It is very common for mineral buyers and flippers to mass mail mineral owners and try to buy mineral interests from those who respond. The worst thing you can do as a mineral owner is make an uninformed financial decision when it comes to leasing or selling your mineral rights.
LandGate’s goal is to equip mineral owners with information that assists them in maximizing the value of their mineral rights. A mineral owner can search for their property at landgate.com to get a free estimated value of their oil and gas rights on a dollar per acre ($/acre) basis. Any client who lists their minerals for sale or lease on LandGate’s marketplace will receive a free valuation report showing both the full reserve value and the market value of their mineral assets. There is no obligation to sell on LandGate’s marketplace and any offer can be accepted, rejected or countered.
Read our rights owner’s guide to better understand what to do in this situation and learn how LandGate can assist. You can also learn more about unsolicited offers for your oil and gas royalties and how you should handle those offers.
Similar mineral rights offers are not an indication of market value. It is common for mineral buyers and flippers to create subsidiaries wholly-owned by the same parent company. These subsidiaries send offer letters at the same time.
For example, one subsidiary sends an offer for $1,000/ac, the other for $1,100/ac, and another of these subsidiaries sends an offer for $1,150/ac. The mineral owner will think that the market value is around $1,100/ac, and may feel great negotiating a deal at $1,400/ac. The real market value could be 5 times the amount being offered by these buyers. This tactic is orchestrated by the mineral buyer to give a false sense of market value to the mineral owner.
Read LandGate’s rights owner’s guide to better understand what to do in this situation and learn how we can assist. You can also learn more about unsolicited offers for your oil and gas royalties and how you should handle those offers.
It may not be. Operators lease land from mineral owners to develop oil & gas wells and sell the commodity to the market. Since you own the minerals, they must lease the land from you and offer a share of the revenue in addition to other terms specified in the lease such as lease bonus and royalty. In an ideal situation, these lease agreements should be a win/win for both parties. However, when it comes to understanding the economics, the operator is at an advantage having advanced technical knowledge, staff, and resources.
That’s where LandGate comes in, to provide the landowner with as much information on their mineral rights as the operator has at their disposal. LandGate can provide an appraisal of your mineral value before you accept any offer to confirm you're getting the best possible price for your assets. LandGate offers a free valuation to any client who lists their oil and gas property. We can assist you with getting your minerals leased under the best possible terms.
Fill out your information and we’ll contact you regarding a free valuation and begin assisting you with your lease agreement.
Be sure to educate yourself about oil and gas lease provisions before you subject your minerals to an oil & gas lease.
LandGate provides a free estimate of your mineral rights directly online. Simply type in your address at landgate.com to get a free estimated value on a dollar per acre ($/acre) basis. Only LandGate provides this information to you at no cost and with no obligations. If you choose to sell on the LandGate marketplace, you’ll receive a valuation report so that you make informed decisions when you do receive offers on your oil & gas rights.
Start by finding your property on our website.
Definitely not! Deadlines on a purchase offer are a pressure sales tactic and they often result in a low sale or lease price for your mineral rights. Keep calm in this situation, and don’t allow the urgency to impact your better decision making process. Professional interactions should involve clear communication with room for questions and flexibility within agreements.
While the deal terms may or may not be fair, it is important to be informed about the terms of the mineral deal and the value of your asset. In most cases, creating a competitive situation where multiple buyers are making offers on your minerals is the best way to maximize the sale or lease price of your mineral rights.
A nearby sales or lease price is not a measure of what your minerals are worth. The primary consideration when it comes to what your minerals are worth is geology. The subsurface is just as dynamic and changing as the surface, only we can’t see it. Geology is a key driver in mineral value and can change drastically within a short distance, which means different mineral values for properties that are nearby.
There are other important factors to consider when it comes to the value of your mineral rights such as
This is not an exhaustive list of reasons why your neighbor may have received a higher or lower mineral offer. For example, oil prices might have changed between your neighbor’s transaction and your negotiation, or a highly productive well could have been drilled in your area increasing the value of your minerals. LandGate’s automation allows us to get information about activities that help accurately estimate the value of your minerals.
Do not allow a neighboring sale or lease price to impact your negotiations in leasing or selling your oil and gas rights. Instead, focus on the information that is relevant to your property, the current market, and how to maximize the value of your property.
Check out our five tips for mineral owners.
A lease bonus is a one-time payment made to you, the mineral owner, on a per/acre basis at the time the lease is signed. Royalty is a percentage of the proceeds from the sale of production paid monthly to the mineral owner.
Historically, royalty retained by the mineral owner in the lease has ranged between 12.5% to 25%. The lower royalty you retain in the lease, the higher net revenue is retained by the operator. As an example, if you retain a 25% royalty, the operator could pay 100% of the cost to drill, complete and market the production and retain 75% of the revenue interest. If you retain a 12.5% royalty, the operator retains 87.5% of the revenue and recovers its investment much faster.
