The processing of valuing mineral rights can be complicated. You may be searching online to find the value of your mineral rights, but you can’t seem to find anything that will give you a specific number or example. We’ll save you some time and tell you now that you won’t find an exact answer. But why? The reasons why valuing mineral rights online is so difficult is explained below. If you’re looking for the best way to find the value of mineral rights, skip to the bottom section.
No Public Information
One of the biggest reasons it’s so difficult to value mineral rights is that public information about sales/leasing information isn’t available. With the housing market, sales prices are recorded publicly which means you can search through tons of pricing information in your area. By simply having your property address you can look up a rough estimate on zillow.com and get an idea of what a property similar to yours is worth. In Oil and Gas there is no database of pricing information because there is no requirement to publicly file sales/leasing information. When valuing mineral rights online, you’re searching for information that simply doesn’t exist because this information is not publicly available.
Location
Another key factor when valuing mineral rights is the property location. Using the housing market as an example, homes that are in roughly the same area are typically worth a similar amount. When valuing mineral rights the location may be very close to another property that’s worth significantly more or less even though they are very close together. The reason is that geologically one property location may be much better than another which makes the property value higher or lower even for two properties nearby.
Timing
As you evaluate what mineral rights are worth, you may hear from neighbors who leased/sold a few years ago. You may have also leased a property a few years ago yourself and now want to lease the property again. We hear from mineral owners all the time who got $X amount 3 to 5 years ago, and expect to get something similar again. Unfortunately the oil and gas mineral market moves much quicker and the prices from even a year or two ago are largely irrelevant. This is important for two reasons:
1. You may have expectations that are much higher than current market prices. If you previously leased your property for $1,000/acre and now operators are only leasing for $500/acre, you may be seeking too much for your property and never get a lease.
2. You may have expectations of getting the same $1,000/acre you received in the past, but the area you are in has experienced a dramatic increase in prices. You may be willing to lease for $1,000/acre when the current leasing rates are $2,000+/acre. By simply looking for what you have received in the past you may be leaving money on the table by not valuing mineral rights for what they are worth today.
Common Industry Practice
Another reason why it’s very difficult to value mineral rights is that common industry practice is to mask the price paid to either lease mineral rights or sell mineral rights. The reason is that oil and gas companies do not wish to disclose that they paid a higher price to one person because it makes it harder to negotiate with other land owners. By keeping the prices they pay private, they hide the potential value of a property from mineral owners which helps them negotiate the lowest price possible.
Best way of Valuing Mineral Rights
Obviously there are many challenges when valuing mineral rights. So how do you determine the your mineral rights value? The best way is to work with industry professionals who have access to information from your area that can also get your property in front of a large audience of buyers. By having your property evaluated by multiple buyers, you let the market determine how much your property is worth so that you can get the highest market rate possible. When buyers compete to purchase your property, this drives the prices higher ensuring that you get the highest price possible for your royalties.
We recommend listing your mineral rights with a service like US Mineral Exchange. They provide minerals owners with access to thousands of buyers across the United States who compete to pay the highest price possible. In addition, they are knowledgeable about the demand in an area and can negotiate the best price for your mineral rights.
Free Consultation
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!
No matter what question you have regarding your mineral rights, we can help! We usually respond to your inquiry within 1 to 2 hours!
Whether you want to sell mineral rights, determine mineral rights value, or simply have some basic questions regarding your mineral rights ownership, fill out the form and we will quickly be in touch.
