Should you sell oil and gas royalties? It’s common question we get from Texas Royalty Owners. Before you sell oil and gas royalties, it’s important to carefully consider all your options. A lot of royalty owners hear the advice that you should “never sell” but this is not true. Determining if you should sell oil and gas royalties is a personal decision. Everyone’s situation is different. To answer the question of “Should you sell oil and gas royalties” you really have to make the decision yourself. This free guide will help you figure out if you should sell oil and gas royalties.
Should you sell oil and gas royalties?
The most important thing to understand is that this is a personal decision. There are a lot of reasons royalties owners decide to sell oil and gas royalties in Texas. Every person is in a unique situation and selling royalties might make sense for you. To help you determine if selling mineral rights makes sense for you, we are going to provide you with a list of the most common reasons people decide to sell oil and gas royalties. Each of the reasons below is a valid reason to sell oil and gas royalties in Texas.
Inconsistent Income: One of the worst parts about royalty income is that it changes every month. You might get $500 one month and then get $250 the next month. Royalty income is very inconsistent which can make it difficult to budget and plan. One of the most common reasons to sell oil and gas royalties is to get a fixed amount. When you sell oil and gas royalties you end up getting one lump sum payment. This allows you to plan and budget how you will spend the money much easier.
Lost income risk: Oil and gas royalties can stop at any time. This is especially true if you are being paid on just 1 or 2 wells. There is always a risk that the wells producing oil and gas will have a problem. When the wells stop producing oil and gas, royalties also stop being paid because there is no income. You could be getting royalty checks every month and all the sudden nothing! This is a big risk for a lot of royalty owners. Unless you have multiple royalty interests it’s a possibility your royalty checks could stop. To avoid this risk royalty owners choose to get a guaranteed amount of cash by selling.
Decline Curve Fatigue: When a wells starts producing it will begin with the highest amount of production first. Fracking causes a huge surge in production in the beginning of the well. This last for the first 3 to 5 years of the wells production. During this first 3 to 5 year period you’ll see your royalty checks rapidly decline. Trying to figure out what your royalty checks will be each month is basically impossible. You know the royalty check is going down, but by how much? You never know for sure. Should you sell oil and gas royalties and just take a fixed amount now? That’s the decision a lot of new royalty owners make. It allows you to know exactly what your royalties are worth.
Retirement: When a royalty owner is in retirement, they are usually relying heavily on their oil and gas royalties. The problem is that the income is never guaranteed or consistent. If you have entered retirement or are nearing retirement, selling oil and gas royalties can make sense. Doing so will allow you to get a set amount now so you know how much you have to work with in retirement. In addition, you will unlock the value of future drilling possibilities. Buyers will pay you for the royalties coming now as well as the potential future income. This allows you to get the full benefits of your royalties during retirement.
Estate Planning: Should you sell oil and gas royalties to make it easier on your kids/heirs? A lot of people think so. The reason is that keeping track of royalties, taxes, lease agreements, and mineral rights ownership can be a chore. In addition, determining the value of oil and gas royalties in Texas can be tough. Selling solves a lot of problems as your heirs won’t have to deal with the hassle and the value will be known for sure.
Diversification: If a large amount of your monthly income is tied up in oil and gas royalties, selling can make sense. You can diversify this income into dividend paying stocks, real estate investments, and a number of other investment options. Doing so can reduce the risk that something happens in the broader oil and gas industry or specifically to your property/area.
Once you make the decision to sell the next thing to figure out is how you should sell oil and gas royalties. One of the most common mistakes we see royalty owners making is selling far below market value. The reason? They simply don’t know how to sell royalties for maximum value. The next section will help you figure out how to sell oil and gas royalties in Texas.
How should you sell oil and gas royalties?
Determining how you should sell oil and gas royalties is just as important as figuring out you actually want to sell. We see a lot of mineral owners fall into the same trap. They determine they want to sell then quickly sell far below market value. They do this because they don’t know how to sell oil and gas royalties. A lot of mineral owners do a quick google search find and endless stream of buyers and assume they are all paying the same prices. They aren’t! When you sell oil and gas royalties on your own you are making a big mistake! The oil and gas royalties buyers pay prices that vary in a big way. One buyer might pay $10,000 for a property and another might pay $25,000 for the exact same property. As a mineral owner you goal is to sell for the highest price.
So, how should you sell oil and gas royalties for the highest price? The best thing you can do is work with an industry expert like US Mineral Exchange. We recommend them because they have a history of helping mineral owners sell for the highest price. They specialize in getting oil and gas royalties sold for maximum value. They will help you avoid selling below market value and we’ve talked to a lot of royalty owners in Texas who had great success listing their property with them. If you want to sell oil and gas royalties, list your property at US Mineral Exchange to ensure you sell for the highest possible price.