Mineral Rights in Texas
HOW DOES OWNING MINERAL RIGHTS IN TEXAS WORK?
Owning Mineral Rights in Texas
Texas is practically synonymous with the United States oil & gas industry. As the most prolific producer of oil & gas in the United States for about a century, it’s impossible not to mention Texas when discussing the industry. Deciding to sell your mineral rights can be a significant financial decision, as there are a myriad of factors that influence their value. It’s important to have a thorough understanding of these variables to make an informed decision.
The value of mineral rights depends on several characteristics. Before finalizing a deal, consider the following:
Market Factors
Commodity prices can have a drastic influence on the value of mineral rights. When the price of oil is higher, exploration companies are motivated to drill more. Increased activity means more revenue for mineral rights owners, and a higher value when negotiating a sale of their mineral rights.
Location
Mineral rights that are located in regions that are known to have a high degree of production, reserves, and operator activity, such as the Permian basin, will be valued at a higher rate. See below for the major Texas oil & gas basins.
Current Leases
Producing leases with high royalty rates (e.g., 25%), strong operators, and active drilling boost value due to reliable cash flow and development momentum. In contrast, non-producing or low-royalty leases—especially those held by production (HBP) with limited activity—can depress value by restricting re-leasing opportunities.
Reserves
The estimated amount of recoverable resources (based on geological surveys and historical data) significantly impacts mineral rights value.
Major Formations of Interest
Permian Basin
A large sedimentary basin in excess of 86,000 square miles, the Permian is the most productive oil field the United States. It has been producing oil and gas for a century, with a recent revival period that occurred with the advent of the shale boom.
Eagle Ford Shale
The Eagle Ford Shale formation has significant crude oil and natural gas, with a high composition of carbonate shale. This type of shale has a brittle structure that lends well to hydraulic fracturing.
Barnett Shale
This formation is located under Fort Worth and contains considerable natural gas reserves. Before improvements in hydraulic fracturing technology, these reserves were difficult to access due to the particularly impermeable nature of the shale. The formation’s name comes from John W. Barnett, who founded Barnett Springs — a town where this shale was located.
Haynesville Shale
The Haynesville shale formation extends from East Texas into Arkansas and Louisiana. This is another formation that contains a great deal of shale gas reserves. It became particularly prominent after 2008.
Want to Learn More?
The Eckard Insight app has videos, articles, podcasts, and webinars—all about the energy industry, market trends, and more! For the web version, click here.
