Selling Mineral Rights in Oklahoma

June 2, 2023

In 2019 and 2020, many oil and gas mineral owners in Oklahoma were not interested in selling their oil and gas mineral rights. In fact, they wanted LandGate to assist them in getting their minerals leased. What we started seeing at the end of 2020 was an increased desire to sell. Why the change? Seems to be a combination of oil prices bouncing back to $70/bbl and the financial stress placed on a lot of Oklahoma mineral owners due to the pandemic. LandGate wants to answer many of the questions we are hearing from our Oklahoma mineral owners. This guide will focus on selling mineral rights, as well as selling monthly royalty payments owned by mineral owners who have leased their minerals to a company that has successfully drilled a well.

What are Mineral Rights?

Mineral ownership constitutes the right to explore for and produce oil and gas. The mineral owner has the right to:

Enter onto the property to explore for oil & gas
Authorize another entity to enter the property and explore production opportunities by granting an oil & gas lease
Receive oil & gas lease payments, including bonus and royalty payments
Use a reasonable amount of the surface to explore for hydrocarbons

What is a Bonus Payment?

A bonus payment is a one-time payment made to the mineral owner at the time the oil and gas lease is signed. It is calculated on a per net mineral acre basis.

Example of a bonus calculation:

If you own a 25% mineral interest in a 640-acre tract, then you own 160 net mineral acres
Net acres = Mineral Interest x Gross acreage, or 25% x 640 = 160 NMA
If the offer is $350/net mineral acre, you will receive a bonus check in the amount of $56,000 ($350X160)

What is a Royalty Payment?

When a mineral owner grants an oil and gas lease to a developer, the exclusive right to drill for oil and gas is transferred to the developer. In exchange for granting the lease, the driller agrees to pay the mineral owner a royalty. The royalty is a percentage of the proceeds from the sale on oil and gas produced, which is typically paid monthly or quarterly to the mineral owner.

Why Would Someone Want To Lease or Buy Minerals If They Are Not Producing?

Just because your mineral rights are not producing oil and gas now does not mean they won’t be producing in the future. There are many reasons why your mineral rights might be more valuable in the future than they are now. Specifically, changes in the price of oil and gas and advances in technology play a big role in determining the value of mineral rights. Advances in horizontal drilling along with hydraulic fracking have improved the economics for operators, making minerals more valuable.

Why Should you Sell Your Oklahoma Minerals?

Common reasons why mineral owners have decided to sell their oil and gas mineral rights:

To take advantage of the additional income to help with unexpected expenses
They are elderly and want a big cash payment now to enjoy their retirement
They saw the price of oil drop to below zero last year and now want to sell at $65/bbl
They know they will receive more money selling their oil and gas minerals instead of leasing

Why Would You Want To Sell Your Minerals If They Are Producing?

All mineral owners like cashing in on that royalty check in the mail every month! However, many don’t know that they can sell the future income stream from their royalties for cash up front, until they receive an unsolicited offer in the mail. There are thousands of individuals and investors actively trying to buy oil and gas royalties. Instead of waiting years for royalties to trickle in, mineral owners are taking advantage of selling their royalties up front. Royalty payments are never guaranteed, so selling future royalties as a lump sum up front does away with this risk.