How Does My Mineral Rights Values Diminish Over Time?

There are many variables that can affect the overall value of mineral rights, beyond the control of mineral owners and operators. Owning mineral rights comes with built-in economical risks, including but not limited to fluctuating Oil and Gas prices, OPEC announcements, political and regulatory threats and newer technologies pushing greener agendas.

Several factors contribute to the worth or value of your mineral rights and how that value will change over time. Typically, mineral rights are leased to exploration companies if the geology in an area is promising. The operator leases your property for a primary term, wherein the operator may decide to drill wells. If no wells are drilled in the defined time period, the lease would expire, at which point, you would be free to explore a new lease. Once a well is drilled, your lands are considered held by production (HBP) for as long as oil or gas is produced in paying quantities. Upon executing division orders with the operator, you will start to receive royalty checks in proportion to the mineral interest you own. Depending on the clauses in your Oil and Gas Lease, the operator has the right to fully develop the area by drilling additional wells. They may also choose to sell or assign their assets to another company that wishes to explore and test the area with further drilling.

Many royalty owners have seen offers for their mineral rights increase over the years. However, there will come a tipping point where the offers begin to decrease as oil is produced. There is only so much oil in the ground that can be extracted. Once wells begin to flow, the maximum amount of revenue that can ever be realized will begin to decrease along with the total amount of oil in the ground. In theory, the offers anyone will make on these assets will begin to decrease along with it. When considering an offer, companies factor the revenue that has already been realized and often remove that from the final offer.

Oil and gas properties are in many stages of development, so it is important to have a qualified professional look into the uniqueness of your tract to give you a better idea of what you own and the value of your asset.

Call to speak with one of Stags Certified Professional Landmen (CPL) to get the most out of your minerals.

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