Do You Know How To Value Your Mineral Rights?
February 24, 2016
Selling mineral rights first requires determining the value of those rights. This involves a detailed process that considers everything from the type of resource and its location, to the age of the deposit and how long it is expected to be productive. Complicating this is the fact that the value of mineral rights can change quickly based on demand, the current price of resources, and many other factors. For these reasons, should you be looking to sell your mineral rights, it is essential to work with an experienced oil and gas company that can accurately determine a fair value.
Producing vs. Non-Producing Rights
One of the main factors in valuing mineral rights is whether or not the right is producing. Producing rights are those that are being actively drilled and producing oil or gas, while non-producing rights are basically untapped deposits in the ground. There is much greater risk associated with an untapped right, making its value less than one that has already been drilled and is producing. Obviously, the non-producing right will require an investment in drilling to access the oil or gas in the ground. Therefore; these rights sell for less than active rights that can be measured in terms of what and how much they are producing.
Location and Mineral Rights Values
Location definitely affects the value of mineral rights, but not because of what is on the surface. Where a right is located, in terms of the city and state, means little to its value since it is what lies beneath the surface that matters most. The geography and geology of the ground where rights are located is extremely important for accurately determining the actual content of the substances in the ground. When there is question about how much of a substance is actually in the ground, and lacking a reliable way to determine this, the value of a right is generally lower due to the amount of risk posed. This means there are definitely areas where selling your mineral rights will be more valuable simply because it is easier to measure them.
Mineral Right Size, Type, and Demand
In terms of the size of mineral deposits, bigger is definitely better. Once again, this is due to the cost and effort required to access these resources. A large right that can be estimated to produce for a longer time, holds much more value than a smaller one that may stop producing after a while. Additionally, the type of right (oil or gas), and the current demand and price of each, greatly affects the value of any mineral rights. Oil and gas prices constantly fluctuate; however, in a market where a sudden loss or gain in value is expected, the value of mineral rights can be drastically affected.
Getting a value based on location, land makeup, and whether a right is producing or not are the main steps in valuing mineral rights, since these details are mostly stable when well-estimated. Knowing whether you should sell your mineral rights - and when - is largely dependent on things like demand as well as current and expected prices for the oil or gas that can be produced. For the best and most accurate valuation of any mineral rights, always deal with an experienced royalties company, one that understands the complexities in estimating values. Being able to explain that is very pertinent to selling your specific mineral rights!
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