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Posted by on Jan 4, 2014 in Minerals | 0 comments

Your Mineral Rights: Sell, Lease or Just Hold On To It?

If there is one thing that’s certain about selling mineral rights, it’s the cash that is ready to be placed in your hands – not tomorrow, but today. The oil and gas business is definitely a risky and shaky one; so much so that an offer amounting to millions of dollars today can suddenly go kaput because of the “hold on and never sell” principle.

Selling mineral rights may be the hottest issue right now among owners along the shale regions, the area where oil and gas exploration activities are most active. These areas include the Marcellus shale, Niobrara shale, Haynesville shale and Eagle Ford shale, among others. And where gas and oil plays are intense, that means a significant cash bonus for you, but only if your mineral rights are on lease at the moment or, for a really big lump-sum, if you decide to sell.

Not long ago, one family was offered $4 million, while another was offered as much as $12 million by a company willing to buy their mineral rights. Both refused to sell, thinking that their properties would produce much more and that the amounts were not big enough.

Wells were drilled near their properties, not long after; the natural gas produced from the drilled sites, however, was far below than what the company had expected. Good for the company – it did not have to spend $16 million for nothing. For the two families, though, it was a very, very big and disappointing loss, for what could have given them millions of dollars are now worth nothing at all.

Can holding on to mineral rights prove wiser than selling part of it (and keeping the rest) or selling everything? Even big companies with producing leaseholds decide to sell eventually – this is the trend in the oil business. Many owners too, in the past, have embarked on the practice of selling their rights than leasing or holding on to them. And when speaking about the shale regions a sale can involve huge amounts, maybe even enough to actually support you and your family for the rest of your lives.

The amount you can get from the sale will also definitely be useful for future financial concerns such as retirement funds and the education of your child/children. A part of it may also be used for a relaxing vacation, a holiday escapade which you deserve, or to pay off the balance of your mortgage (if you have mortgaged your property), to save it from being foreclosed, as well as to save you from filing for bankruptcy.

Thus, choosing not to sell when a company offers to buy can be a decision that you may regret in the future. On the other hand, opting to hold on to your property and leasing it instead may also yield fruit in due time; the only question is, how long will that time be?

Some owners decide on leasing half of their mineral rights and keeping the other half untouched. A wise decision? What if the leased half comes short of the company’s (which leased it) expectations, or worse, produces nothing at all? Your whole property will then be worth nothing.

You can base your decision on these two arguments, then; take the risk of not selling, which can end up with your property being worthless or worth very little, or decide to sell everything, which can save you from the inconvenience of negotiating with the leasing company and which will allow you to immediately put to use and enjoy the big cash that is ready for payment. Which will it be?

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