Mineral rights are valuable assets that can generate long-term income, especially when oil and gas production is involved. Whether you’re buying, selling, or inheriting mineral rights or royalty interests, it’s essential to understand how to evaluate their true worth.

Many landowners and investors confuse mineral and surface rights - they are very different. Mineral rights give you the legal authority to produce or lease subsurface resources like oil, gas, and minerals. Royalty interests, on the other hand, entitle you to a portion of production revenue without operational responsibility.

Key Factors That Determine Value

The value is influenced by several core elements:

• Production Status: Active production typically increases value, especially with proven reserves.
• Location: Areas like the Eagle Ford Shale in Texas command higher prices due to ongoing activity.
• Lease Terms: Favorable lease agreements with competitive royalty rates (e.g., 20-25%) can significantly boost long-term income.
• Market Trends: Commodity prices for oil and gas directly impact revenue potential and asset valuation.

Appraisal Tips for Accurate Evaluation

To get an accurate appraisal:

• Review historical production data and current well performance.
• Consult with a landman, appraiser, or energy attorney familiar with the region.
• Examine title records and lease agreements for any encumbrances or expirations.
• Factor in tax implications, including depletion allowances and potential capital gains.