Many royalty and mineral owners in the US weren’t interested in selling their minerals in 2019 and 2020. We see a rise in the desire to sell oil and gas royalties by 2021. What’s causing it? This is most likely due to a combination of low oil and gas prices in the last two years, financial stress from the pandemic, and $70 oil. Below we will discuss mineral and royalty rights, but this guide will focus on the sale of your monthly royalties.
What is a Mineral Interest?
Mineral ownership is the right to search for and produce oil or gas. Mineral owners have the right to:
- Explore the property by stepping onto it
- Allow another person to access the property for exploration (by granting an Oil & Gas Lease).
- You will receive the benefits of granting a lease, such as royalty consideration.
What is a Royalty Intent?
A driller is granted the exclusive right to drill, develop and drill when a mineral owner grants an oil-and-gas lease. In return for the lease, the driller must pay the mineral owner an oil or gas mineral royalty. This is a percentage from the profits of the oil and gas production and is paid to the mineral owners monthly.
For what would you want to sell your oil and gas royalties?
The clients often decide to sell their royalties for the following reasons:
- Unexpected medical costs
- College expenses – Their income fell during the pandemic.
- They are old and would prefer a large cash payment now rather than a monthly royalty check.
- They were shocked to see oil prices drop below zero last year and are now willing to sell their oil at $70/bbl.
Every month, royalty owners love to receive their royalty checks by mail. Many royalty owners want to know how much money someone would pay them for future royalties. Most oil and natural gas royalty owners do not realize that there is a market for oil and gas royalties until they receive an unrequested offer from someone interested in purchasing oil royalties. You might be unaware that there are so many companies and individuals who want to purchase royalty interests in producing oil.
Uninformed royalty owners are often made to accept offers by oil and gas royalty buyers. A few royalty owners may have noticed that their monthly checks for royalty payments are decreasing. This is not good news as royalty owners depend on this check every month. You might be tempted by someone offering to pay you 24 times (2 years) the amount of your last check. You might not know that the operator could be drilling more wells and that your royalty check will increase each month. The future drilling plans of royalty buyers will not be disclosed to you. We know what’s happening right now and in the future and can help you get more cash if your royalties are up for sale.
We are the best resource for selling oil and gas royalties.
- We can be your guide just like SEC guideline royalty valuations
- To maximize your sale price, we will include future (undrilled) wells in our valuation
- To help royalty owners understand our valuations, we provide well and production data at no cost.
- Your personal data will be prepared for royalty buyers to view before they offer it.
- We will market your royalty interest to thousands of buyers every month
What is a Valuation?
The valuation report provides a forward-looking financial analysis of the projected oil and natural gas reserves and the potential value they could generate. Many companies that claim to offer the best deal don’t know the actual value of their assets. Some companies will use the average of six months’ worth of royalty checks and multiply it by 36 (3 years) to shop for oil and gas royalty interests at that price. Keep it! That was the average royalty check when oil was selling for $45/bbl. What about wells they’ve drilled but have not completed on your minerals yet? What about wells that were permitted but have not been drilled on your minerals yet?
In many places, you can find a free expert valuation by a team of geologists and reservoir engineers. It can help you maximize the royalty interest you have to make the most of it and get the best price.