We’ve been getting a huge influx of inquiries recently from people asking why royalties checks are going down in value. Unfortunately, you’re not alone! It’s an industry wide problem that oil and gas royalties checks are doing down in value. As the price of oil has been dropping like a rock, the amount you receive in your royalties checks is also going to decline.
Why royalties checks are going down in value
There are two main drivers of how much you receive in oil and gas royalties checks each month. Your mail box money comes from the amount of production and oil/gas prices. When either of these two items changes significantly, it has a large impact on the amount you receive. While wells do decline over time, the decline is generally modest (unless the well is less than 2 years old), so it’s unlikely that production dropped. What’s probably happening is that the current decline in prices to less than $50/barrel is starting to take a toll on your royalties checks. For many royalty owners, this is an unwelcome surprise! Some royalty owners rely on their monthly royalty checks to make ends meet so when you see your royalties checks are going down in value, it can be a very concerning thing.
What to do about declining checks
Unfortunately you don’t have many options when it comes to declining royalty checks. The reason is that you can’t control the two inputs that determine the price. You can’t change the amount produced and you can’t affect the price of oil. What many royalty owners decide to do is sell their royalties. The reason royalty owners decide to do this is because they no longer want to deal with the hassle of inconsistent income. In addition, they do not want to mess with year end tax reporting requirements either. It can be a burden to own royalties for some which is why they make the decision to sell. Every person’s situation is different. If you do decide to sell royalties, you want to make sure you get the highest possible value when you sell.
If you’re considering selling royalties in Texas, we recommend you list your property through US Mineral Exchange. Doing so is like putting your home on the MLS and it alerts mineral buyers from all over the country that your property is available. You will quickly get some offers in and you’ll get to decide whether or not you want to accept any of them with no pressure to sell. We’ve talked with a lot of mineral owners who have had a positive experiences which is why we recommend their service.
