Mineral Rights Buyers in 2024
Finding a mineral rights buyer is pretty easy. A quick google search will quickly lead you to a lot of mineral buyers. The challenging part is knowing which royalty buyer to work with. For every legitimate mineral buyer there are a lot more who will take advantage of you.
Before you sell mineral rights, it helps to understand a little more about these oil and gas royalty buyers.
Who are Mineral Buyers
Among the legitimate mineral buyers, there are basically three different types of mineral rights buyers:
- Individuals: Some, typically wealthy, individuals buy mineral rights. They may have a lot of other assets and like the diversification of owning oil and gas mineral rights directly. Other individuals may be looking for oil and gas royalty income as a way to generate return.
- Private Companies: There are a number of private companies that focus exclusively on purchasing mineral rights. These private companies typically have an in house team to evaluate deals. The funding for their purchases comes from private investors who want to buy mineral rights but don’t have the expertise to do it on their own.
- Private Equity Backed Companies: Most larger deals are completed by private equity backed companies. These companies get their funding directly wall street or other private equity backed funds. Most PE (private equity) backed funds are focused in very specific locations. They build up a portfolio of assets in a specific county.
As long as the oil and gas royalty buyer is legitimate, any of the above types of buyers is perfectly fine. Smaller deals are typically purchased by individuals and private companies. Larger deals are typically purchased by private companies and private equity backed companies.
Operators: It’s worth mentioning that operators do sometimes purchase oil and gas mineral rights. However, operators nearly always pay below market value. When an oil and gas operator approaches you to purchase your mineral rights, this is a good indication that they plan to drill soon. Do not sell mineral rights to an operator without getting competitive bids. They are obviously legitimate buyers, but you will likely end up selling below market value.
Flippers Disguised as Mineral Buyers
One of the biggest challenges when finding a mineral rights buyer is locating legitimate buyers. One of the primary reasons that US Mineral Exchange was founded was due to flippers. For the average mineral owner, figuring out whether you are working with a flipper or a legitimate buyer is nearly impossible.
What is a flipper? A mineral rights flipper is someone who puts you under contract, and then flips that contract to a legitimate end buyer. Using the example below, you may find someone who offers to give you $2,000/acre for your mineral rights. That person may turn around and sell the contract to someone else at $3,000/acre, and then that person turns around and sells to a legitimate end buyer at $4,000/acre. You could have made $4,000/acre but instead you only walked away with $2,000/acre!
Using the example below, even if you did manage to find someone who would pay $3,000/acre, you are still leaving substantial money on the table!
This is a simplified example, but something extremely similar to this happens all the time to mineral owners. The worst part is that you will have no idea it is happening. A flipper will offer you $2,000/acre, close the deal, and you’ll never even know you could have made a lot more money!
We talk to a lot of mineral owners who are convinced that they got an awesome deal. They got offers in the mail, found more mineral buyers online, then negotiated a price that was way higher than their initial offers. What those mineral owners do not realize is that the best deal they found was still far below market value. Just because you get an offer that is a lot higher than a low ball offer or you negotiated your offer up a lot does not mean you got a good deal. You very well may be working with a mineral rights flipper who still made a nice profit.
At US Mineral Exchange, we have processes in place to ensure you are only working with legitimate end buyers. Our goal is to get you maximum value when you sell mineral rights. The only way we can do this is by finding you a true end buyer who is willing to pay the best price.
Why Companies and Individuals Buy Mineral Rights
As you look for someone to buy your mineral rights, you may be wondering why they are buying from you. There are two primary reasons:
Flipping: As we discussed above, a lot of entities buy mineral rights simply to turn around and sell them for a quick profit. This is not your ideal buyer because if they can quickly find someone at a higher price, why shouldn’t you be collecting the higher amount?
Long Term Investment: Legitimate royalty buyers are interested in making a long term investment. They purchase mineral rights with the intent of holding for 10, 20, or even 30+ years. These mineral buyers will purchase a lot of different mineral rights over time. As drilling occurs and oil and gas royalties are produced, their investment over time pays off. They get diversification from buying a lot of mineral rights. These are the mineral buyers who will pay the best price.
How to find Mineral Rights Buyers
If you want to locate oil and gas royalty buyers there are a lot of different ways to do it. As a mineral owner, the hardest part about finding someone to buy your mineral rights is locating a legitimate buyer. Generally speaking, find a mineral buyer is easy! The problem is that you will nearly always sell below market value when you take the shotgun approach. The reason is simple. You cannot reach out to enough mineral buyers to get a fair price.
With that in mind, here are some of the ways to find buyers:
5 Mineral Buyer Tricks
Our #1 goal is to protect mineral owners from being taken advantage of. There are a number of common tricks that mineral buyers will use to convince you to sell. These tricks are often used to convince you to sell below market value. Do not fall into these common traps:
1
Bait and Switch Offers: Teaser offers, or bait and switch offers, are extremely common in the mineral rights space. There are a lot of mineral buyers who will send you a very high offer. They have no intention of paying this price. Their goal is simply to get you to pick up the phone. Once you contact them, they will quickly revise the offer to something substantially below their initial offer.
2
Deadlines: Mineral buyers are experts at creating a sense of urgency. They will create a completely made up deadline for the offer. Frequently these deadlines gives you just a few days to decide. Don’t make a rushed decision when selling mineral rights that have been in your family for decades! A legitimate buyer will give you time to make a decision.
3
Lease Royalty Rate: Another common buyer tactic is to assume a lease percentage that they know is incorrect. For example, they may “assume” a 25% lease, but very few mineral owners have a 25% lease. When the offer adjusts based upon your true lease percentage, your offer may drop by up to 50%!
4
Purchase and Sale Agreements (PSA): The PSA specifies the terms of the offer. Are you familiar with the difference between a net mineral acre and a net royalty acre? Do you know how many days is standard for title in your area? Mineral buyer slip language into these agreements that will cost you substantial money. You need someone on your side that understands these agreements. Imagine selling a home without an agent and letting the buyer draw up all the paperwork. Mineral owners do this all the time and get taken advantage of.
5
Mineral Deed: The mineral deed is the document that actually transfers your ownership to the buyer. It’s important that this legal document be correct. Mineral buyers will sometimes specify acreage you didn’t intend to convey. They may also write the deed so that they get any acreage you own in the county, not just what you are in pay on.
Unfortunately there are many ways to get taken advantage of when selling mineral rights. There are many legitimate mineral buyers out there, but there are also a lot of shady flippers and mineral buyers. They will do anything they can to take advantage of you and get a better deal. They make substantial money preying on mineral owners who are not familiar with selling mineral rights. You need an advocate in your corner who is going to protect your interests and help you sell for the highest amount possible.
Contact US Mineral Exchange:
Do you have an offer to sell mineral rights? Are you looking for offers from other mineral rights buyers? List at US Mineral Exchange and we can quickly get your mineral rights in front of thousands of mineral buyers. Getting competitive bids is the only way to ensure you sell for the best price. We don’t get paid unless we can find you a higher offer than your existing offer.
If you have questions, please fill out the free consultation form below. We’ll quickly be in touch to help answer your questions and point you in the right direction.