What are my mineral rights worth?

The price someone would be willing to pay for your mineral rights will vary from buyer-to-buyer, as there are many factors that determine value, and buyers interpret them differently depending on their particular biases for a given area.

That said, properties with current or recent production are usually the most attractive to buyers and are thus the easiest to value and sell. Producing properties are commonly valued at between 36 and 72 times their average monthly income (per production month) over the past six months. For instance a property producing an average of $1000 of income each month over the past six months would be valued at between $36,000 and $72,000 using this method, regardless of how many acres are involved. This is only a rule-of-thumb however and some buyers will assign a higher multiple to larger properties that are producing little income simply because there is more acreage involved, while others may keep the property’s value strictly within the 36-72 month multiple mentioned above, regardless of the acreage involved.

The price received can also vary within the above multiples and beyond as buyers take into account such things as the area’s production history, the number and age of nearby wells and their proximity to other production. Future drilling prospects, current governmental policy and taxation laws, and current and perceived future oil and gas prices are also taken into consideration when valuing producing mineral rights.

Much of the criteria used to evaluate producing properties can also be used to value non-producing properties. In areas where there is current leasing activity, the lease bonus amounts being paid will affect the value of both leased and unleased minerals in the immediate area. If a buyer feels there is a good chance your property will be developed further within the next few years it will be valued higher than property located further from the current drilling/leasing activity.

When valuing non-producing mineral rights, buyers commonly use a “lease bonus multiple” rather than an income multiple if these figures are availalbe. They will look at the lease bonus amounts paid in the area recently and use a multiple of between 2-5 times that amount to determine value for unleased mineral rights. More value will be given to unleased minerals in active areas than to unleased minerals outside of major oil and gas plays. This is simply because the buyer of unleased minerals in an active area expects to lease them soon after purchase, thus he is (hopefully) willing to pay more for those minerals up-front than he would for minerals that will likely remain unleased for some time. Minerals that are already leased are often also valued using lease multiples when available, though which multiple will depend on the likelihood of drilling occurring before the current lease expires.

Though many factors are involved in valuing mineral rights, the best way to determine the true market value of your mineral rights is to get them in front of at least a few reputable buyers who are not in any way affiliated. If you are considering selling your mineral rights, then listing them for sale on The Mineral Hub would accomplish this goal.

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