Caddo Minerals is a premier and trusted buyer of mineral rights and royalty interests.
Caddo acquires both leased and un-leased mineral rights as well as producing and non-producing royalty interests, overriding royalty interests and working interests. Looking to liquidate your energy ownership? Caddo offers a fast, easy and efficient way to do so. Caddo pays top dollar and closes deals quickly.
Contact Caddo for a FREE consultation and evaluation of your mineral rights or royalty interest ownership. Call us at 877-620-7717, complete the form under the “Contact” tab or email Caddo at email@example.com.
Caddo will then gather information regarding the property and provide you with a quote. In addition to the quote, Caddo will provide a detailed analysis on the valuation of the property and guide potential sellers through the decision-making process of selling minerals or royalty interests.
If Caddo’s offer is accepted, the deal will be closed within a few weeks. Caddo will email or overnight the necessary agreements, and fund the sale with a cashier’s check or money wire directly into the seller’s bank account. We NEVER use bank drafts!
Deciding to Sell Mineral Rights or Royalty Interests
The price depends on the specific property. Caddo utilizes three different valuation processes:
1. Producing Interests – If the interest is producing, and the potential seller receives royalty checks from an operator, the valuation process is simple. In this case, Caddo will research the stage of production of the interest and the location of the interest (for example, the formation and/or the play). This information will provide a standard decline rate which all wells experience. This means the amount of production in a well will decline over the life of the well. Typically, wells experience a rapid decline rate within the first year. After the first year, the decline rate slowly levels off. Decline rates are unique to different plays (for example, the Haynesville or Eagle Ford Shales). However, decline rates are similar within plays. Once Caddo pinpoints the interest on the decline curve, Caddo will make an offer based on a multiple of the current cash flow. This multiple could be anywhere between 20-75 times the current monthly royalty check.
2. Leased But Non-Producing Interests – If the interests are leased, but not currently producing, they are a bit more difficult to value, but the process is still fairly straightforward. There are a variety of factors to consider in this situation, including whether a rig is on location, or if drilling has begun. However, because there is no current production, several unknown factors remain that affect the value of the interest. Caddo will look at the known factors including the current lessee and any neighboring production, among other indicators. Caddo will arrive at a value based on the interest’s future production probability.
3. Un-Leased – Purchasing an interest that is not leased can be a risky endeavor. Therefore, the valuation is completely interest specific. However, the sale of un-leased interests can yield a nice return considering the risky opportunity costs. Caddo is a well-diversified investor, meaning Caddo can take some risks on un-leased interests.
How Mineral Rights Are Valued
Owners may sell mineral rights or royalty interests for many reasons. Caddo does not advise on financial decisions, but below are a few reasons to consider selling mineral rights or royalty interests:
1. Risk and Uncertainty. Mineral rights and royalty interests might earn more money over time if retained rather than sold, but future profits are not guaranteed. Mineral rights and royalty interests could lose value for many reasons, including low oil and gas prices, weak production results, risky operators, slow development, or drainage. Some sellers prefer the guarantee of cash today rather than the hope of earnings in the future.
2. Turn a Revenue Stream into a Lump-Sum Cash Payment. Producing mineral rights or royalty interests bring a stream of revenue, month-by-month. However, some sellers prefer a lump-sum cash payment now for reasons such as retirement, college tuition, mortgages, or to diversify investment portfolios.
3. Tax Reasons. Caddo does not offer tax law advice. However, there are some tax reasons to sell interests at specific times, such as for generating favorable capital gains tax treatment, estate planning, or to offset deductions. Consult with a tax attorney or accountant, and if selling is advantageous, talk to Caddo.
4. Estate Settlement. The division of small mineral rights or royalty interests among heirs can create probate headaches.
5. Management Headaches. Managing mineral rights or royalty interests requires time and money in order to track royalty checks, communicate with well operators, and compute production taxes, among other reasons.