Oil & Gas Appraisals Mineral & Royalty
Selling Your Mineral Rights
Over the past 15 years, mineral and royalty interest values have skyrocketed as this asset class has become highly sought after by investors.
Today, the old adage of “never sell your minerals” has all but started fading into history as individuals, families, family trusts, corporations, etc. have noticed the value of these assets and how easy it has become to buy, sell, and trade.
It’s absolutely imperative to have an appraisal of your minerals or royalties done, especially if there could be a possibility of selling those interests.
How To Get Your Mineral Rights Appraised?
Why is it important to get your mineral and royalties appraised? When buying and selling real estate, an appraisal is always required and buying and selling minerals and royalties is no different. After all, they are also considered real estate.
The value of mineral rights is constantly changing due to fluctuating commodity prices and oil and gas production levels. Values of today may not be the same tomorrow. It is always good to know the most up-to-date fair market value for your mineral and royalty real estate before going through the process of buying or selling.
Minerals and royalties are selling for, in some cases, 1,000x or more. It's imperative to have an appraisal of your minerals or royalties done.
Know what your asset is worth.
As a mineral and/or royalty owner it is your right and within your power to keep all of your assets, divest only a percentage, or sell all your mineral rights. If you decide to sell a percentage or all of your mineral and/or royalty interests, Venergy will build the framework to properly and thoroughly get your interest ready for market by preparing a comprehensive Mineral & Royalty Prospect Proposal. As part of our representation service, Venergy will perform extensive due diligence including, but not limited to:
Mineral and/or Royalty Appraisal and Reserve Analysis
Existing Lease Conditions
Operator(s) Activity and Performance
With the full report and presentation ready for market, Venergy captures every detail to maximize advantages to bring only fair and above market offers. This saves time by weeding out low-offer players and it also gives you the upper hand to ensure you receive offers from reputable, qualified purchasers. No multi-chain brokers, or "get-rich-quick" flippers.
How Are Minerals and Royalties Appraised?
Mineral Rights Value & Evaluations
Every Mineral & Royalty Appraisal is a comprehensive report developed by our Certified Petroleum Engineer and includes:
A forecast of the future hydrocarbon production on your properties by taking in to account surrounding producing wells, any currently producing wells, and any future wells that are likely to be drilled on your properties based on the proper field spacing rules in which your properties are located
A model of the current and future development, production, and price data in order to calculate the net present value of future royalty revenue
Your report will also include the top three most important values, including:
A fair market, final dollar per mineral acre and per royalty acre valuation
Minimum value parameters - the lowest value range worthy of acceptance
Maximum value parameters - the highest value range one could ever expect
Your appraisal also takes into account:
Current and potential future commodity prices (past if retrospective) for oil, gas, condensate, and natural gas liquids
Sign up for a complimentary Mineral and Royalty Appraisal consultation.
How to Handle Inherited Minerals & Royalties?
Mineral and royalty rights can be willed, gifted, deeded, or sold to you, members of your family, or anyone else for that matter.
You're probably wondering "how do I know what I own?" or "what do I need to do next?".
First, take deep breath and know that you're in the right place.
It is especially important to know what your minerals and/or royalties are worth when they are passed down or inherited. A Venergy Retrospective Mineral and/or Royalty Appraisal is absolutely essential should there ever be a possibility of selling those interests at some point in the near future.
Schedule a consultation as soon as possible; the oil and gas industry is rapidly changing and you need to know how it will affect you and the future of your newly inherited interests.
Do I own mineral rights on inherited property?
It depends. When one inherits property, they receive the same rights as the person passing the property had at the time of distribution. If the one passing the property down the line owned the rights the minerals, then the answer is yes, the one on the receiving end will receive those rights as well.
Royalty rights can also be inherited and are just as important. In fact, after lease bonuses have been paid and if an operator is drilling on and producing leased minerals under your property, the royalty rights are extremely important. If you simply own the minerals and no royalty rights, you will not receive any monthly revenues from the production. In this regard, one could say (in some instances) that royalty rights are more important that owning the mineral rights.
Are mineral rights valuable?
There are quite a lot of factors that come into play when determining how valuable minerals under a piece of property can be. They can more than likely be of great value to the owner if:
The minerals are already leased
The minerals are producing
There is quite a bit of leasing or drilling activity taking place in the area where your minerals are located
Conversely, if your minerals are unleased, or there is not a lot of leasing or drilling activity in the area where your minerals are located, or if they're not producing, then perhaps they are not worth all that much.
But don't be discouraged if your minerals fall into the latter categories, activity is always moving and spreading and can change very quickly from one area to the next. A Mineral Appraisal is the best place to start to know the value of your newly inherited asset and can even help save you potential capital gains tax headaches.
Want to know how much your mineral rights are worth?
What happens if I lose or forget that I have mineral rights?
The good news is that one cannot simply lose or misplace their mineral rights. Once owned they are owned forever until one gifts, sells, or passes them down through inheritance. If one forgets what they own a little bit of research by an experienced Landman could go a long way. A check of the courthouse records or the online county tax roll could clear this up in a jiffy.
Are mineral rights taxable?
If you simply own minerals and/or royalties and they are NOT producing yet, you will NOT owe any taxes on those rights until they get put to use, or become producing.
If you're interested in buying and selling minerals and royalties, capital gains taxes are taxes placed on various assets based on length of ownership and the year in which they are sold. If you do not get an appraised baseline value upon based on the time and date of the inheritance, you risk significant tax implications if/when you decide to sell.
Long-term capital gains taxes are placed on assets sold after having been owned for longer than one year. The federal long-term capital gains tax rate is typically between 15-20%, however, some state's have their own capital gains tax rate in addition the the federal capital gains tax.
What could my capital gains look like?
Take this simple example: You inherited minerals and royalties at some point in the past and let’s say they were worth $500k at the time of inheritance. A few years later, you sell them for $1mm. If you didn’t get a present mineral and/or royalty appraisal at the time of inheritance, or a retrospective mineral and/or royalty appraisal dated back to the time of inheritance, prior to selling those interests you would be taxed 15-20% capital gains tax on the full $1mm.
If you would have done one of the aforementioned appraisals, as long as you owned the assets for longer than one year (long-term capital gains), you would only be liable for the 15-20% capital gains taxes on the $500k profit ($75k @ 15%) instead of the full $1mm ($150k @ 15%).
The uncertainty of what to do with newly inherited mineral interests can feel like a burden, but it doesn't have to be.
Venergy promises to educate you on your newly inherited interests to help ease your concerns.
Values can change quickly so don't delay in getting the process started.
Contact us today so we can help.
Benefits of an Oil and Gas Appraisal
> Prenuptial planning
> Forced separation of estate (e.g. Marital Divorce)
> End of Life Ownership Transfer
> Trust & Will Planning