When mineral interest (MI) is listed for sale, it usually refers to non-producing minerals. This means that there are no oil or gas wells on the property, and therefore, the owner does not receive royalty checks. Perhaps, one day in the future, an exploration and production (E&P) company may lease the mineral rights and try to drill a well. Some wells are successful, while others are not.
When "royalty interest" is listed for sale, it refers to producing minerals with an active oil or gas well. The royalty interest owner should be receiving royalties on the sale of oil and gas - based on the owner's decimal interest in the well. When the oil and gas lease ends, the royalty interest ends, and the mineral interest owner can re-lease the mineral rights.
The combination of mineral interest and royalty interest indicates the seller is selling both the mineral interest (usually with executive rights) and royalty interest in a producing property with revenue. If you buy both the mineral and royalty interest, you will still own the mineral rights when the current least expires.
Like royalty interest (RI), Overriding Royalty Interest (ORRI) ends when the lease ends. You will only own interest for the duration of the lease - so don't buy something that is about to be plugged!
Wellbore only interest is similar to royalty interest, but rather than receiving royalties on all wells in the lease; you will only receive royalties on the sale of production from one or more specific wellbores. When the well stops producing, your interest ends.
|Source||Accredited Investors Only?||Price Range||Focus||Auction||Sealed Bid||Negotiated Sales||Listing|
|EnergyNet||✓||$50 - Millions||All O&G Producing States||✓||✓||✓||✗|
|Oil & Gas Asset Clearinghouse||✓||$200 - Millions||All O&G Producing States||✓||✓||✓||✗|
|Mid-Content Energy Exchange||✓||KS, TX, OK, LA, CO||✓||✗||✗||✗|
|Simon Energy Assets||✗||TX||✗||✓||✓||✗|
|Wiggins Auctioneers||✗||OK, KS||✓||✗||✗||✗|
|Mineral Focus||✗||All O&G Producing States||✗||✗||✗||✓|
|Mineral Marketing||✗||150K - 50 Million||All O&G Producing States||✓||✓||✓||✗|
|America's Choice Royalty Partners||✗||PA, OH, WV||✗||✗||✓||✗|
|RealX||✓||All O&G Producing States||✗||✗||✗||✗|
|LandGate||✗||All O&G Producing States||✗||✗||✗||✗|
|Energy Advisor's Group||✗||All||All O&G Producing States||✗||✓||✓||✗|
EnergyNet is probably the most popular online mineral auction. EnergyNet offers a continuous auction, with small properties selling for a few hundred dollars to larger properties selling for several hundred thousand dollars.
During the first quarter of 2020 EnergyNet sold $4,836 assets for more than 78 million dollars at auction, through negotiated sales, and sealed bids.
EnergyNet is only for accredited investors. They will contact your financial advisor to confirm your status as an accredited investor and verify that you have sufficient funds to meet your bid allowance.
Oil & Gas Asset Clearinghouse has been selling minerals since 1992 and offers a continuous online auction, private sale listings, and negotiated transactions.
OGAC does not require banking information to sign up for a buyer's account, making them accessible to buyers who may not be eligible for EnergyNet.
Additionally, Oil & Gas asset Clearinghouse 's primary goal is to put deals together - online or offline. If they know what you are looking for, they will keep you in mind when they come across a relevant property.
Mid-Continent Energy Exchange (MCEE) offers an ongoing bid-exchange auction with bi-monthly live auctions containing a variety of mineral rights located in Oklahoma, Kansas, Texas, and other mid-content oil and gas states.
Mid-Content Energy Exchange has an online bidding system so internet bidders can participate in the live auction (via simulcast) without being there in person.
Simon Energy Associates (SEA) is an independent firm specializing in the divestiture of energy assets. SEA sells mineral rights through negotiated sales and sealed bids. They have well-researched, thorough data rooms to felicitate your due diligence.
Simon Energy does not require buyers to be accredited investors, but most of their properties range from $500,000 to 10 million dollars.
Wiggins Auctioneers is a well-known auction service based in Oklahoma. They are open to the public, and bidders do not have to be accredited investors.
Every few months, Wiggins auctions off various properties in Oklahoma and Kansas. They usually sever the minerals from the surface and sell each separately.
Mineral focus connects buyers and sellers without taking a commission or charging a fee. They list land with mineral rights as well as minerals without surface rights.
Mineral Focus does not participate in the negotiation - they introduce buyers and sellers via a free online listing service.
Mineral Marketing follows a traditional real estate model, but for mineral rights. They sell minerals, operating rights, and equipment in transactions between $150,000 and 50 million.
Mineral Marketing negotiates deals between buyers and sellers with occasional live and online auctions.
America's Choice Royalty Services (ACRS) is a licensed brokerage focusing on the Marcellus and Utica shale plays of the Appalachian Basin.
ACRS has a network of mineral buyers ranging from large hedge funds managers to private investors. They help buyers find what they are looking for while assisting sellers in capitalizing on a valuable asset despite the lack of drilling and infrastructure.
