Finally moved to the landman step in selling my families mineral rights in TX. Just wanted to get thoughts on the percentage they quoted. First they quoted 10% off the total sale and I’ve never done this so I dont know if thats okay/good/ bad. Then they said we could also do a sliding commission of 10% on the first 100k, and 7.5% up to 300k and 5 % for anything over 400K.
Is this how it works?
There are lots of details that are important that are not included… here are a few:
do you have a written engagement letter spelling out exactly what someone and you have agreed for them to do for you?
is this involving $100, $1000, $10,000, $100,000, $1,000,000… in other words, do you have any sense for the value of what you own?
has any title work been done? are you 100% sure of what you own? the metric you are looking to understand, and truly need to understand, is how many net mineral and/or net royalty acres you own
do you know what a PSA is? known as Purchase and Sale Agreement. This is the document you need to understand and be aware of. This is a contract that sets out what you are agreeing to do.
OK, those are a few of the basics.
I have never heard that? I always just paid the land man his daily rate or hourly plus mileage when needed. Then I decided what to do with what he provided me. I would then contact the operator personally and see what they offered first. Usually this was the best offer for a sales, but not always. Then I make my decision as to if I sell or not.
Just my 0.02 cents on this. MK
As old as I am I can’t understand why some people think that that it is too much trouble owning mineral rights! Mineral rights are one of the few things a person can own that will have the possibility of making them money and not have to hardly any work.
You may be surprised on how much of this you could do on your own, but to give some practical advice the auction sites take ~6%…I would do 0% up to 300 or 400K and 5% on the difference of 300 or 400 and the final sales price. If they’re not gaining anything, why are you paying them? There are public mineral buyers - Sitio, Kimbell, Black Stone; or, many PE-backed buyers have places to get a quote on their websites.
You need some sort of agreement where they can’t buy it from you for 10% of it’s worth himself. A lot of costly legal work should go into the agreement on what they will and won’t do. Not saying they would do that, just what is there to stop them from doing that? After 15 years involvement with oil and gas, I trust nobody. I actually learned that before the 2 year mark and nothing has occurred to do anything but reinforce that conclusion. Like in boxing, protect yourself at all times. If anything does go wrong, you almost never get back to even, so you should make as certain as you can that nothing can go wrong. After a handful oil and gas lawsuits and a few more that I didn’t bring because there wasn’t enough to gain, I don’t sign anything anymore if it doesn’t move $10,000 one way or the other. With inflation, I probably need to increase that amount.
As usual with this site it’s a bunch of fear tactics & no real insight into anything that helps you. 0% on the 300k? Who would work for 0%? Who’s going to sell a 700k deal for a day rate?
The numbers you shared are fine & in line with what I’ve seen. I’d just have an attorney put fresh eyes on the agreement & make sure you’re covered. Also why is this person lazy for wanting to sell there minerals? Maybe they just want money to do something else. Be better mineralowner5 be better
@TexasMineralNewbie What other asset would be appraised in this manner? “Value is $475,000, but could be $225,000 higher or lower.” A house, farmland, commercial building, collector car…none. If this landman can not do any better than that, he does not have a pulse on the market and should not be trusted to solicit all potential buyers, much less achieve the highest price.
Furthermore, for that commission rate, you should look at Energynet. At least you know you’re reaching a large pool of potential buyers.
Finally, how well do you trust this landman? What prevents him from selling to his friend’s company for $300,000 and then a resale for $700,000 and they split the profits? Just something to consider.
Absolutely fascinating topic. This whole minerals thing is interesting. So many possibilities
Keep in Mind that they can drill regardless