Is It Easier to Sell Minerals in 2020?
Despite the fact that we are experiencing a down market, a “down time” can be a “good time” for mineral owners. One could argue that minerals are more marketable now than they were in 2019.
There is plenty of data that seems contradictory to this claim. For example, the Wyoming Oil & Gas Conservation Commission Permit and Rig Activity and Macrotrends oil price data for a 30 day period is reported as follows:
| Drilling Permits Filed | Active Rig Count | AVG WTI Crude Oil Price | |
| June 2019 | 3,301 | 32 | $58.53 |
| June 2020 | 195 | 2 | $39.27 |
That data doesn’t paint the full picture. This can be good news for those who own minerals.
2020 is a Good Time to Sell Your Minerals
Activity has dropped with the price of oil. And what is happening in Wyoming mirrors what is happening in all US Basins. So, if activity and prices are down, why would minerals be more marketable now than a year ago?
Well, at higher oil prices, operators know they can lease minerals and drill before the leases expire. And they can lease minerals for far less than buying minerals. Now that prices have dropped, there is no incentive to lease if the economics don’t justify drilling. However, at LandGate, over the past 3 months, we have found the demand to buy minerals is higher than we have seen it in two years.
This does not necessarily mean the value of your minerals has increased, but the demand and marketability seem to have increased. And minerals in the Permian Basin might be selling for more than minerals in other basins, but we are seeing that the marketability is the same.
Why Mineral Owners Are Moving from Leasing to Selling
As reported in a Colorado publication, we are finding that the economic impact of the Covid – 19 pandemic has reached mineral owners due to a decrease in demand for oil and gas. This is unfortunate, but our clients, and mineral owners in general, who were not interested in selling their minerals in the past, have changed their minds. Many mineral owners, who receive monthly royalty checks, were not prepared to see their royalty checks reduced by as much as 50%. Many mineral owners have been receiving a check every month for years. They rely on these checks for things such as rent, college tuition and medical expenses to name a few. Selling their minerals rather than leasing allows them to continue to pay the bills.
Although the price of oil has dropped, LandGate’s valuation tool creates a realistic expectation of what our clients should be paid. As a result, we have a client who accepted an offer of over $20,000 per net mineral acre this week….and that was in South Texas, not the Permian Basin. Our inventory of buyers acknowledge that our valuation tool means higher prices for them. But they are not necessarily looking for a quick return on their investment. They understand market fluctuations and changes in supply and demand.
We are certainly in an energy transition. The price of oil is down. Demand is down. Production is down and fewer wells are being produced. But unlike leasing minerals, buying them is perpetual. And at LandGate, we get minerals sold because we know the value.
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