Lower Oil Prices & The Value of Your Mineral Rights
Updated: Dec 21, 2018
The recent decline in the price of oil can have various implications on the value of your mineral interests. The most direct effect is seen by those mineral owners who receive a monthly royalty check from oil and gas production. The value of mineral royalties is dependent upon oil and/or natural gas commodity prices, and thus will have a correlational effect on the royalty revenue you see on your check every month. With oil prices declining over 65% in the past year, this can be alarming, especially to those who rely on these payments as a source of income.
As a mineral owner, one important consideration to take into account is the uncertainty of the future of the oil and gas market. Industry experts have a range of opinions on whether crude oil prices will increase or decrease, leaving the future for oil and gas exploration unknown. However, it is fairly agreed upon that prices aren’t predicted to sky rocket back to recent years’ prices at $100 per barrel any time too soon.
What To Do About Reduced Oil Prices
In order to get a good sense of the value of your mineral rights, there are a few things you should do. First and foremost, you should have an understanding of what’s currently going on in adjacent properties or counties as well as seek offers from a reputable mineral buyer such as Tower Rock Oil and Gas. We offer free evaluations in order to inform you with the appropriate information so that you may make your own decisions. After you have looked into your property, one option may be to consider selling either a portion or all of your mineral or royalty interests. This can be beneficial for many reasons, and because you receive a guaranteed payment for some or all of your mineral rights, you diminish the risks associated with an unsteady commodity market.
While the large-cap, publicly traded oil companies can generally handle the burden of decreased cash-flow from the declining oil and gas market, that doesn’t always hold true for individual mineral owners. We recommend assessing your situation and determining if riding out the wave of the unstable oil and gas market is worth the risk, or if you’d rather delineate your risk with a guaranteed payment now. If you plan on selling within the next 5 years, selling before prices further deflate may be a smart decision. If you have 10+ years to wait, holding on to your minerals to see if prices increase may be a better choice for you.