With oil and gas prices continuing to plunge, the picture is beginning to become more clear for mineral owners. The opportunity to sell mineral rights or sell royalties for the highest value may be on hold. As oil prices continue to fall, many mineral rights buyers we speak too are already being more cautious.
Oil Prices Affecting Mineral Rights Buyers
After speaking with a few mineral rights buyers, we are hearing a lot of the same words being said. Mineral rights buyers are getting “cautious” with oil prices where they are. Instead of simply reducing how much they are willing to pay, some mineral rights buyers are taking a wait and see approach. They are not comfortable moving forward with purchases until they see some stability in the price of oil. It’s important for mineral owners to realize that the offers they were getting even 30 days ago may not be the prices that buyers are willing to pay today.
Oil Prices affect Mineral Rights Value
The value of your mineral rights is weighted heavily on what the current price of oil is. Why does it matter? Every part of the process to extract oil and gas from the ground is tied to oil prices. When prices are high, operators can afford to take larger risks and also drill more wells. This means they can pay higher prices for leasing mineral rights and buyers can pay higher prices for purchasing mineral rights. When the price of oil decreases, this means less money for drilling and taking risk. Mineral rights that were previously very valuable are now only worth a fraction of what they were originally worth. In some areas, the economics may no longer make sense to drill at all and the current value of the mineral rights could drop to zero until oil prices rise again.
What does this mean?
With oil prices falling, what does this mean for mineral owners? It’s simple, you basically have 2 options. Option 1 is to wait for oil prices to come back and see if you can get the same price you were offered in the past. How long you will have to wait is the question. It could be 6 months or 6 years, no one knows for sure. Option 2 is to sell mineral rights or sell royalties now. There will still be buyers out there willing to purchase your mineral rights. If you do sell mineral rights, make sure you sell it to the buyer who can pay you the highest price. We recommend listing the property on US Mineral Exchange because your property will get the most exposure there.
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If you own mineral rights and have questions, fill out the free consultation form below. We can help you with the following questions:
- Mineral Rights Value
- Evaluate whether you have a fair offer to sell mineral rights
- Answer questions about selling mineral rights
- Understanding Market Value of Mineral Rights
- + Any other questions related to mineral rights!
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