How to Know the Value of Mineral Rights

Determining the value of Oklahoma minerals can be difficult due to the various factors that go into the process. Many times property owners may wish to sell their oil and gas mineral interest for much more than it’s worth, while other people may miss out by underestimating the value. It’s always in your best interest to work with experienced professionals to look at every aspect of your mineral rights to determine how valuable they actually are. If you’re thinking about selling or transferring your rights, knowing the value is crucial to make a fair deal for everyone involved. Here are some of the main factors that determine the value of oil and gas minerals.

Minerals Under Production Have Higher Value

When minerals are currently producing and generating income, they are going to be much more valuable. This doesn’t mean non-producing minerals have no value at all, but it’s obvious producing mineral rights should have a much higher value at its present state. For producing oil and gas minerals, the actual value can be determined by the flow rate, current prices and other factors. The oil and gas cash-flow from wells, as well as the potential future drilling activity, will play a huge role in the purchase price of those mineral rights.

The Amount of Land is a Factor

The larger the plot of land you’re selling, the more valuable it will naturally be. It’s easier and cheaper for oil and gas companies to have a larger area to work with, so they are more willing to pay a higher price to drill on the land. The same principles apply when you’re looking to sell mineral rights. The more you have, the higher they will be valued.

Nevertheless, owning a smaller plot of land can be highly profitable as well. Since large oil companies seek to move fast and secure their funding by proofing oil and gas reserves, they often times skip over smaller mineral land. This provides investment companies and institutional investors to contact the smaller mineral owner to propose leasing or buying their mineral rights, so they can take part in the exploration and production of the oil companies that leased the surrounding area.

Location and Oil and Gas Prices

Simply owning a large plot of land doesn’t make it valuable in terms of oil and gas mineral interest. The value is determined by the amount of oil and gas formations you have below the surface, the ease of accessing and transporting the oil and gas to refineries, the amount of activity within the area and other factors that provide oil companies a reason to determine your area as the next best area to drill. For example, owning mineral rights in North Dakota in 2010 had nowhere near the value of owning the same minerals in 2013. This is due to advanced technology enabling oil companies to frack shale and extract oil and gas in areas that were uneconomical at the time. Throughout the shale revolution, some mineral rights have gone from $500 per acre to $30,000 per acre.

Finally, the current price of oil and gas also dictates the value of minerals. As these prices can fluctuate and no one really has control over the fluctuations, understanding the price and making a transaction decision based on projections is usually required.

Eckard Land and Acquisition helps investors and investment companies know exactly how valuable their oil and gas minerals are. We analyze historical trends, current situations and projections to help investors determine when the right time is to buy or sell mineral rights. Having as much information available to you is critical in making the best investment decision for your portfolio, and we are here to help. Feel free to contact us at any time for answers to your general or specific questions about anything related to mineral rights.

Contributor: Troy W. Eckard

Contributor: Troy W. Eckard

Troy W. Eckard has over three decades of energy expertise. Troy has been investing in tangible asset since 1985, and built multiple companies focused on aggregating, maturating, and liquidating investment opportunities.​ He's the longest World MoneyShow attendee, and is striving to continue his presence to inform and educate investors on tangible assets.