Through 2020-2021, COVID restrictions were the main issue driving down oil and gas demand. In 2022 and 2023, international sanctions resulting from the Russia/ Ukraine war drove down the supply of both oil and gas. Because of this, oil prices are expected to stay strong through 2023 and 2024, making this a great time to consider selling mineral rights.
2023 is a Good Time to Sell Your Minerals
Activity has dropped with supply and demand fluctuations throughout recent years. So, if activity and prices are down, why would minerals be more marketable now than a year ago? Well, at higher oil prices, operators know they can lease minerals and drill before the leases expire. And they can lease minerals for far less than buying minerals. Now that prices have dropped, there is no incentive to lease if the economics don’t justify drilling. However, at LandGate, over the past few months, we have found the demand to buy minerals is still very high. This does not necessarily mean the value of your minerals has increased, but the demand and marketability seem to have increased. And minerals in the Permian Basin might be selling for more than minerals in other basins, but we are seeing that the marketability is the same.
Factors Affecting Mineral Rights Value
The value of mineral rights is impacted by many factors. As the price of oil swings up and down, the value of your mineral rights will also change. In addition to oil prices, here are some other factors that affect the value of mineral rights:
Operator/ Drilling Company
Lease terms (if the minerals are currently leased)
Why Mineral Owners Are Moving from Leasing to Selling
As reported in a Colorado publication, we are finding that the economic impact of the Covid – 19 pandemic has reached mineral owners due to a decrease in demand for oil and gas. This is unfortunate, but our clients, and mineral owners in general, who were not interested in selling their minerals in the past, have changed their minds. Many mineral owners, who receive monthly royalty checks, were not prepared to see their royalty checks reduced by as much as 50%. Many mineral owners have been receiving a check every month for years. They rely on these checks for things such as rent, college tuition and medical expenses to name a few. Selling their minerals rather than leasing allows them to continue to pay the bills. Although the price of oil has dropped, LandGate's mineral rights estimations within our free property reports creates a realistic expectation of what our clients should be paid. As a result, we have a client who accepted an offer of over $20,000 per net mineral acre…. and that was in South Texas, not the Permian Basin. Our inventory of buyers acknowledge that our valuation tool means higher prices for them. But they are not necessarily looking for a quick return on their investment. They understand market fluctuations and changes in supply and demand. We are certainly in an energy transition. The price of oil is down. Demand is down. Production is down and fewer wells are being produced. But unlike leasing minerals, buying them is perpetual. The best way to get maximum value when selling mineral rights is to create competition. LandGate's marketplace is used by thousands of high-intent developers and buyers, so listing your minerals on our marketplace is a great way to initiate this competition.
Listing on LandGate starts by generating your free property report with lease and sale estimates: