Mineral Value or Mineral Offers

Mineral Value or Mineral Offers

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I received an offer for my mineral interest. What should I do?

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.

I received similar offers for my mineral interest. Does this mean the offer is on par with oil & gas market value?

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.

I got an offer in the mail to lease my minerals. How do I know if the mineral offer is a good deal?

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.

Be sure to educate yourself about oil and gas lease provisions before you subject your minerals to an oil & gas lease.

How much are my mineral rights worth?

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.

The landman who made an offer on my mineral rights gave me a deadline for accepting. They say the offer is off the table if I don’t accept by that date. Should I hurry up and sign?

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.

Read more negotiation tips for mineral owners.

Why did my neighbor receive a lower or higher offer for their minerals?

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

  • Mineral royalty rate
  • Amount of mineral acres
  • Existing or historical wells on the property
  • Oil and gas market conditions

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.

Different companies have approached me offering different amounts for the lease bonus and royalty on my mineral rights. What do these terms mean, and why do they vary?

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.

Learn more about lease bonus and royalty.

Is it a good idea to have my attorney negotiate the lease or sale of my minerals?

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.

What makes LandGate the #1 online marketplace?

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:

  • LandGate has the largest buyer network through partnerships with companies like Entoro Capital and National Land Realty.
  • Only LandGate provides a free valuation report so that you know both the current market value and future potential value of your property.
  • LandGate is free and only charges a fee if we are successful in closing your transaction.
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