Published: Sep 19, 2022 | Updated at: Sep 23, 2022
How Much Are Mineral Rights Worth in Texas?
The Lone Star State is awash in oil and gas production, and it’s only getting bigger. In recent years, the Permian Basin has seen a boom in production, with the number of oil and gas wells drilled increasing exponentially. This has led to a corresponding increase in the value of mineral rights in Texas.
If you own mineral rights in Texas, you may be wondering how much they are worth. The answer, unfortunately, is not a simple one. The value of your mineral rights will depend on a number of factors, including the location of your property, the type of minerals present, and the current market conditions.
In this article, we will take a look at some of the factors that will affect how much mineral rights are worth in Texas. We will also provide some information on how you can get an estimate of the value of your property.
Beware of Low-Ball Offers
There are many companies that will offer to buy your mineral rights. You can contact them by phone or mail.
Some will offer outrageously low prices, which are far below the true value of your minerals.
You will never get the highest price for your minerals from these companies. Others will make an initial offer, which is intended to interest you and get you to work with them but is much higher than they will realistically pay. They will ultimately pay two-thirds or less than the initial offer.
Oil and Gas Prices Fluctuate Constantly
Oil and gas prices are in constant flux due to a variety of factors. In recent years, demand has outstripped supply, driving prices up significantly. In the last year, the recovery from the COVID-19 shutdowns has also contributed to an increase in prices. The slow process of recovering from this disruption has slowed oil production.
The are many factors that affect the price of gas and oil, including transportation, refining, marketing, and inventory levels. Geopolitical or economic crises also affect oil prices. This shift in uncertainty may change the price of oil or gas and lead to regional variations.
Similarly, taxes on gas and petroleum products are often a major factor. Developing countries often choose to subsidize these products because they drive economic growth. Developed countries have less need for subsidies for these products and do so only in temporary situations when prices are extremely high.
Factors That Affect the Price of Mineral Rights
The price of Texas mineral rights can vary greatly based on several factors. These include the county where the property is located, the type of oil producing zones, the type of lease, and the current market for that particular mineral.
The price of mineral rights is also affected by whether or not the minerals are producing. If the minerals are producing, the owner will receive royalty checks from the company that drills for oil and gas. Non-producing mineral rights in Texas are much less valuable.
Do You Own Surface Property?
The value of mineral rights is complicated and isn't calculated using a simple formula. Fortunately, there are a few tips you can follow to help you decide how to determine the mineral rights value of your property. The first step is to understand the property. If you own surface property, you may also have mineral rights in Texas.
The quantity of hydrocarbons present in a property plays a huge part in its value. If the property contains predominantly oil, its value is going to be much higher than if it contains mostly gas.
Oil and gas usually have associated liquids as well. It is also important to understand that oil and gas prices fluctuate widely, so timing is crucial.
Location, Location, Location
Another important consideration is the location of the property. Some areas, even in the same County will have greatly different values.
This is dependent on the proven reserves for the area that you own in.
Who Owns What?
Among other factors, the type of ownership also matters. The owner of the mineral rights owns some properties, while others are owned by a lessee. The lessee gets a portion of the revenue generated by the minerals and receives a royalty.
A lessee's leasehold interest in the minerals is separate property if it is acquired with separate property. A royalty interest is community property if it is acquired with community property.
If you're looking to lease your mineral rights in Texas, make sure that you understand the law and how to protect yourself and your property rights. An experienced oil and gas attorney can help you draft a mineral clause that is beneficial for both sides.
Legal Protections for Mineral Owners
Knowing which protections are available to you as a mineral owner is essential. In Texas, there are a number of legal protections for mineral owners.
The first is the accommodation doctrine, which protects existing surface uses. The doctrine may apply when a proposed development is expected to cause substantial impairment to the existing surface use. There is no reasonable alternative for the mineral owner.
