Should I sell my mineral interest now or wait for higher prices?
Posted by admin at November 10th, 2015
If you’re fortunate enough to be a mineral interest owner in or near one of the major shale plays in America you’ve no doubt witnessed a significant reduction in the value of your property over the last eighteen months or so. As oil and gas prices dropped, so has the price that mineral buyers are prepared to pay for mineral interests. Their mineral interest purchases are all based on their projected return on their investment so, with oil and gas prices half of what they were a year and a half ago, their return stands to take twice as long and naturally they expect mineral prices to be adjusted accordingly.
So how soon could you expect to see the value of your mineral interests return to where they were such a short time ago? Well, it’s largely dependent on exactly where mineral interests are located and how motivated exploration and production companies are to develop a certain area, but until oil and gas prices experience a rebound don’t expect mineral prices to improve significantly. Most experts agree that the recent drop in oil prices will not be short lived. There are lots of reasons why oil prices have dropped like they have but the primary factor is that worldwide production is now exceeding demand by over 2,000,000 barrels of oil per day and, like any commodity, this glut is driving the price down. And the same goes for natural gas. Gas production is at an all-time high and even with low prices, production is not expected to slow anytime soon with no large surges in demand on the horizon so natural gas prices should also remain low. Energy efficiency and the increase in renewable energy such as wind, solar and battery power is also having an impact on the demand for fossil fuels.
So should you sell your mineral rights when oil and gas prices are low? Well it all depends upon your situation and how important a lump sum payment could be to you and your family. You might have been able to sell your rights at an earlier time at a much higher price, but if there are simply too many questions about the future value of this highly volatile asset it might be time to consider selling at a lower price and investing that money in safer investments you can control.
Apache Land and Royalty would welcome the opportunity to discuss current market trends and future demand for oil and gas with you so please give us a call at 888.428.4811.