I hoping for expert advice! I inherited Mineral rights in several sections in Andrews and Gaines counties of W. Texas. There are several producing wells. I know very little about this business except the monthly royalty checks. I’m constantly getting offers to sell. I have know idea of what the value is of these wells and mineral rights to the other non-producing areas. Where does one begin to somehow get an idea if the value of the wells/mineral rights?
Richard:
To begin, I would never consider selling minerals unless your in need for some quick cash as one day these minerals could provide a source of income for years. If you are considering selling, there are several methods for getting a value for the minerals. One way is to estimate what kind of revenue they can generate, that is, if a well was drilled on the minerals, how much money would it generate for you. That involves alot of speculation. You can't accurately predict what a barrel of oil will sell for in the future. Another way is to look at the sale price of similiar properties. Unfortunately, it is very hard to find this data and just because a similiar property sold for some amount doesn't mean that it was sold for too little or too much. Also remember, all it takes is one lucky wildcat well to discover a new field, so it can be very easy to under value minerals. Finally, since you can't predict the future of what will or will not occur in regards to drilling, it remains a difficult task to put a value on minerals.
Mr. Mallory
Thank you for your insight and advice. Everyone I have ever talked to about this have advised not to sell. That seems to be the collective wisdom. Thank you again.
charles s mallory said:
Richard:
To begin, I would never consider selling minerals unless your in need for some quick cash as one day these minerals could provide a source of income for years. If you are considering selling, there are several methods for getting a value for the minerals. One way is to estimate what kind of revenue they can generate, that is, if a well was drilled on the minerals, how much money would it generate for you. That involves alot of speculation. You can’t accurately predict what a barrel of oil will sell for in the future. Another way is to look at the sale price of similiar properties. Unfortunately, it is very hard to find this data and just because a similiar property sold for some amount doesn’t mean that it was sold for too little or too much. Also remember, all it takes is one lucky wildcat well to discover a new field, so it can be very easy to under value minerals. Finally, since you can’t predict the future of what will or will not occur in regards to drilling, it remains a difficult task to put a value on minerals.
Not selling is definitely an agruement that you will hear a lot. However, realize that mineral buyers and oil & gas companies buy and sell minerals on a daily basis for many reasons.
If you are good at buying cars and selling them for a profit, it makes sense to sell minerals that arent doing much for you now and using that money to do something you are good at.
I personally have sold minerals on a few occassions for different reasons. Needed money to build a house, needed money to pay off some bills, even needed money to buy more minerals.
Always think outside the box. If EVERYONE is telling you not to sell, try to find a reason why you should because obviously people do. I am not telling you to sell, I simply want you to make sure that you think about it and weigh both sides.
Adam,
Thank you for your feedback. Using your metaphor, I don’t know if I have a Ford Pinto, a nice family car or a corvette. These minerals came by way of inheritance. I have never bought nor sold minerals. I do know these are in Andrews and Gaines counties of Texas. From what I have read, many believe only about 40% of the oil and gas in the Permian Basin has been captured since the 1920’s. However, the monthly revenue from the royalties is not enormous. Some say the wells are pumping a depleting resource. Others say new drilling technologies will make wells more productive. Further, I have minerals in sections of Gaines county which have no production at this time. It’s quite frustrating as I don’t know how to evaluate any of this. Is there some multiple that can be applied to the monthly revenue to give you some ballpark figure of the worth of a well? What about non productive minerals? Is there a way to ballpark it’s value? Is there a professional who specializes in this kind of situation? It just all seems so nebulus. Thanks again for your feedback.
Adam said:
Not selling is definitely an agruement that you will hear a lot. However, realize that mineral buyers and oil & gas companies buy and sell minerals on a daily basis for many reasons.
If you are good at buying cars and selling them for a profit, it makes sense to sell minerals that arent doing much for you now and using that money to do something you are good at.
I personally have sold minerals on a few occassions for different reasons. Needed money to build a house, needed money to pay off some bills, even needed money to buy more minerals.
Always think outside the box. If EVERYONE is telling you not to sell, try to find a reason why you should because obviously people do. I am not telling you to sell, I simply want you to make sure that you think about it and weigh both sides.
Richard:
There is an individual on this forum that has alot of experience dealing in minerals, including buy and sell. His name is Buddy Cotten and his email is www.cottenoilproperties.com If you contact him, he might be able to give you further insight in regards to your questions.
Thank you so much! I definitely will reach out to him.
charles s mallory said:
Richard:
There is an individual on this forum that has alot of experience dealing in minerals, including buy and sell. His name is Buddy Cotten and his email is www.cottenoilproperties.com If you contact him, he might be able to give you further insight in regards to your questions.
Richard; you also have to consider if you might have untapped producing zones. You might be getting a new well soon. People want to buy producing minerals to make money off them, they will make the money you would have made in time because it's extremely unlikely they are going to pay you more that a few years production, discounted several ways. If you need money now I would get a loan and make the payments from the royalty.