One thing to consider is that operators prefer to drill on oil and gas leases with a lower royalty. So, accepting a lower royalty and taking more cash in lease bonus could increase the chance your minerals get drilled and produced. Some mineral owners could receive a much higher lease bonus if they retain a lower royalty. Royalty is only received by the mineral owner if a well is drilled and completed, and if it is a producer. If a well is drilled and does not produce oil or gas (a “dry hole”), or if a well is never drilled, the mineral owner would have benefited from receiving a higher lease bonus.
We have a great respect for attorneys and work with them on legal matters, but attorneys cannot value your minerals and are not professional mineral negotiators.
LandGate has experienced oil & gas professionals and negotiating lease or sale agreements is what we do. LandGate works for you for a small commission like a real estate agent; the more we can get you and the faster, the better for you and us. Our interests are completely aligned with yours.
An attorney gets paid a large hourly rate, and unfortunately, the more difficult your transaction becomes and the longer it takes, the more they get paid by you. If an attorney offers to work for a commission, they are likely in violation of ethics rules and can face disciplinary action by the ethics board of the state.
You can use an attorney to review the legal documents for the lease or sale of your minerals. If you do not know of an attorney, we can refer you to an attorney in your state specialized in oil & gas transactions.
Start by finding your property on our website.
LandGate is the highest rated and reviewed property rights marketplace. We have five star ratings from Google and Facebook. Assisting our clients is our number one priority.
LandGate works directly for you, the property owner. We are motivated by the commission of the sale to get you the best possible deal for your mineral rights. Many online listing platforms scrape deals from other sites and charge subscription fees to oil & gas buyers to view the deal. Other platforms charge buyer commission fees, meaning that they are not working with your interest in mind. Working with LandGate has many benefits, which include:
Contact LandGate to list your oil & gas minerals for sale.
There can be several reasons why your mineral royalty checks are reducing over time. The most common reason is that oil & gas production declines with time. Just like poking a hole in a balloon, the pressure drops as air is released. In fact, the majority of an oil & gas well's cash flow is generated in the first two years of production. Eventually, the decline stabilizes but is still declining.
When an operator drills new wells, the production is likely to jump back up, but it might take decades for an operator to circle back to a lease and drill new wells.
With that in mind, it is important to realize that previous royalty checks are not a measure of how much your minerals are worth in the future. This is why LandGate uses a reserve-based valuation approach similar to what oil & gas companies use to evaluate economics. The mineral rights valuations that LandGate provides ensure that the landowner is fully aware of the future economic potential of their minerals.
Many other factors can affect a royalty check including commodity prices, pipeline constraints, and wellbore problems.
There are several possible reasons you’ve stopped receiving royalty checks. Perhaps the most common reason is that the well(s) stopped producing, or the operator temporarily shut off the well. There could be a number of reasons a well stops producing. Such as, anything from the well having problems to it not being economically viable at lower commodity prices.
Another reason is that the contracts which dictate the sale of oil & gas (called marketing contracts in the industry), are being renegotiated or transferred. Unfortunately, these contracts can sometimes result in lower prices of oil and gas, ultimately hurting the mineral owner. Normally, a mineral owner does not have to pay for transportation costs, but sometimes the operators add it to the lease or try to apply the transportation cost to the oil or gas price.
As an engaged mineral owner, it’s important to understand what the operator is doing and why they are doing it. If an operator is using tactics that are not favorable to the mineral owner, it can be difficult to resolve these issues. LandGate provides support in negotiations so that mineral owners end up with favorable conditions.
One reason people sell minerals and royalties is because they are frustrated with the operator and would rather own minerals somewhere else under a credible operator. Our marketplace also provides favorable lease and sell options on our online marketplace for free.
Additionally, LandGate provides free production and well data so that mineral owners can see the activity of their operator and make informed decisions.
Prior to receiving payment on your minerals, you would typically receive documents from the operator indicating a well may start producing soon . You will first receive a Division Order from the operator. A Division Order is basically a document which reflects the ownership interest you have in production from a well. If you agree with the interest you are being credited with, you will sign the Division Order and return it to the operator.
You should begin receiving royalty checks no later than two to three months from the time a well starts producing on your property, assuming you own the mineral rights associated with the producing well. If you think you should be getting paid a royalty, but you’re not, it’s best to contact the operator in your lease agreement to try and resolve the issue as quickly as possible.
LandGate provides free well and production data so that mineral owners can find out if a well is producing on their property and take the necessary steps to ensure they get paid by the operator.
