Mineral purchasers have seen record low commodity prices and rising oil and natural gas prices in the past year. Challenges and possibilities will abound.
As U.S. production lags behind global demand and the Ukraine crisis continues, we predict oil prices to settle around $90 in 2023. Mineral owners wishing to sell or hedge investments with a partial sale of producing oil properties might leverage current pricing. However, royalty interests now fetch 7x EBITDA cash flow multiples, stabilizing profit margins.
Due to abundant supply, natural gas prices have fallen from 2022’s highs. Haynesville is losing ground to the Permian, where associated gas production can hurt mineral owners (Wahab prices are negative).
All indicators point to the U.S. being a major LNG exporter in the next several years, giving long-term prospects for mineral purchasers who can buy great land in Appalachia, Louisiana, and Texas.
In a complicated market, mineral purchasers face several dangers. To get the greatest price and boost profits, oil and gas assets must be valued. Every acquisition, not just huge ones, requires due diligence owing to lease and mineral ownership complexities. Mineral purchasers must control acquisition expenses while verifying ownership and avoiding expensive title flaws.
Let me offer a few basic tactics and Enverus tools that can supercharge your acquisition prospect and due diligence search.
Reaching Mineral Sellers with the Right Revenue
Mineral purchasers require a focused list of prospects, whether it’s a tract’s mineral owners or a county’s spreadsheet for the USPS bulk mailing service. Setting up effective and lucrative outbound lead generation has historically been time, labor, and cost expensive due to the abundance of public data and lack of clarity into fair market value.
Enverus Texas Mineral Appraisals is a cloud-based system that helps mineral purchasers quickly map, discover, and assess the best mineral, royalty, and working interest possibilities in the Permian, Eagle Ford, Barnett, and Haynesville Shales. It helps acquisition teams analyse well output, calculate fair market value, set multiples for acquisitions or divestitures, and export the target list for prospect outreach.
The lease level output reported by operators to the state is assigned to the well level by Enverus, which may be rolled up for a more accurate property value analysis.
Mineral Ownership Verification
Mineral purchasers must verify a prospect’s ownership and ascertain if royalty payments are from a lease or non-participating royalty interest when interest decimals divide owing to inheritance, conveyances, and A&D. A basic title check might reveal hidden title faults and difficulties, which can be costly to remedy.
Ownership history from Texas Mineral Appraisals helps validate decimals. Enverus Courthouse has documentation from 150 Texas and New Mexico counties, many dating back to statehood, for pre-acquisition due diligence.
By searching an abstract survey, section, lot, or block for ownership data, Courthouse lets your team move quickly on a deal and get first mover advantage. Search for name references and drop mineral deeds, conveyances, plats, easements, right of ways, and probates on a map in an AOI. Courthouse may also be used for competition research on buyers and aggregators.
Reducing Acquisition Costs
Running title is important in the complicated minerals market. Mineral purchasers used to attend county courthouses or pay landmen to research ownership. Enverus Courthouse simplifies and accelerates running title, lowering expenses.
Courthouse lets landmen and attorneys share runsheets for greater title checks. Land and legal may be more productive with digital courtroom records, bringing mineral purchasers greater transparency and cost effectiveness.
In a recent on-demand webinar, Silas Martin and Tract CEO Ashley Gilmore discuss how to quickly verify mineral ownership and locate the correct mineral asset.