Key Takeaways:
Avoid prioritizing deadlines, as they are often pressure tactics that can lead to low sales prices. Maintain clear communication and flexibility in agreements.
Lease offers are fully negotiable, beyond just bonus payments and royalty percentages. Consulting with a local mineral rights expert can be beneficial.
Understanding mineral worth requires a thorough technical analysis and appraisal. Use available resources, such as free property reports, to understand the value before negotiations.
Recognize the present value of money and consider it in deals, as future royalties might not hold the same worth due to market volatility.
Commodity prices significantly affect mineral value. High prices increase value, while low prices can reduce royalty payments and influence drilling activity.
Be aware that obtaining drilling permits does not guarantee drilling will occur, as operators may face unforeseen challenges and regulatory changes. This can impact future royalty values.
As a mineral owner, deciding how to get the most value for your mineral rights can be stressful. You want to make sure you are getting the best deal, but all of the paperwork and complexities can be overwhelming. LandGate's experts will share some insights below to help you rock your negotiations.
Don't Prioritize Deadlines
Deadlines on a purchase offer are often a pressure sales tactic that result in a low sales price. 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.
Don't Jump at the Sight of a Lease Offer
Lease bonus payment and royalty percentages are NOT the only two things that matter. Everything in a lease offer is negotiable. Landowners should consider consulting with a local mineral rights expert when it comes to reviewing the quality of a lease offer to determine if it is mutually beneficial- LandGate can refer mineral owners to a local expert.
“I know it like the back of my hand”
There are many factors that influence the calculation of mineral worth. Each deal deserves a fully engineered and technical analysis of the specific acreage. This is the best way to ensure you are getting a fair deal. Mineral owners should consider getting a mineral appraisal in addition to getting their free property report on LandGate's map with free lease and sale estimates.
A Dollar Today? Or a Dollar Tomorrow?
Money is worth more today than tomorrow (or some time in the future). When reading a deal, consider the present value of money. One thousand dollars of production royalties in 30 years is not equivalent to one thousand dollars in your pocket today. The oil and gas market is volatile, and the future interest in developing your minerals is unknown. Keep this in mind when reviewing payment and development proposals.
“Good Deal?”
The interests of buyer and sellers are not always aligned. Buyers want a deal. When it comes to your minerals, don’t assume the buyer is offering a number that reflects the mineral value. It is always good to get a credible, third party (unbiased) estimate. This way, you will understand what your minerals are worth, before discussions, and can flex some negotiating power.
Rollercoaster of Commodity Prices
Oil and gas prices effect the value of your minerals. When commodity prices are high, and companies are drilling wells, your minerals will be worth more than when prices are low. If commodity prices decrease, drilling and royalty payments may also decrease, even if your minerals are leased. Commodity prices affect all activity in the oil and gas industry. Check out the latest in OPEC news here.
Permits are Paper. Rigs are Real.
Operators may permit wells but never actually drill them. It is common for operators to apply for many drilling permits, only to have plans change due to unforeseen challenges such as capital restraints. New well performance can also influence how future acreage is developed (number of wells drilled, completed and produced). Government restrictions, or changes to existing regulations, can slow down or expedite the operators ability to develop acreage. Understand that outside forces can affect the value of possible future royalties.
Mineral owners can receive a free property report from LandGate with lease and sale estimates for their land. From there, landowners can publish an (optional) free listing to LandGate's marketplace for exposure to high-intent developers and buyers.
*Note: None of the information in this guide is intended to be used as legal advice. It is intended to be used as a tool to help mineral owners get the most value from their negotiations. LandGate can not provide legal advice.*
