Several reports have emerged this month discussing the falling price of oil. The EIA warns that an increase in drilling and a surplus of oil will lead to lower prices. Economists tend to agree but the good news is that it will lead to lower prices at the pump. Lower prices at the pump may be good for travel, but not always good for the mineral and royalty owner. I know that these discussions tend to make everyone nervous. When we are nervous, we make rash decisions that feel right in the moment but may not be right in the long term. While predictions can come true, sometimes they don’t. The key is to understand what is happening and make good sound decisions for your family and your legacy.
As a mineral and royalty owner, you probably get at least one offer letter per month. If you are in an area with a sudden uptick in activity, you might be getting a letter a week. When the price of oil begins to fluctuate, it is easy to start to panic and take these offers into serious consideration.
When panic wants to set in, stop and take a deep breath. Don’t panic. Take inventory.
I’m not an expert, but I know from experience that when the offers start coming in the mail, mineral buyers have more information than I do. When I get an offer – the first thing I do is go to my property and find out what might be happening. We have had several great speakers from the Railroad Commission at the last two Texas conferences discussing how to use their free services to check production on your property. The RRC provides a public GISviewer on their website that is a great basic tool to find out what is happening in the same section where you own minerals. You can locate this viewer at https://www.rrc.texas.gov/resource-center/research/gis-viewer/ - the website also includes a user guide and a video on how to search by survey. Once you locate new wells - keep in mind that the RRC usually runs about six months behind – you can find out information about that well.
Doing this initial search can be helpful because:
· Maybe you have funds in suspense that you didn’t know about
· Maybe there are new permits that you didn’t know were filed
· Maybe there is a new operator for your old well and you’ve been left out of the paydeck but thought the well was plugged
The point is, you don’t know anything about what is going on with your property unless you take inventory.
Another way you can take inventory is to do some tax research. The taxing authority for the county is a great resource to find out what kind of activity is going on around your mineral property. When you get your tax bill, which usually comes out in September, make sure to take a look and find out what new wells might be online for you. Even if you don’t find new wells, take this information provided by the taxing authority and track it on the RRC’s GISviewer. What’s happening around your wells? Are some drilled closer to your section than you think should be? Are you being left out of any wells that cross your property lines? Are you being charged taxes on wells that you haven’t been paid on yet? Operators often put accounts in suspense for varying reasons, especially after a merger. If you find discrepancies, don’t panic. That’s why you are taking inventory.
A final method you can use to take inventory of your mineral and royalty assets is to update your records through a courthouse search. There is a video available to members that shows you how to use online services to find out if your lease has been bought or sold, or if other leases and/or minerals are being conveyed around your property. Sometimes you can glean a lot about future activity from doing a courthouse search. You can find the video under the Members tab. It’s called “How do I search for my deeds and leases or other important documents?” Remember that these videos are part of your membership to NARO and NARO-TX and are always free for you to view as many times as you like.
If while going through this process you find some discrepancies in the records or find that you aren’t being paid for some wells, don’t panic. Confidently take the inventory you’ve created to your mineral manager or attorney and ask questions. Find out next steps. Get paid.
I hope that you will find that you’ve armed yourself with knowledge and now understand your property better. As mineral and royalty owners we can’t control the price fluctuations of the market, but we can understand what we own and organize it in such a manner that when we do decide to sell, we are selling out of a position of strength and confidence and not from a position of fear and panic.