready to produce oil or gas. Each component has a specific role.
Casing
Steel pipes run into the wellbore in sections called strings. Each string lines the hole from a certain depth up to the surface, and cement is pumped into the space between the outside of the casing and the wellbore wall to hold it in place.
Wells typically have multiple casing strings of decreasing diameter, surface casing protects shallow groundwater formations, intermediate casing stabilises deeper unstable formations, and production casing is the innermost string through which the well ultimately produces.
Cement
Pumped into the space between each casing string and the wellbore wall. Cement anchors the casing in place, seals each geological formation from the ones above and below it, and prevents fluids from migrating uncontrolled between formations. The integrity of the cement job is fundamental to the integrity of the well.
Perforations
Once the production casing is cemented in place at the target formation, the casing is perforated (small holes are shot through the steel using shaped charges) to create the pathways through which oil and gas flow from the formation into the well.
The depth and spacing of perforations determine which part of the formation the well is producing from.
Tubing
A smaller diameter pipe runs inside the production casing. This is the actual conduit through which oil and gas travel from the formation to the surface.
The space between the tubing and the inside of the production casing is called the annulus, which is used to monitor well pressure.
Wellhead
The surface assembly at the top of the casing strings. It provides the pressure seal at ground level, supports the weight of the casing strings below, and serves as the structural base for everything installed above it.
The wellhead is where the subsurface well meets the surface.
Christmas Tree
The assembly of valves, gauges, and chokes installed on top of the wellhead. It controls the rate at which oil and gas flow from the well to the surface facilities, allows the well to be shut in quickly if needed, and provides monitoring points for well pressure and production data.
| Component | Role in the Well |
|---|---|
| Casing | Lines the wellbore in sections; provides structural integrity and zone isolation |
| Cement | Seals the space between casing and wellbore wall; isolates formations |
| Perforations | Openings in production casing that allow oil and gas to enter the well |
| Tubing | The conduit that carries production from the formation to the surface |
| Wellhead | Surface pressure seal and structural base at the top of the casing |
| Christmas tree | Valves and controls that regulate what flows from the well |
Types of Wells
Not every well produces oil. The type of well is determined by what it is built to do and what it produces or injects.
Oil Well
A well that produces primarily crude oil from the target formation. In Texas, oil wells are permitted and tracked under oil leases at the Railroad Commission. A single oil lease can contain multiple oil wells, each with its own API number.
Gas Well
A well that produces primarily natural gas. In Texas, gas leases are structured differently from oil leases, each gas lease has only one well, and each gas lease is associated with a single API number.
Gas wells may also produce condensate alongside natural gas.
Injection Well
A well that injects fluid (typically water or gas) into a formation rather than producing from it. Operators use injection wells to maintain reservoir pressure as production removes oil and gas, improving the recovery rate from the surrounding producing wells.
Saltwater Disposal Well
A specific type of injection well that disposes of produced water, the saltwater that comes up alongside oil and gas during production. Produced water cannot be discharged at the surface and must be injected into a permitted disposal formation deep underground.
Saltwater disposal wells are regulated by the Railroad Commission in Texas.
Well Status: What It Means for Royalties
The status of a well is one of the most important indicators for a mineral owner to track. Status determines whether royalties are being generated, whether the lease is being held, and what to expect from the operator.
Producing
The well is actively flowing oil or gas. Production revenue is being generated, and royalty payments will follow on the operator's payment schedule, typically 60 to 90 days after the production month in Texas. A producing well is the normal, expected state during the active life of a lease.
Shut-In
Production has been temporarily stopped. A well can be shut in for mechanical reasons, equipment repairs, low commodity prices, pipeline connectivity issues, or operational decisions by the operator. Shut-in wells do not produce royalties unless a shut-in royalty clause applies, which allows the operator to pay a small flat fee to maintain the lease.
Whether a shut-in well holds a lease depends on the lease terms. Some leases contain a shut-in royalty clause that allows the operator to pay a small flat fee to maintain the lease during a temporary shutdown. Without such a clause, an extended shut-in period may put the lease at risk under the habendum clause.
Plugged and Abandoned
The well has been permanently decommissioned. Cement plugs have been placed at strategic depths inside the wellbore to seal all formations, the wellhead and surface equipment have been removed, and the surface has been restored. A plugged and abandoned well can no longer produce. No future royalties will come from it.
| Well Status | Producing? | Royalties? | Lease Implication |
|---|---|---|---|
| Producing | Yes | Yes — on operator's payment schedule | Lease held by production |
| Shut-In | No | Generally no — unless shut-in royalty clause applies | Lease at risk if extended; check lease terms |
| Plugged and Abandoned | No | No — permanently | Lease no longer held by this well |
Why Mineral Owners Should Care
A well is not just background context, it is the physical asset your royalty income depends on. The condition, status, and type of well on your lease directly affect how much you receive, when you receive it, and whether your lease remains in force.
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Well status determines whether royalties flow.
A producing well generates monthly royalty income. A shut-in well does not — and depending on your lease terms, an extended shutdown may have implications for whether the lease stays in force. Knowing the current status of every well on your lease is one of the most practical things a mineral owner can track.
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The completion design affects production rates and your royalty amounts.
How a well is completed — the number of perforation stages, the interval of the formation targeted, the volume of fracturing fluid used — directly affects initial production rates and long-term decline. Two wells drilled into the same formation by the same operator on adjacent leases can produce very differently depending on how they were completed. Production rates determine the revenue base from which your royalty is calculated.
