Guide · the owner's primer

Someone offered to buy. How did they get that number?

How mineral buyers price an offer, and the questions to ask before you take one.

Offers to buy minerals arrive by mail with a number that looks large. The buyer arrived at it from three things you can also see: what your interest earned last year, what new wells are already permitted near it, and how long they expect to wait to get their money back.

What the buyer knows

• Your cash flow. From the pay decks, or from the Commission's production records applied to a decimal they estimate.
• The permits. Approved drilling permits under or beside your tract — the red circles on the plat — are public. A buyer who sees five new horizontals permitted beside you is paying for them, and hoping you have not looked.
• Decline. Horizontal wells make most of their money in the first few years. A buyer's price is a bet on the wells to come, not the ones declining now.

Questions to ask before you answer

• How many months of my current checks is this offer? (Ask us; it depends on the wells.)
• What is permitted within a mile that is not yet producing?
• Does the offer cover all my minerals in the county, or this tract only? Read the deed they sent.
• Is the buyer the operator, an affiliate of the operator, or a fund? Each prices differently.
• What would selling do to the family's other interests, and to the estate?

Sometimes selling is right — a small, scattered interest, an estate that needs cash, a tract with nothing coming. The point is to decide with the same facts the buyer has.

A written opinion of an offer is a flat fee; see lease and offer review. We never buy from a client, so our opinion is not a bid.