How to determine the value of Mineral Interests?
• Quickest way to get a valuation is to go to the tax records where the interest is located. • Ownership test – A. Are you receiving a Check for royalties? B. Have you been approached by a Land Man (or other entity) seeking to buy and interest? • Determining Value: • Establishing a Value involves “Establishing a Present Value of a Future Income Stream.” • Factors making this difficult: A. Length of time Income stream will last. B. How much production will decline over life of well. C. Future value of Commodity at the time of Production • Due to difficulty of the valuation process, when in doubt, and the interests are small, GO WITH TAX APPRAISAL DISTRICT valuation. • If Interests are larger- consider hiring a private entity (ex. Petroleum Engineer) to give an independent valuation. • How to determine a good offer? Producing? Non-producing? • If offer is for a producing interest: Use Tax appraisal or Independent evaluation as a benchmark. • If a Guardian wants to solicit potential buyer