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Multiple wells on one lease mean multiple production streams.
A lease that supports several producing wells generates royalty income from each one independently. If one well is shut in while others continue producing, royalties from the active wells continue. Understanding how many wells are on your lease, and the status of each, helps you spot gaps in royalty statements.
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Knowing the difference between well types helps interpret operator activity.
If an operator drills an injection well on your acreage, it does not produce royalties, but it may be designed to increase production from nearby oil wells. Saltwater disposal wells generate no royalties either. Understanding which type of well is being planned or drilled on your property helps set the right expectations.
Where the Well Appears in the Lease Lifecycle
1. Planning
Before any drilling begins, the operator plans the well — its surface location, target formation, wellbore path, and casing design. The well exists on paper first: a drilling program that describes what will be built, to what depth, and for what purpose.
2. Permitting
The operator files a W-1 drilling permit with the Railroad Commission of Texas. This is the formal application to drill a well at a specific location. The API number is assigned to the wellbore at this stage — one permanent identifier that follows every subsequent filing about this well.
3. Drilling
The wellbore is drilled. This stage belongs entirely to the wellbore — see Wellbore for the full drilling process. The well itself does not yet exist during drilling; it is built in the next stage.
4. Construction and Completion
Once the wellbore reaches total depth, construction of the well begins. Casing is run and cemented, perforations are shot into the target formation, tubing is installed, and the wellhead assembly is fitted at the surface. The well completion process ends when the well is ready to flow. A W-2 completion report is filed with the Railroad Commission.
5. First Production
The well begins producing oil and gas. The lease moves into the secondary term of the habendum clause, held by production. This is the moment the well starts generating royalty income for the mineral owner.
6. Active Production
The well produces over months and years. Production volumes naturally decline over time. The operator monitors well performance and makes operational decisions — adjusting choke settings, managing pressure, and scheduling maintenance — to maximise recovery.
7. Shut-In
At some point the well may be temporarily shut in. This can be planned (for maintenance or a workover) or unplanned (mechanical failure, pipeline issues). The well's status changes from Producing to Shut-In in the Railroad Commission records.
8. Workover
If production declines significantly or a mechanical problem develops, the operator may perform a workover, remedial work on the well's equipment to restore or improve production. The well is shut in during the workover and returned to producing status when the work is complete.
9. Plug and Abandon
At the end of its productive life, the well is permanently decommissioned. Cement plugs are set inside the wellbore, the wellhead and surface equipment are removed, and the surface is restored. A plugging report is filed with the Railroad Commission.
A Real-World Scenario
David owns mineral rights in Midland County, Texas. In early 2023, the operator on his lease submitted a W-1 permit to drill a new horizontal oil well targeting the Wolfcamp B formation.
After the wellbore was drilled and the well was constructed and completed, the well came online in September 2023 — status: Producing. David received his first royalty payment in November 2023, reflecting September production.
In March 2024, the operator temporarily shut the well in to replace a failed downhole pump. For that month, David's royalty statement showed zero production. The well returned to Producing status in April, and royalty payments resumed the following month.
David tracked each of these status changes — from permit to completion to shut-in to producing again — without waiting for the operator to contact him.
What to Check
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Know the status of every well on your lease.
A well's status — Producing, Shut-In, or Plugged and Abandoned — tells you immediately whether royalties are flowing or not. Status changes are filed with the Railroad Commission and appear in the public record.
Mineral View's Well Report shows the current status, production history, completion details, and full document vault for any well on a claimed lease — giving you a clear picture of what each well is doing without navigating the RRC directly.
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Watch for new well activity on your lease.
A new W-1 drilling permit is the first public sign that an operator plans to drill a well on your property. Mineral View's Lease Activity tracks daily RRC filings on claimed leases — including permit submissions, completion filings, and status changes — so you can follow a well's entire journey from permit to production.
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Review your royalty statement against well status.
If a royalty payment is lower than expected or missing entirely, cross-reference the production period against the well's status for that month. A shut-in period, a workover, or a status change to Plugged and Abandoned will explain a gap. Understanding the well's history makes royalty statement review straightforward.
Important
Mineral View can help you understand well status, production data, operator filings, and regulatory context for your minerals. For questions about legal ownership, lease interpretation, or how specific well activity affects your title, review the relevant documents with a qualified landman or Texas oil and gas attorney.
Common Questions
Both are producing wells built using the same construction process — casing, cement, tubing, and wellhead. The difference is what they primarily produce. An oil well produces crude oil as its primary product, though it may also produce associated gas. A gas well produces natural gas as its primary product, though it may also produce condensate.
In Texas, the Railroad Commission classifies wells as oil or gas based on the primary product, and the two types are tracked under different lease structures — oil leases can contain multiple wells, while each gas lease has only one.
Yes. Most oil wells produce some natural gas alongside crude oil — this is called associated gas or casinghead gas.
Whether the mineral owner receives royalties on both depends on the lease terms and what the granting clause covers. Similarly, gas wells often produce condensate alongside natural gas. The royalty applies to each substance produced and sold, as defined in the lease.
Yes. A shut-in well is not producing, so no production revenue is generated and no royalty payment is owed for that period. Depending on your lease terms, a shut-in royalty clause may allow the operator to pay a small flat fee to maintain the lease during the shutdown, but this is not a substitute for royalty income — it is a lease-maintenance mechanism.
If a shut-in period extends without a valid savings provision, it may also have implications for whether the lease stays in force under the habendum clause.
