How to Calculate Mineral Rights Value in 2020
If you want to know how to calculate the value of mineral rights you’re in the right place!
Figuring out how to calculate the value of mineral rights can be a challenge. We will provide you with some mineral rights value rules of thumb that will guide you. The values we provide will be a good park park estimate of mineral rights value in 2020.
Factors in Calculating Mineral Rights Value
The reason it is impossible to accurately calculate mineral rights value is because there are many factors that play a role in the value. No two mineral rights properties are ever identical. This is why it’s impossible to find an average price per acre for mineral rights. The only exception is if you own an identical interest to a family member and that family member has an identical lease.
Many mineral owners attempt to search for “comps” to understand whether they have a fair offer to sell mineral rights. There is no such thing as comps in mineral rights due of the factors below. In a single county, the average price per acre for mineral rights could be anywhere from $250 to $10,000+/acre depending on all these factors.
Each factor can play a significant role in calculating mineral rights royalties value. This is why it’s impossible to figure out how to calculate the value of mineral rights accurately. Here are just some of the factors that play a role in the value:
How many wells have been drilled
How many wells are left to be drilled
Decline curve for existing wells
Localized Oil and Gas Pricing
No Deductions Clause
Surrounding Permit Activity
Surrounding Rig Activity
+ MANY MORE!!
With all of these factors above and many more, accurately calculating royalties value for your specific mineral rights is nearly impossible. This is why mineral rights appraisal services do not work.
The Best Way to Estimate Mineral Right Value
Mineral owners come to us all the time and ask us, how much are mineral rights worth per acre?
The best way to estimate mineral rights value is through existing offers. Existing offers are truly the best way to get a ball park feel for mineral rights value. Every mineral buyer is different. Some mineral buyers will send you a low ball offer. Others will send you a teaser offer and then reduce the price when you contact them. However, if you get multiple offers in the mail to sell mineral rights you can get a general feel for the market value through these offers.
Mineral buyers take all of the factors above into account when making offers. A real legitimate offer from a qualified buyer is the best estimate of the market value of mineral rights.
If you have an offer to sell that you are strongly considering, we recommend listing your mineral rights at US Mineral Exchange. We can quickly get your mineral rights in front of thousands of qualified buyers and get competitive bids. Over 95% of the time we can find you a higher offer.
How to Calculate Value of Mineral Rights
When mineral owners are trying to understand how to calculate the value of mineral rights, they often want the “Zillow” for mineral rights. This does not exist and any company claiming they are the Zillow for mineral rights can’t provide accurate information.
The reason is that it’s simply not possible to accurately calculate the value of mineral rights. Some mineral appraisal type services will claim to give you an accurate calculation of mineral rights value. These services are always wrong. We have checked their estimate vs. sales in an open competitive market and they are always wrong. Don’t waste your money!
Every property is unique. As we mention above, there are a large number of factors that affect value. You simply can’t calculate mineral rights value with any accuracy. With that said, further below we’ll provide you with some mineral rights value rules of thumb that will help.
Average Price Per Acre for Mineral Rights
We are frequently asked about the average price per acre for mineral rights in a given county. There is no average price per acre for mineral rights!
The reason is that your mineral rights ownership is different than anyone else’s.
Assume that you have mineral rights with a 12.5% lease and all 6 wells that will fit on your acreage have already been drilled. These wells have been producing for years. Your neighbor next door has a 25% lease and they had 1 old vertical well from 1950 that just got shut in. The operator has a drilling pad set up and is drilling 6 new horizontal wells on his acreage.
Your acreage could be right next door to someone and the value could be completely different. Your mineral rights could be worth $1,000/acre because there isn’t much oil left while your neighbor could be getting an offer for $10,000/acre based upon an active rig and a 25% lease.
This why there is no average price per acre for mineral rights. Every owner (even in the same wells) is unique. Your lease agreement terms, your lease royalty percentage, your ownership type, etc all play a role in the average price per acre for mineral rights.
Gross Acres vs Net Acres
One thing that confuses a lot of mineral owners is the difference between gross acres and net acres. If you want to know how to calculate the value of mineral rights you need to know the difference.
The gross mineral acres describe where your ownership is located. On your mineral deed and on your lease agreement, they will typically list the gross mineral acres. This leads a lot of mineral owners to believe they have a lot more acreage than they really have. The gross mineral acres is usually a nice clean number like 40 acres, 80 acres, or 160 acres. If you think you have a nice large round number of acres, you are probably looking at the gross acres.
When you calculate the value of mineral rights you need to use your net mineral acres. This number is more difficult to calculate. You need copies of your check stubs OR you need an order for payment document that will show you how many net acre you leased. If you send US Mineral Exchange a copy of your check stubs we can help you calculate how many net mineral acres are owned.
Mineral Acre vs Royalty Acre
If you have heard the term “royalty acre” or “net royalty acre” this may be confusing. Mineral buyers will use the term net royalty acre as a way to compare two different properties apples to apples.
It all boils down to your lease rate.
The most simple explanation is that a net royalty acre is a net mineral acre leased at 12.5%. Let’s look at two examples:
1 net mineral acre leased at 12.5% = 1 net royalty acre
1 net mineral acre leased at 25% = 2 net royalty acres
A 25% lease is double 12.5%. This means you have double the number of net royalty acres. Mineral buyers can compare two different owners in the same tract and calculate how much they are buying by looking at the net royalty acres.
Mineral Rights Value Rules of Thumb
As we discussed above, the best way to calculate mineral rights value is with an existing offer. However, there are some mineral rights value rules of thumb we can use to help you get a rough idea of the value. While these estimates will not be perfect, they will help you get a rough ball park estimate of the value.
