About a decade ago, I inherited a bunch of fractional interests in some mineral rights purchased by my great-great-grandfather that have been divided and divided over the years. The recording keeping through the generations has been poor, and trying to figure out what I actually own has been challenging. One of my aunts and I, over the years, have separately tried to catalog what we inherited and we think there are about 50 different tracts across 5 states (TX, CO, OK, MS, LA). Some are actively producing, and some aren’t likely producing at this time.
For a handful of reasons, I’m ready to divest myself of my mineral rights.
What is a good process to
identify my mineral rights to ensure I have a complete list?
get a sense of a viable offer?
identify a potential buyer or buyers?
While I’ve done a fair amount of reading posts on this site, and attempted working with a landman in Texas to start this process, I’m in a bit of a bind – my annual income from these hardly justifies paying anyone to help me sell. I have some notion of process, but I’ve seen some really thoughtful folks on here give clear guidance on how to proceed. Most things I read lean towards cleaning up records to maintain ownership, or selling specific rights… I need some more holistic guidance.
(And before anyone tries to convince me it is easier to keep, I’ve just going through three rounds of messy estate stuff and want these cleared before my successors ever have to tangle with the decades of poor record keeping.)
Thanks in advance for your thoughts. I’ll do my best to answer your questions to help me!
It’s good you’re taking a cost cautious approach to this. What’s your annual revenue like off of all of them? If you have non operating working interests, I’d start by trying to sell them back to the operator.
This is a really tricky process and there are very few people that can handle it well. The key is to do the legwork initially to find all the properties and get a proper descriptions. Most county records deed records can be accessed online with a little work. If the property is in sections the descriptions are easy. They can be way more complex if you happen to have anything in East or South Texas. If you are going to divest, get it all done. What I have seen most time is that the seller focuses on the producing properties and overlooks the non-producing, which creates problems down the road in the case of future probates etc. Get scans done of all the original deeds, leases and any necessary probates and start looking for a buyer.
There is a significant overhead cost with doing a multi-county sale properly. All the probates really need to be filed along with the deed/deeds. That gets expensive very quickly. Make sure the buyer knows this is their cost. You will also have to decide if there is going to be one omnibus conveyance or one for each county. When I have done this in the past, I have usually done two duplicate originals for each State. Do conveyances for each parish in Louisiana. If you are in Texas also decide who pays any unpaid taxes. Good Luck!
@Diesel - in good year, for all the interests combined, I might see $4k-$6k.
@spud - sounds like you are suggesting a county-by-county approach, and that having deeds for each is key to the sale? Or is having a sufficient detailed list all I need? I’m hoping that the level of detail I need is mostly the tract information.
I’m assuming I would need to talk to each county to get those. I guess I can ask in each county forum for specific information on those counties?
For non-producing interests, sounds like the operator might be my best bet?
This is very helpful. And sounds like it’s going to be a tedious pain in the ….
I, like others, are kind of guessing at the best way to handle this without looking at the paperwork.
Assuming you want to sell these with a minimum of effort, I would try to find somebody who would make an offer on all the properties you can identify and based in part on the check stubs you are receiving. I would suggest it be a single bid for all the properties.
I’d recommend getting all your paperwork together and organized, then develop a spreadsheet cataloging your properties. If you want to divest, the more insight and transparency you can give to a buyer the better. What counties, or how many counties are you working with? You’ll have to file paperwork in each one & each county has their own recording requirements.
@tim_dowd i have a decent spreadsheet of anything that has proceeded in the last 5-10 years, and am hoping that would be useful to a prospective buyer.
How much legwork is it reasonable to expect a buyer to do? My assumption is their capacity to pull information way exceeds mine! But that said, I am looking at 5 different states.
Without answering your question directly, there are at least two general rules at work. (There are actually a lot more, but we’ll go with two for now.)
The hotter the area, the more work a prospective buyer will put into the pre-due diligence. I’m kind of guessing that as this is spread out, and the annual income isn’t much, a prospective buyer won’t put much more effort into this than looking at your spreadsheets, your check stubs and perhaps a list of legal descriptions. That is a good start.
The more you have it organized, the more likely it is that you will get more than one bidder. if the property is spread out and the income is not tremendously great, a prospective buyer won’t want to put in a lot of extra work. The easier you make it on them, the more likely they will bid on it. To be extreme, if a seller said, I have a bunch of properties, but I don’t know what they make or how many I have, then a prospective buyer would just walk away. too much work.
A third rule, perhaps, is that mineral buyers don’t want to kiss too many frogs, if they don’t think they will become princesses.
As @tim_dowd notes, the spreadsheet is a good start, but there would be legal work to do in each state for an overall sale. Another way you could off load the
caretaking details besides selling everything, would be to enlist a mineral management person or firm to put some knowledgable people on your side.
Your manager or managers could probably fill in some of your missing information, answer your questions and take care of the tasks you don’t want to do or leave undone for your successors. It would cost something, but arranging a sale is not necessarily cost free and there is a risk of loss in a hasty sale.