Evenson Auctioneers is a Kansas based auction service that holds periodic oil and gas mineral auctions. Auctions are open to the public, and 20% of the sales price needs to be paid at the time of the auction.
Evanson has an email list to notify buyers of upcoming auctions.
The Energy Advisors Group provides mineral buyers with a personal buying experience. EAG facilitates off-market and on-market negotiated sales and sealed bids for mineral properties throughout the United States. EAG also provides buy-side services and can help mineral buyers source capital. They have been around for a long time, and through their contacts, can help you find exactly what you are looking for.
LandGate is a new marketplace for mineral, wind, solar, water, and other property rights. LandGate provides free listings of mineral and other land resources for sale throughout the United States. They also provide valuation services and a SaaS solution that helps buyers sellers determine the value of various property rights.
RealX makes it easy to buy, sell and lease property rights including, oil and gas, wind, solar, timber, cell towers, pipelines, transmission lines, and agriculture. They do not represent the buyer or the seller, instead, RealX provides a platform for buyers and sellers to connect.
Develop an acquisition plan and preferred location to buy minerals. For some people, it'll be whatever they can find for less than "x" number of months ROI. For others, it's a specific type of interest in a specific area. It's usually wise to diversify your mineral portfolio.
Look through the auctions, sealed bids, negotiated sales, and minerals for sale listings on the websites above to get a sense of what is available and see what fits into your acquisition plan.
Once you find some listings that interest you, do your research. Thorough due diligence is essential. Look up the property on the state's oil and gas regulatory commission's website (and GIS viewer). View the production (if any) as well as offset production. Overlay maps of the mineral location and drilling activity. Look at the lease terms. Run the title to verify ownership and interest amount. And more.
Once you have identified a good mineral property to purchase or bid on, submit your offer or place a bid. Each platform will have its own process that you need to follow.
If you are the winning bidder or your offer was accepted, you will probably receive an invoice and have two or three business days to wire the funds and pay for your new minerals. Once the payment is received, the mineral conveyance or deed will be signed and sent to you or sent to the county clerk's office for recording (and then forwarded to you).
Some firms send the conveyance document or deed to the county clerk where the minerals are located for recording. Others send you the original documents, and you need to have them recorded with the county clerk. If you purchased producing minerals, a copy of the recorded document needs to sent to each operator to transfer the minerals into your name and get into pay status. You may also want to send a copy to the tax appraisal office. Once the ownership is transferred, the operator will send out new division orders, which you need to review, sign, and send back with a form W9 (for future tax reporting).
Make sure you know what you own and keep good records. Original documents should be well-organized in folders, and digital copies should be placed in digital folders. You should also have a spreadsheet, detailing everything you own. Download a free mineral management spreadsheet. Alternatively, there several good mineral management software packages that can be helpful.
New oil and gas wells decline sharply (especially horizontal wells). The royalties from the first few months of production should not be used to value the property. It is quite common for a 1-year old well to produce 1/2 or even 1/3 of its initial production. A valuation based on the first 6-12 months of production will result in dramatically overpaying for the interest. You may never get a return on your investment.
Hydrocarbons are finite resources. Successful conventional wells generally produce smaller amounts of oil and gas for long periods of time. The newer horizontal wells produce large quantities of hydrocarbons, but only a few years. Buying interest in a well that is near the end of its life is risky. It may be plugged and abandoned before you get a return on your investment. And if your interest terminated with the lease, you no longer have the ability to generate income in the future.
Non-producing minerals are mineral rights in a tract of land that does not have an active oil or gas well. Without revenue, there are no royalties. The minerals may remain non-producing for decades, or generations. Many non-producing minerals will never be drilled. Others will be drilled but will result in a dry hole or well with a short economic life. On the other hand, buying non-producing mineral rights in active shale plays can be a good investment - if you pick the right location.
More often than not, mineral owners don't really know what they own. The onus is on the buyer to do conduct extensive due diligence before purchasing minerals. Poor due diligence may result in your purchasing minerals from someone who doesn't actually own any minerals (or who owns only a small fraction of what they thought they owned). It's risky - especially when buying non-producing mineral rights.
Most mineral owners do not hire an attorney to negotiate lease terms. This is a huge mistake and usually leaves money on the table. One of the many terrible, but common lease terms is giving free gas to the operator in order to run the well. Some operators have started running their frack fleets on natural gas, and guess who is financing that? Buying mineral rights with poor lease terms exposes you to additional risk.
If you don't thoroughly understand the different types of mineral rights and accidently buy working interest, you now have the responsibility of operating the well and paying all the expenses (including the mineral owners)! Non-operated working interest owners are not involved with the day-to-day operations but are still obligated to pay their share of the expenses. For this reason, a lot of buyers stick with mineral interest (MI), royalty interest (RI), overriding royalty interest (ORRI) and non-participating royalty interest (NPRI).