Selling Mineral Rights

Would you put a “For Sale by Owner” sign in your yard and then accept the first offer you get from a buyer just because it was a lot of money? What if your home is worth much more?

 

In the same way, you should not try to evaluate your mineral and royalty interest and make a deal with the first buyer who comes along. Don‘t put a “For Sale by Owner” sign on your minerals and royalties!

 

Caple Royalty Services is dedicated to helping you receive True Market Prices for your minerals and royalties, using our expertise and experience to inform your decisions, research all aspects of your properties, and market your interests to an extensive list of quality buyers to win you the best deal.

 

Whether you‘re an individual or institutional mineral owner who has been approached to negotiate an oil and gas lease, or if you need to monetize a portion of your producing or non-producing royalties, Caple Royalty Services‘ goal is to level the playing field with oil and gas companies so that you get what your property is worth.

Mineral Rights Sale

One of the most important financial decisions you will ever make as a mineral owner is the decision whether or not to sell your oil and gas mineral rights. Regardless of whether you would like to sell all your mineral rights or just a portion, such decisions should be carefully weighed because the financial implications can be significant. Unfortunately, the mineral rights sales market is not transparent so it is very easy for a mineral owner to make an uninformed decision when negotiating with a mineral buyer.

 

I formed Caple Royalty Services for the express purpose of helping mineral owners wisely manage and maximize their mineral assets. While some people seem to intuitively understand they need help in this area, I see an incredible number of people elect to navigate these waters alone because they distrust everyone, or they want to save a commission charge. If that reasoning was wise, we wouldn’t pay realtors to sell our homes, stockbrokers to buy our stocks, and electricians to wire our homes. But, for some reason, many mineral owners try to manage something they don’t truly understand.

 

As an owner of minerals and working interest for over thirty five years, and having worked for twenty years on the exploration side of the business, I would like to give you some simple steps to consider as you evaluate your decision to sell some or all your mineral rights in order to meet your financial goals.

  1. If you are financially secure, independent of your mineral leasing and royalty income, then I would caution you against selling your mineral rights. These assets provide you and your heirs with opportunities for significant financial windfalls when oil and natural gas prices rise or new exploration proves up the reserve potential of your minerals. These assets can also prove to be worthless because of oil or natural gas price collapse, condemnation of your minerals’ value through the drilling of dry holes, or new advances in technology that to some degree lower our dependence upon fossil fuels. Do you think anyone was predicting $45 oil six months ago?
  2. If you are NOT financially secure, independent of your mineral leasing and royalty income, you need to evaluate how large a proportion the value of your mineral rights hold in your overall financial position. Just like owning too much of one stock increases your portfolio risk, choosing to make your financial health dependent upon a commodity and its volatile price swings, is incredibly risky. You may need to consider selling some of your rights in order to balance out your risk, paying off debt or putting more cash in the bank.
  3. If financial management is one of your strengths, you probably know what needs to be done in order to secure your financial well-being. If it is not your strength, utilize a financial advisor to help you look objectively at your financial needs.
  4. If you determine that the sale of all or a portion of your mineral rights is necessary to reduce your risks, utilize a qualified mineral advisor to guide you through this process.
  5. Find the best buyer! We market to a broad spectrum of buyers ranging from individuals, family office, and royalty companies, and even active oil and gas operators. It does not serve your purposes to market to a handful of buyers in the name of creating competition, and assume you will get the best price. The best buyer may not be in that small sample of buyers. We never know who will step up and be our best buyer for properties we are marketing, in fact, we are often surprised by the outcome.
  6. Watch out for selling your producing minerals for a multiple of cash flow, such as current monthly income times a negotiated number of months of future production, when the buyer is actually buying your royalty because of a higher value related to other formations not yet developed or the expectation of improved production from the current producing formation due to new completion or fracking techniques. Many times we see that the actual production has little value compared to the underlying undeveloped formations that have recently been proven productive in the area. Caple Royalty Services reviews the area around its client’s minerals for possible upside potential in the non-producing formations or in improved well completion results in the producing zone.
  7. Once you have verbally accepted an offer, you will be asked to sign a letter agreement (sometimes referred to as a ‘PSA’ or ‘Purchase and Sale Agreement’) that states the terms of the mineral sale, including the purchase price, due diligence period, and closing deadline. Be careful not to enter into an agreement that will continue beyond a reasonable period of time required for the buyer to check the title to your mineral interest, usually thirty days. We provide our expertise to reach a mutually acceptable agreement that protects your rights.
  8. If title curative is needed, you may have to extend the agreement until you are able to secure the documents the buyer requires to be provided prior to closing. We go to great efforts to help our clients secure these curative documents.
  9. Utilize a neutral third party escrow service or attorney for the closing, or have the buyer deliver proceeds directly to you PRIOR to delivering an executed conveyance to them. Don’t send your executed conveyance to them based upon the promise of funds being sent to you upon the buyer’s receipt of the conveyance. Caple Royalty Services can provide you with escrow services.
  10. After you have closed your mineral rights sale, and before you meet with your CPA, you will need to determine your cost basis in the minerals that you sold so the CPA can compute your gain. For those who purchased the minerals, your purchase price will be your cost basis, but for those who inherited the minerals, you may need to get an estimation of value based upon nearby sales or lease activity on the minerals during the time period you inherited those mineral rights. Caple Royalty Services can assist you in this valuation.
  11. After you know your tax burden, you can pay off debt or invest the remaining funds in accordance with your financial goals. You are part of an incredibly small percentage of people in America, much less the entire world, who are able to own and benefit from oil and gas minerals. This is a time to be very thankful, indeed!

If you are looking to sell your mineral rights, Caple Royalty Services can help. Go ahead and give us a call at 214.254.4808 for a free consultation. You can also get a jump start on the sale of your minerals by completing our Online Confidential Mineral Rights Sale Assessment – for free. Click Here to Start Now!