Sell versus Lease

When does it make sense to sell rather than lease one’s mineral acres?

In the past few weeks, we have received a flurry of six and even seven-figure offers to buy our mineral acres in individual sections in Loving County. These offers are generally for undrilled sections close to or on the Texas/New Mexico border.

I know the Permian Basin is the hot place to be right now, but what if conditions change and oil companies retreat and decide not to lease in our sections? Is the opportunity to become an instant millionaire missed because of the future promise (and hope) of continued drilling and income?

I realize the answer to this question probably depends on the background, circumstances, and personality of each mineral owner.


Northern Loving County is one of the most economical regions in the entire country for onshore oil production. Thus, if oil companies retreat from that region, it essentially means there is no onshore oil production happening in the US, so I wouldn't worry about oil companies losing interest anytime soon. Further, there are so many private equity funds trying to invest in the Permian, that if one company leaves, a dozen are eager to take its place.

The unsolicited purchase offers you're receiving are often below what the true market value is for the minerals. As far as prices, there are a lot of value drivers in mineral deals, such as location, which yours is the best of the best, whether a property is leased, whether there is production on the property, whether there are permits on the property, who the operator is, etc...

If you're receiving lease and purchase offers, I'd be inclined to just lease the minerals. Worst case scenario, a well is not drilled, and you can lease it all over again in three years. If you want to hedge your bet, you could always sell a percentage of what you own.

You might consider reaching out to the forum sponsors to see what lease and sale prices they're observing in your area, but if they were my minerals, I'd be inclined to hold and not sell.

Best of luck!