How much are my minerals worth?

by | Sep 28, 2020

A holistic approach, you hear that phrase a lot these days. Considering all approaches, making sure the solution is multifaceted. It can even be applied to mineral rights and Herco LLC uses this philosophy when it comes to executing your oil, gas and mineral appraisals. When our client’s ask “how much are my minerals worth?” they can feel confident that their asset has been looked at from every angle.

Finding a value for your oil, gas and mineral rights can be a complex task. Over the last 40 years, Herco LLC has honed our appraisal skills to know exactly what to look for when it comes to determining value. As each mineral property is unique, the criteria for valuation can change. It takes years of industry experience to know just what to look for. For example, you may have what we would call non-producing mineral rights, this means that currently there is no active production (no oil or gas being pumped from the ground) on those mineral rights. One might think – “then these minerals are valueless” – not so. There are multiple things to consider when evaluating these types of interests. In some cases non-producing mineral rights can be more valuable than a producing property and here is why: non-producing mineral rights have potential, though with a level of uncertainly – that potential has value. So when Herco LLC takes on a non-producing mineral appraisal we look at a myriad of aspects including but not limited to:

  • The going rate for oil and gas lease bonus payments for State, the Bureau of Land Management and fee minerals in the area.
  • The potential for mineral rights to be leased so a mineral buyer can recover a portion of the acquisition costs.
  • If the minerals are currently leased, when will the present lease expire? what royalty rate does the present lease provide for? does the lease have a “pugh clause” or a “shut-in provision”?
  • Current producing wells that are in close proximity to the mineral rights.
  • Environmental and cultural concerns that may impact the future development of the mineral rights.
  • Potential producing horizons that fall within the mineral rights boundaries.
  • The ability of the leasehold owner to market the oil and gas should a discovery be drilled
  • State oil and gas production tax rates.
  • Public and private sector sentiment towards the development of the mineral rights.
  • If landowner’s royalty rights have been sold, segregated or assigned by a previous owner then the value of said mineral rights are decreased.

All these things must be taking into consideration when coming up with a value for your oil, gas and mineral rights.
Likewise, a producing mineral appraisal has multiple questions to consider. How many wells are on the property? What is the typical lifespan of a well in this area? What is the average production per year for these wells? Are there any permit for new wells on or near your mineral rights? Knowing what questions to ask and how to put those answers together is what makes Herco LLC a leader in this industry.

As a consumer, make sure to ask your mineral appraisal company “how do you determine the value of my mineral rights?” It should never be solely based on the value of the current oil and gas production, because that can severely undercut the value of your property. You want a company like Herco LLC that takes that multifaceted approach for one important reason, accuracy. Whether you need that step up in basis, estate tax thresholds or looking to sell, you can feel confident that our value is backed with formulations that are industry tested. Herco LLC stands behinds its work and is ready to prove our methodologies whenever necessary.

That’s why we use a holistic approach when coming up with a value for your oil, gas and mineral rights. Using Herco LLC, you’re going to get that level of service every time.