An operator cannot steal your minerals, but can steal your mineral resource, meaning an operator can exploit your minerals without your consent. This process is called "forced pooling". There are several steps that the operator must take to force pool you:
Most mineral owners think that their mineral resources cannot be taken without their consent and throw away the letters and notices from operators. In terms of negotiation, when you are receiving notices from operators, this is when your minerals likely have the highest value. Contact us right away so we can help to quickly find you a top mineral lessee.
Depending on the rules of the oil & gas commission of the state, you can still get a good deal for the lease or sale of your minerals even after you have been forced pooled by the operator. It gets more complicated, but for the best deal we recommend you contact us before the wells start producing.
The entirety of your minerals doesn’t get force pooled, but your mineral resources get force pooled well by well. Most of the time, an operator will permit several wells and force pool you for all these wells. Yet until the well is producing, we can help you get a good deal for a lease or sale of your minerals. If a well has started producing, you might have lost some value for that well, but you can still see a return on the remaining wells that are left to be drilled if you act quickly. We have helped numerous mineral owners in your situation.
Remember to research the forced pooling laws by state. Again, depending on the rules of the oil & gas commission, you might still get a default royalty from the operator. However, it won’t be the best royalty percentage and you would have missed a lease bonus payment.
Forced Pooling (sometimes called Statutory or Compulsory Pooling) is a legal mechanism that allows operators to drill wells when they are unable to get 100% of the mineral interest owners to commit to support the drilling of a well.
In terms of negotiation, when you are receiving force pooling notices, even after a hearing, this is when your minerals likely have the highest value. Forced pooling is NOT in the best interest of the mineral owner. If you've received communication threatening forced pooling, seek help right away. Contact us and we will provide oil & gas industry expertise to help quickly find you a mineral lessee.
An AFE (Authorization for Expenditure) is a bill for the oil well(s) to be drilled. Since you haven’t leased (yet) and are currently considered a non-operating partner, the Operator sends an invoice for your cost share of these wells. The cost share is determined by your working interest in the wells, which is calculated using your gross acreage, mineral interest, and the size of the Drilling Spacing Unit of the wells to be drilled. An AFE is an estimate of cost, the actual cost to be paid will be known later. Do not panic, but act quickly and contact us right away.
In terms of negotiation, when you are receiving several operator notices, especially these invoices, this is when your minerals likely have the highest value. Contact us and we will help quickly find you an oil & gas lessee.
Oil and gas is a cyclical commodity, meaning that there are periods of high demand followed by periods of high supply. While these prices will impact the perceived value of an asset, most oil & gas companies and buyers understand supply and demand cycles.
The reality is, if your oil and gas minerals were valuable before, they are still valuable today. You can make money on your mineral rights even when oil or gas prices are low. Perhaps more important than oil or gas prices is the development by operators in your area. The old adage holds true, even for oil & gas mineral rights: location, location, location.
LandGate closes deals for our clients on a regular basis. In any market, it's best to understand the value of your minerals before accepting an offer. That's why we start with an accurate appraisal of your mineral rights. Our clients have the same information as oil and gas industry professionals regarding the value of their mineral rights. We also market your listing to many mineral lessees/buyers, so you get more offers on your mineral rights.
Read more about how selling in 2020 may be the best option.
This is a very common theme that we often hear from mineral owners. The truth is that minerals should be looked at as a financial vehicle similar to stocks and bonds. Since mineral values are directly correlated to the commodity price of the minerals of concern, their value can dramatically increase or decrease based on market conditions.
For instance, oil and gas minerals will trade for a much higher price when there is a high commodity price compared to a low commodity price. Timing of production can also have a heavy influence on the value of minerals, but commodity price is one of the biggest drivers. In addition, production moratoriums and other government regulations can negatively influence mineral values. In summary, the value of your minerals can and will vary greatly over time.
If you’re a mineral owner in New Mexico or Colorado, and they are putting tighter regulations in place, it may serve you best to consider selling your mineral rights now. While oil and gas will continue to be produced into the near future out of necessity, there can be market corrections or political risks that actually lower the value of minerals in certain areas.
The LandGate marketplace is a great way to sell minerals in one state and buy minerals in another. Oil and gas companies do this all of the time and savvy mineral investors understand that hot plays come and go.
There is no obligation to sell your mineral rights on LandGate’s marketplace. We recommend you list your mineral interest, review the valuation and offers received, and make the decision that is best for you. Fill out LandGate’s contact form and we will be in touch with you right away.
It is important to understand the terms of your mineral lease and make sure the operator isn’t bending the rules, so to speak, and trying to claim that your lease is still active. Since lease agreements generally require a producing well to hold the lease, the most important thing you can do is make sure that wells are producing on your property.
