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Why Are Offers So Low?

We hear this question all the time: Why are offers to buy my minerals so low?

It’s why most people never sell. It’s why buyers get a bad reputation. The real question is, are offers really that low? It’s nearly an impossible question to answer, but let’s peel back the layers of how an offer is made and why they may feel so low in 2022.

How is an offer created?

There are several ways buyers create and market offers to owners. Let’s look at marketing first:

  1. Cashflow multiple is when a buyer offers you some multiple of the cashflow you receive today. Usually you see this as, “We’ll offer 120x your monthly check.” This is a very simple, useful marketing pitch. Many buyers sending out these marketing mailers are just trying to get someone to call or email them. Their real offer will be different than what is advertised.
  2. Curated offers have become more common. This is when a buyer and their team target a specific area or county and create an individualized offer for each owner. These offers are meant to be a complete analysis of what is cash flowing today and what the upside value is as well. They hope that by providing a specific number it shows they have taken the time to evaluate your interests specifically.
  3. Blanket offers are what most owners are used to receiving. This can be by phone, email, target ad or physical mail. It is simply a marketing campaign and there is no real meat on the bone to their offer, just a hope you will reach out.

Underwriting principles:

  1. Cashflow today: Cash is king. Royalty income today is an important factor in determining the value of your royalties or mineral estate. With the decrease in activity across all basins as operators live within their cashflow, royalty income is playing a larger factor in the value of the estate. Many buyers require 6-9 months of royalty checks to underwrite the value of your estate. Luckily, with MiQ this process is simple because we provide the digital data, removing the need for transferring files across email.
  2. PDP vs. PUD: Just as cashflow is king, producing assets (PDP) play an important role in valuing your estate. PDP heavy mineral estates are seeing higher multiples than PUD, or undrilled, heavy estates. This is because there is less activity across the U.S. as operators drill fewer wells. This forces a heavier discount on non-producing acreage as the value of an asset is eroded the longer it takes to drill it. You can use MiQ to determine the number of potential wells left to drill on your mineral acreage which gives you a greater understanding of whether you are PDP or PUD heavy.
  3. Location, location, location: At the end of the day, mineral ownership in the top basins, states and counties will get better valuations.
  4. Operator: Believe it or not, the company you have signed your lease with matters. Buyers know which operators could be problematic or which charge higher deductions. If you are with an operator that a buyer does not find favorable, your assets can be discounted to factor in that risk. In the same way, having the right operator can dictate a premium.
  5. Time: A dollar is not worth the same as it will be tomorrow or in ten years from now. Buyers must factor in the risk of how long it will take to drill out your minerals. Lower activity means longer timelines which lead to your minerals being discounted to offset the value of a future dollar, today. This is often a challenge for owners to grasp but is usually a leading factor in what might be considered a low offer. As an owner, your cost to hold on to your minerals is nothing. For a buyer, it is an investment and an opportunity cost.
  6. Commodity Prices: Oil and gas prices are not stable. They are a global commodity and are impacted by more than just what transpires in the U.S. There is an agreed-upon price deck that is used when valuing minerals called the strip. It is based on what the prevailing prices are in the future as determined by commodity traders. Just because oil is $20 or $100 today does not mean it will remain so. Your future royalty checks will go up and down based on commodity prices and buyers account for that risk when making an investment today. You can always ask what the strip pricing they are using is to underwrite your minerals to get a sense of where they see risk in the market.


The act of buying and selling mineral rights is not easy. Unlike houses, which have offset values through the MLS (multiple listing service), minerals have no such database. As an owner you must remember that you are in control of the sale and must ask how a buyer is valuing your minerals. Prior to selling, do some research on activity around your assets. If you don’t have at least three offers on the table, it is difficult to know whether you are being offered a fair price. If all three offers from different groups come back within a margin of error of one another, that is a reliable definition of your asset’s value today.


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