The Value of Non-Producing Mineral Rights

One of the major factors that contributes to the value of a mineral estate is whether the minerals are producing or non-producing. As you might expect, minerals that are under production and making money are valued much more highly than non-producing minerals that don't currently generate profit. However, non-producing minerals can still be put up for sale and have the potential to make money for the owner. 

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If you own mineral rights that aren’t currently producing, you need to know about getting the most out of those rights. Keep reading to learn more about the value of non-producing mineral rights and getting the highest offer for your rights. At The Mineral Auction, our mineral rights brokers can identify the value of your minerals and market even non-producing mineral estates.

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Key Takeaways

• While producing rights are often worth more, non-producing rights can be highly valuable for mineral owners.
• Key factors to consider when determining the value of non-producing mineral rights are production history, nearby active wells, and the geology of the area.
• To get assistance with your mineral valuation and to get fair market value for your rights, you can get assistance from a mineral broker.

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What Impacts the Value of Non-Producing Mineral Interests

The value of non-producing minerals is usually determined by a price per net acre multiplier. This represents how much of the land is owned, the net acreage, and the present value of that land. To make these calculations, you’ll need a good amount of property information and market data. With the market constantly in flux, it is important to understand how non-producing minerals can be profitable. 

The two major characteristics that can affect value are current production activity and location. Since non-producing wells have no current activity, the location-related factors that affect the value of non-producing minerals include:

• Production History – If the property has produced before, the value of the land may increase due to the prospective profitability of the land.
• Proximity to Producing Wells – If the non-producing wells are near current drilling operations and energy company leases, then the value of the land can increase. Permit activity nearby can significantly increase the value of your rights as it’s a sign of imminent development.
• The Geography and Geology of the Area – A specialist is needed to determine the value of the land itself in order to prove the potential of the land. Using geological indicators, you can determine the probability of commercially viable levels of hydrocarbons, or oil and gas reserves, on your land and drive up the value.
• Your Ownership Interest – Not all mineral owners own 100% of the mineral rights to a piece of land. Surface owners and inheritors of mineral rights need to verify their ownership interests to accurately determine the true market value of their rights.

Of course, beyond the characteristics of the land itself, the other major influencing force on the value of non-producing rights is the current market. High current oil and gas prices can significantly increase mineral rights prices since they increase the profitability of future production. On the other hand, low commodity prices can lead to lower offers. Recent sales of similar mineral rights properties can give an indication of the current market value of mineral rights.

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The process of valuing non-producing minerals ultimately leads to the “upside potential” of the land, or the improved worth in the near future. Depending on the factors above, your property may not seem like it has strong potential for oil and gas development, which can lead to minimal offers. Despite this, there are many factors that play into the profitability of the minerals that you should consider.

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Contact Us for Help With Mineral Valuation and Sales

With producing rights, the opportunities for profit are clear: you can generate royalty revenue from the active wells. However, land doesn’t have to be actively producing oil and gas to have value. In addition to leasing mineral rights for bonuses and royalty payments, owners of non-producing mineral rights can also sell those rights for a lump sum payment.

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Once the value of your mineral estate is determined, the next step is to get your property in front of a large number of buyers. That’s the key to making a profit from non-producing minerals. The brokers here at The Mineral Auction will work tirelessly to locate the right buyers for your property. To discuss the mineral selling process, contact The Mineral Auction or give us a call at (866) 805-3769 to learn more about the value of your property and the auction process.

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