If you stop receiving royalty payments from the operator, go onto LandGate’s website and follow these steps:
Unfortunately, not all operators respond or ‘play nice’ when it comes to these contracts. Hiring an attorney is costly. The longer it takes to resolve the issue, the happier the attorney will be. As an alternative, you can sell your minerals and receive money for your assets while avoiding the headache of dealing with a non-responsive operator. There is no obligation to sell, so listing your minerals on LandGate’s platform provides you with options to make the best decision.
Fill out LandGate’s contact form and we can explain the process of a no-obligation listing.
Operators tend to look for any loophole, or offer vague arguments, to try and claim that a lease is still valid, even if a clear reading of the lease agreement shows that is not the case. If you have contacted the operator and the operator does not want to release the lease, which is all too common, you are in a difficult position of either exposing yourself to costly legal counsel, or choosing to sell your minerals. The benefit to selling your minerals is that you can get out of the battle with the operator and cash in on the value of your property with no out-of-pocket expenses.
One tactic that operators deploy to try and hold a lease is to produce a well for one day out of the month (or sometimes less often), so that they can report production while minimizing their costs. It is important to review the terms of your lease to make sure the operator is meeting their production requirements.
If you suspect that the operator is not meeting their required production levels, it may be a costly legal fight to try and get the operator to release the lease. If you sell your minerals, you can avoid the back and forth with the operator and cash in on the value of your property with no out-of-pocket expenses.
The process of drilling a well starts with the operator filing a permit with the state. The well is permitted, then spud (drilled), and finally completed and produced. The well status can be found on LandGate’s map for free. Simply locate your parcel, make sure the well layers display permits and drilled wells, and see if there are any permits or wells on your property. You can click on the permit to view the production start date.
The production start date is LandGate’s estimated date of when that permit will be drilled and completed. LandGate uses an algorithm that considers the number of rigs the operator is running in the basin, the number of wells the operator can drill, and the frequency of completions by the operator, all to determine an estimated start date.
If you do not see any permits on your property, it is unlikely that the operator will drill a well on your property within 1-2 years. If the start date on a permit is 1-2 years in the future, the operator will not likely drill the well any sooner. The key is to make sure that the operator isn’t making empty promises. If they are, it may be in your best interest to sell rather than trying to fight the operator. Contact LandGate to learn most about listing your minerals for sale.
A Pugh Clause in an oil and gas lease agreement limits the holdings of non-producing tracts of land after the primary term of the lease. It’s a good thing for a mineral owner to add to the lease because an operator will likely write language in the lease that will allow a small well producing very little to hold the lease forever.
A Pugh Clause will make it easier for a mineral owner to have the lease released and to get a new lease with a new lease bonus. A Pugh Clause in the lease will also incentivize the operator to drill more wells to keep the lease active, hence it will likely generate more royalties for the mineral owner.
Additional information on mineral lease provisions can be found here.
Every state has unique mineral rights laws, so it's best to check the law as it applies to surface use by a mineral owner in your state. With that said, the mineral owner has a right to reasonably use the surface to extract the minerals on the property. The mineral owner or the operator leasing the minerals, and surface owner, will enter into a voluntary agreement called a surface use agreement. The surface use agreement (SUA) dictates how the operator may use the surface to drill for oil & gas.
Generally speaking, all parties want to maintain a positive and professional relationship. The surface owner will want the operator to prevent spills, maintain equipment, and protect certain natural elements of the land. On the other hand, the operator will want to make sure to have access to roads, easements, and drill sites.
Mineral rights ownership on a property is often different than surface ownership. While the original landowner may have owned both surface and mineral rights, these rights can be segmented, severed, or sold.
Typically a surface owner will own the entire surface. Very often the mineral rights on a parcel are owned by multiple owners, so it is possible that you also own the mineral rights with other mineral owners.
You can check if you own the mineral rights at your county clerk's office. You need to trace the full history of your ownership through all the deeds and see if the minerals on your property (or part of them) have ever been ‘reserved’ when the property was sold or transferred. It would look something like “Reserve Minerals” on the Deed. If you see the minerals have been reserved in the conveyance of the title, it is likely that you don’t own them anymore. This process is called running title, which can be very complex and is usually handled by a professional landman.
If you need help determining mineral rights ownership, let us know and we'll work with you. There may be other ways to profit with surface ownership, so give LandGate a call if you want to learn more.
Working interest is the owner’s share of the cost of oil & gas extraction. Revenue interest is the share of the revenue generated from the sale of oil & gas. A mineral owner typically owns only a revenue interest. The remaining working interest and revenue interest is owned by the operator and its partners. The operator may seek investors, called non-operated working interest partners, to share in the cost and revenue of a particular oil & gas drilling project, but the investor does not have control over the operations.
LandGate’s marketplace includes listing of non-operated working interest and of operated working interest. Our team of experts have past experience working with operators as well as transaction experience in acquisition and divestitures at the corporate level.
Some common terms include:
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