Knowing The Value Of Mineral Rights

Posted by Ryan C. Moore on May 30th, 2019

Opportunities abound for smart people in the oil and gas industry. These range from leasing mineral rights to actual jobs in the oil and gas industry produced. Realizing the facts will help you take advantage of those opportunities to their full advantage. It can be full of traps, but a little information can guide you through the maze. If you are a landowner who has the right to offer minerals, there are a number of things you need to know.

Mineral rights Oklahoma is the rights to gas and oil that are below any surface of the land that you own. Oil companies are often interested in renting out the right to drill and delete these deposits from your property. You will be offered an upfront bonus, usually large, and then you will be paid a percentage of each product produced from your minerals - royalties.

Below are listed factors that determine mineral rights:

Your geographical location is your right

Your mineral rights location plays an important role in estimating its value. For example, mineral rights in Shale Play areas such as Eagle Ford Shale, Haynesville Shale, Niobrara Shale, Marcellus Shale, etc., are found to have significant and untapped oil and/or gas reserves. In many cases, higher values will be quoted for rights in this region.

• The rate of decline in production

A well cannot produce the same amount of oil and/or gas or mineral throughout its production. When extraction continues, the rate of mineral well production decreases (in some cases drastically). For example, Shale wells (such as the Haynesville well) the rate of decline will be around 82% during the first year. So, the production of all wells in the future will be less than the initial production. This impacts on future income and hence predictions of future performance. Therefore, the rate of decline in the well has an impact on the value of your rights or royalty interest.

• Commodity prices

Oil and gas prices, mechanical risks, and drilling costs are the main problems that determine the value of your rights. Because oil and gas prices often fluctuate, the appropriate discount rate will be used. In addition, if the value of this commodity market is expected to face significant risks in the future, then the value of your rights will vary based on events and projections in the future. There are many risks to these values and greatly affect the value of your rights. Instead of speculating on prices that occur in one way or another, many owners prefer to have cash vs.

• Time value of money

All oil and gas contained in your property cannot be extracted and liquidated in one day. Cash inflows also spread over the years. Furthermore, the production level will decrease which directly impacts on future income. All of these considerations make it valuable to have liquid assets (cash) rather than having diminished assets such as mineral rights Texas.

Many of the above factors continue to fluctuate. It is never known when they will rise or fall. Therefore, if you choose to sell it now, you can eliminate the risk of holding or owning it by selling all or part of your ownership at once.