If you are receiving oil and gas royalties, you may find yourself in a situation where you want to sell them. Our guide below will help walk you through every thing you need to consider when selling oil and gas royalties. If you have additional questions, simply fill out the form at the bottom of this page!
Value of Selling Royalties
The most common questions we get from mineral owners who are selling oil and gas royalties is about the value. Mineral owners want to know how much their royalties are worth so that when they do sell them, they can ensure they are receiving a fair price. You may have search online for hours, but there is no clear answer. The reason is that many buyers want to pay you the least amount possible for your royalties. Information about selling oil and gas royalties is hard to find because the buyers don’t want you to know what a fair price is!
To determine the value of selling oil and gas royalties, you need to know how much you receive each month on average. Most buyers will use your most recent checks to come up with an average amount you receive each month. They will then use this information to determine how much they are willing to pay. Most good buyers will pay between 4 years to 6 years worth or production for your royalties. We’ve made it easy for you! Simply fill in the average amount you receive each month in the calculator below, and you can see the range you could get for selling oil and gas royalties:
You may be wondering why there is such a large range of 4 to 6 years. The trust is that your royalties could fall below or above that range based on a number of factors. While most people fall into the 4 to 6 year range, all of the factors below will play a role in determining how much your royalties are worth.
Factors affecting Selling Oil and Gas Royalties
Even though you can expect to receive 4 to 6 years worth or production for your royalties, the factors below all play a role in selling oil and gas royalties:
Location: Just like in real estate, every location is different! The location of the wells your royalties are being produced from will affect how much a buyer is willing to pay. Some areas have a very quick decline curve and others decline very slowly. Buyers will adjust their priced based on where your royalties are located.
Decline Curve: Every oil and gas well declines through time. When a well is first drilled, production starts out very strong as the oil and gas is released and starts coming to the surface quickly. The first 3 to 5 years (depending on location) a well declines very fast. You may have received $5,000 per month for the first few years of production, but those checks may be reduced to $3,000 +/- after the initial decline sets in.
After the initial decline curve is over, the production will begin to level off over time. However, there will still be a gradual decline in production as the well is produced. Some areas decline quicker than others, and this affects the value a buyer is willing to place on what is being produced today. Buyers know that a well producing $1,000 today will be producing less next year, so they adjust their priced based on this.
Oil and Gas Prices: Current oil and gas prices play a role in how much royalties are valued at. If the price of oil and/or gas goes up, this means that the royalties being paid out will also increase because the value coming out of the ground is higher. You’ll receive larger royalty checks and even more money. However, the prices of oil and gas can go down as well, meaning your royalties could be worth even less in the future. The buyer is taking on the potential upside that prices will rise, but they are also taking on the risk that prices could decline and it could take many years for them to get their money back.
How to Sell Oil and Gas Royalties
If are considering selling oil and gas royalties, there are some important things to consider before you sell. The most important thing to know about selling oil and gas royalties is that you need to find the large possible market. Why is this important? When you try and sell your royalties, you want to ensure that as many buyers as possible can compete to pay you the highest price. The more buyer that know your royalties are for sale, the better the chances that you will get the most value for selling oil and gas royalties.
Consider this, if you were going to sell your home, would you call up a couple people who are in the market to buy and expect to get paid the highest price? Absolutely not! Now imagine that your home is listed on the MLS, there’s a sign in the front yard, and your property is available online so that thousands of buyers know you property is available. Obviously you will receive substantially more money if every buyer knows your house is on the market.
So how do you get your royalties in front of a large number of buyers? We recommend that you list your property with US Mineral Exchange. They provide a nationwide online platform that will connect you with thousands of royalty buyers from all over the country. By creating a simple listing, your royalties will be viewed by qualified buyers who will compete to pay you the highest possible price. If you’re considering selling oil and gas royalties, we highly recommend US Mineral Exchange because they make the process simple and easy.
Free Consultation
If you own mineral rights and have questions, fill out the free consultation form below. We can help you with the following questions:
- Mineral Rights Value
- Evaluate whether you have a fair offer to sell mineral rights
- Answer questions about selling mineral rights
- Understanding Market Value of Mineral Rights
- + Any other questions related to mineral rights!
No matter what question you have regarding your mineral rights, we can help! We usually respond to your inquiry within 1 to 2 hours!
Whether you want to sell mineral rights, determine mineral rights value, or simply have some basic questions regarding your mineral rights ownership, fill out the form and we will quickly be in touch.
