The valuation process for mineral rights, oil and gas royalties, and overriding royalty interest involves a combination of engineering analysis, geological evaluation, and economic modeling. At Western Mineral Consultants we see our role as taking the complex and making it easy to understand so that you feel comfortable with your decision.
How Much are Mineral Rights Worth?
Finding a fair value for mineral interests is a critical step towards selling oil and gas royalties. An owner must consider multiple factors when determining how much their mineral rights are worth.
First, it is important to understand that all oil and gas wells decline in production at various rates over time. Eventually all wells reach their economic limit at which time the well is considered depleted and is plugged and abandoned. This is why we recommend that no one rely solely on royalty income as the primary income source, or have mineral rights dominate your investment portfolio.
To reach a value of the remaining reserves we utilize several tools to gather the past production data, calculate the production decline rate, and review the cash flow history of the well. We will also review activity surrounding your mineral rights to determine the decline rate of more established wells within the same geographical area that are producing from the same reservoir, as well as determine feasibility of future development potential under your interests.
Using this information, along with operator reputation, commodity pricing and interest type, we will forecast future performance, calculate the remaining reserves, and present you with an offer to purchase your interest.
If the offer is accepted and you decide to sell your mineral interests, we will then complete a title search to insure that the title is clear and without liens or encumbrances. Finally, we will confirm and make sure that all taxes are paid.
We will then prepare the necessary deed or assignment along with any other necessary paperwork and send them to you along with payment for your interest.
Our offers typically range 24 – 72 months of current production. Our objective is to offer you top dollar for your oil and gas royalties, while addressing risk and uncertainties that may be involved in future production. Find out more about how to sell your mineral rights and learn about oil and gas royalties taxation here on this website.
Again, we will complete this process as rapidly as possible, usually within a few days, not weeks!