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Can selling minerals ever be wise?

  • 06/10/2016 1:08 PM
    Message # 4067821
    Anonymous

    After another boom and bust cycle in the energy business, it seems beneficial to pause a moment and critique the age old axiom ' you should never sell your minerals'.  NARO is ground zero for any mineral owner wanting to learn more about managing their minerals, so I m hopeful we can have a discussion that helps all NARO members to more wisely manage their minerals as part of their personal asset base.   


    For mineral owners seeking education and wisdom from NARO events and members, they should find counsel that equips them for their personal situation and finances.  In other words, wise counsel for an affluent mineral owner whose mineral asset base reflects half their total net worth, is very different than wise counsel for someone whose mineral asset represents most of their total net worth.  The test here to determine your position might be to reflect back on the day you saw oil heading south of $40, with forecasters saying it may go to $20.  Was it 'disappointing' news, or did you feel nauseated because you quickly realized the big offers for your minerals were history, nobody knows if and when prices will come back, and you begin to wonder how you will repay the loans you assumed would be paid by generous royalty payments from lots of wells.


    So, I would like to start this chat so we can share opinions, wisdom learned through years of mineral management, and hopefully in doing so, we all become more equipped to evaluate our own mineral management strategies and to assist others who are looking for wise counsel because they are relatively new mineral owners.  


    Can selling some or all of your minerals ever be wise?

  • 06/15/2016 10:44 AM
    Reply # 4077247 on 4067821
    Anonymous

    Whenever an unsolicited offer is received it's time to take a closer look since someone may have more intimate knowledge of happenings taking place on or around your property.  A prime example is one of my then future clients was receiving million dollar offers to sell minerals under a half section. The investigation revealed two eight well pads that were drilled in late 2015.  No sale took place.

     

    Every time I hear sell, my response question is are you in a cash crunch.  If no, why sell unless your determined to clean up you portfolio since ownership resides in multiple states.  Even then, with some research you might be able to swap, value for value, exchanging, for example, Oklahoma minerals for Texas minerals.  If the latter, definitely seek legal assistance and a CPA, BEFORE SIGNING OR AGREEING TO ANYTHING.

     

    As a trustee/executor we encounter times when the future heirs are charities who have no desire to hold minerals or the future heirs want no future ownership.  These situations are rare since we encourage continued ownership.