As you consider whether to sell royalties, one of the first questions that comes to mind is the royalties value. Your royalties could be a great source of income, but you may find that getting the full royalties value today is more important than future income. If you are clearing up an estate, paying off a debt, or putting a down payment on a home, selling royalties may be a great option to help achieve your goals.
Calculating Royalties Value
If you want to calculate what your royalties value could be, check out our blog post on calculating value. The short answer is that your royalties value will be the average monthly income from the last 6 to 12 months, multiplied by 2 to 7 years. The royalties value is still a large range because there are a number of factors (discussed below) that can play into the value. As a royalty owner, you want to ensure that you get the highest price for your royalties.
Selling Royalties for Highest Value
If you have decided to sell royalties, you want to ensure that you receive the highest value possible. To get the maximum value, you want to get your property in front of as many buyers as possible. When multiple buyers compete to pay the highest prices, you will always receive more than accepting the first offer to sell royalties. We recommend listing your royalties with US Mineral Exchange because their online platform will give you access to thousands of buyers from all over the country. Listing with them ensure that your property gets the maximum market value possible. The experts at US Mineral Exchange help royalty owners through the process by finding you the right buyer and negotiating for the highest possible price.
Factors Affecting Royalties Value
There are a number of factors that determine how much a buyer is willing to pay for your royalties. Some of these factors include:
Risk Tolerance – Some buyers may only be willing to pay 2 to 3 years of production because they need to recoup their investment faster. Others are willing to pay 4 to 7 years of production because they can afford to receive income until their investment is worthwhile.
Well Life Cycle – All wells eventually stop producing, and each area and well are different. A buyer will use sophisticated software to calculate how much production the well has remaining and make their decision to purchase based on what the model tells them. If a well only has a few active years remaining, this will significantly reduce the amount paid. However, if a well has many years of solid production left, a buyer will be willing to pay significantly more.
Additional Exploration – If you are selling your royalties with the mineral acreage, the buyer may hope that some day additional drilling takes place and more royalties are paid out in the future. Some buyers are looking for the additional upside that mineral acreage provides and will pay a premium for the acreage included in the package.
If you have questions about royalties value, just fill out the form below and we’d be happy to help!