Another important legal protection for mineral owners in Texas is the mineral lease. Mineral lessees can manipulate the surface of the land to conduct mineral exploration and production. This may include drilling wells on any surface or subsurface location, conducting seismic tests, and using surface and subsurface water for drilling.
In addition, surface estate owners cannot refuse a mineral lessee's rights. They also can't require a mineral lessee to return the land to its original condition.
No Negligence Allowed
Another legal protection for mineral owners in Texas comes from the fact that oil and gas companies cannot act negligently. A negligent act is when someone acts unreasonably and causes damage. An example of this would be an operator polluting fresh groundwater. However, this doesn't mean that they should be able to continue doing so.
The law also restricts the right of mineral owners to disturb or destroy property. Mineral owners typically do not attempt to extract minerals in areas with high population density, which is why these laws protect property owners.
There are various limitations in the ability of mineral owners to use the land for agricultural purposes. Therefore, it is important for landowners to learn whether they have mineral rights on their property and whether these rights can be sold for royalties.
The Texas land and mineral owners should understand their mineral rights. Having a clear understanding of their rights will help avoid complications down the road.
A thorough understanding of these rights is necessary to protect the interests of all parties. A misunderstanding of these rights can lead to conflict and damage to the landowner.
Also, it is also important to understand the laws that protect mineral owners. Many of these laws are complicated and can affect ownership rights and royalty calculations. An Oil & Gas company who specializes in these matters can guide you through the complexities of mineral rights in Texas.
Selling Mineral Rights
The first step to selling your mineral rights is to find a buyer. While some mineral buyers may approach you directly, most will talk to two or three and then negotiate based on the lowest price. This can be a very time-consuming and inefficient process.
Many quality mineral buyers will use a Texas Royalty Broker. A broker helps them make the selling process go as smoothly as possible.
Maximize Your Earnings
If you're interested in selling your mineral rights in Texas, you should first consider a price that will allow you to maximize your earnings. Typically, oil prices in Texas have risen above $100 only a few times in the last 20 years. The reason is that when oil reaches $100, countless operators start drilling, flooding the market, and reducing the price. While these factors may seem unimportant, they can lead to a lower price for your mineral rights if the price of the commodity drops as a result of the flooding of the market with excess crude.
When selling your mineral rights, the process can take as long as 30 days. It's important to work with a seasoned royalty company, as they have access to a network of qualified buyers. This will help protect you from dishonest buyers and ensure you make a profit. By following these tips, selling your mineral rights in Texas can be a very profitable business.
Gather the Right Documents
Make sure that you have the right legal documents. Mineral rights transactions are not published, so your paperwork may get lost. Therefore, you should gather all the necessary documents, including a well history and GIS maps. If you have an idea of the location of your mineral rights, you should prepare a document with the information you need to make an accurate and profitable deal.
Sell Your Mineral Rights for a Cash Return
Once you have completed the paperwork, you can sell your mineral rights in Texas and receive a cash return. Since oil and gas extraction requires millions of dollars, selling mineral rights in Texas is a great way to make a profit.
When you find a buyer, you can sell your mineral rights for a high price. Just make sure you make sure to research the market value and the extraction process before making any deal.
Your Mineral Rights Are Valuable
Now that we have taken a look at some of the factors used to determine how much are mineral rights worth in Texas, we can determine that much of the value is determined by specific factors regarding the particular tract. No two tracts are going to be exactly the same, and values are constantly fluctuating.
Mineral rights are valuable because they provide a monthly royalty check, in some cases, or there is the possibility that the minerals will be developed in the future. The price of your mineral rights will vary depending on the amount of oil you produce and the royalty rate.
When selling mineral rights in Texas, you should consider both cash flow and future upside potential. While you can try to estimate the value by yourself, a buyer will use the cash flow value to evaluate the property.
For more tips on oil, gas, and mineral rights, Contact Halsell! We provide in-depth information and tips about industries around the world.