The estimated value of mineral rights is just that, an estimate! We can nearly always find you a higher price when selling mineral rights by getting you competitive bids. Contact US Mineral Exchange and get a free consultation before you accept an offer.
Below are some good mineral rights value rules of thumb. These rules of thumb can frequently be wrong due to all the factors listed up above. To estimate mineral rights value using a rule of thumb it depends on what phase of ownership your property is in. See our property types page for a more thorough description of each type.
Here are the different phases of mineral rights ownership:
Non-Leased Mineral Rights
If you have a property that does not currently produce royalty income and you do not have an active lease, the value is nearly always under $1,000/acre. The average price per acre for mineral rights that are not leased is between $0 and $250/acre. Unless you have a substantial amount of acreage (250+) we generally do not list non-leased non-producing mineral rights. The only exception is if you have a current offer to sell or you have a recently expired lease that would indicate a higher value.
Leased Mineral Rights
If you do not receive a royalty check but you have an active lease agreement, the rule of thumb is 2x to 3x your lease bonus. For example, if you leased mineral rights for $2,000/net mineral acre, you could expect to an average price per acre for mineral rights between $4,000/net mineral acre to $6,000/net acre. How much you can sell leased mineral rights for depends a lot on your royalty percentage, the lease terms, and how good or bad the deal was you got when you leased.
Producing Mineral Rights
If you get a royalty check you have producing mineral rights.
The mineral rights value rule of thumb for producing properties is a little bit different. There are two factors that affect producing mineral rights value.
- Cash Flow: The cash flow value of mineral rights is based upon what the current royalty income. You can use the mineral rights royalty calculator below to estimate the cash flow value of your mineral rights.
- Future Upside: The future upside value is based upon what might happen in the future. Some mineral buyers will place a value on the future upside when a new well is drilled and you get additional royalty income. This is virtually impossible to estimate as every buyer analyzes it differently. There is no mineral rights royalties calculator that will give you this value.
To estimate mineral rights value for producing properties, take the average of your last 3 months of royalty income. Once you have a monthly average, plug it into the mineral rights calculator below.
You can expect to sell mineral rights for around 4 years to 6 years times the average monthly income you receive. The mineral rights value calculator below is a good estimate of the cash flow value of your mineral rights, but does not account for the future upside value of your mineral rights.
Keep in mind that you could be getting $10/month in royalty income and the calculator above would show a value of $480 to $720 for your mineral rights. You could be getting $10/month and have an offer for $1,000,000 on the table. This happens all the time.
How is that possible? The mineral rights calculator above only takes into account the cash flow value and does not account for future upside.
Accepting Offers for a Fair Price
While a legitimate offer is the best way to estimate mineral rights value, accepting one of these offers is not the best way to get a fair price. The only way to ensure the best price is to get your property in front of thousands of qualified buyers. Your goal is to put the most cash possible in your pocket.
When you accept an unsolicited offer to sell mineral rights you will nearly always sell below market value!
When you list mineral rights at US Mineral Exchange, you will quickly get the property in front of thousands of qualified buyers. These buyers will compete to pay you the highest price. This competition among buyers drives the price higher.
While the offers you get in the mail are a good estimate of mineral rights value, they do not indicate the true highest market value possible. If you want to sell mineral, rights, listing them at US Mineral Exchange will make sure you sell for the best price possible.
Check out our standard listings and auction listings to learn more about listing at US Mineral Exchange. You might also be interested to learn more about how the process works or the required documents to list.
Questions about Estimating Mineral Rights Value?
If you have any questions about how to estimate mineral rights value or wish to sell mineral rights, please let us know using the contact form at the bottom of this page. We will quickly respond to your inquiry!
The more information you can provide about your property the better! We can give you a better idea about the value of selling mineral rights if you provide more information. The most important thing we need is for you to answer the questions and provide your state and county.
If you have the required documents to list, providing those is extremely helpful!
Absolutely not! When you inquire at US Mineral Exchange we will not be putting any pressure on you to sell. We will help answer any questions you have whether you are interested in selling or not.
At US Mineral Exchange, we take privacy very seriously. We will NEVER sell your information or use it without your consent. When you send us documentation or tell us about your property, that information does not go outside our company without your consent. Even when you list a property for sale on our website, we strictly control who has access to the information about your listing so that only legitimate buyers will be able to see property details.
Many mineral owners make the mistake of getting an offer and quickly selling. They then accept an offer far below market value because they felt pressure to sell. There is nearly always a better price available.
We have two types of listings available to help you sell mineral rights for the best price:
Auction Listing – Our auction listings are for just 7 to 14 days. If you have an offer in hand you are seriously considering, an auction listing is a quick way to get a better offer and ensure a smooth closing process. Learn more about our auction listings.
Standard Listing – Our standard listings run for 30 days. These listings are ideal if you don’t have an offer in hand or you are not in a rush to sell. Learn more about our standard listings.
The reason that so many mineral owners decide to sell mineral rights at US Mineral Exchange is access to our large network of mineral rights buyers. Our goal is to help you get top dollar for selling mineral rights by getting your property in front of a huge audience of buyers. This allows buyers to compete against one another which ensures you get fair market value for selling mineral rights.
There are absolutely no cost to list your property. When you locate a buyer by listing your property with us, we are paid a commission directly by the buyers closing agent. This means you never have any out of pocket expenses ever. We only get paid if we can get you a better price than the current offer you have in hand.
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