Someone contacted me and wants to buy my interest in mineral/oil or gas property. Should I sell?

As a general rule it is not a good idea in the long run to sell interests in oil and gas or other mineral properties.  Many people who do not have much interest in or knowledge of oil and gas drilling and leasing sometimes end up owning an interest in a tract of oil and gas — often through inheritance.  The person making the offer to buy your property almost certainly knows more about oil and gas property values and the oil and gas business than you do.  The buyer thinks that now or in the not too distant future the buyer can “flip” your property by selling it to someone else at an even higher value.  Or the buyer may even plan to lease the property for a high signing bonus (sometimes as high per acre as the offer to purchase from  you) and have good chance at receiving future production royalties on top of that.  That is money that you should want for yourself, and not sell to the prospective buyer.

However, holding on to property is not always a bad idea.  The first thing to look at is whether you are being offered a good deal.  If you think the offer is way out of line high, then jump on it.  But this is rare so you should consult with someone more knowledgeable than you to make sure it really is out-of-line high.  Remember the important value is what it is worth to the oil and gas industry and not what it is worth to you!  If you think the offer is way out-of-line low, then reject it no matter what.  And then if you still want to sell, find someone else who may want to buy at a better price.  There are lots of companies out there looking to buy.

But generally, if your property is in an area where Marcellus or other shale horizontal drilling is going on, then sooner or later you may be able to sign a lease for a signing bonus near the amount for which buyer is offering to buy your property.  And after that you will get royalties that will probably be even more money if the driller actually drills.  Of course the signing bonus and the royalties only come if a driller actually shows up to lease your property and then actually drills on your lease.  And as this page is being written in November of 2015, OPEC (the Organization of Petroleum Exporting Countries) is lowering their prices of oil etc. sold to the United States in order to put a damper on America’s oil and gas production.  If you think OPEC can do this permanently, or at least for so long as you would benefit from receiving money, then maybe you should take the proverbial bird-in-the-hand and sell now.  We cannot tell the future, but in the long run, it seems like at some point drilling will come back in established areas and the property will be valuable if not for you than for your heirs.

If the purchase offer is a reasonable amount (remember to sell for what it is worth to them not what it is worth to you), the decision whether to hold the property or sell it depends more on your personal goals and where you are in life.

If you are towards the end of your life and you have a bucket list, and if you want to cross some expensive items off your bucket list, then by all means take the money.

Even if you are younger and want to buy something lasting like a place in the mountains, maybe that is a reason to take the offer.

It is a bad idea to sell and take them money just in order to buy something like a car that will wear out.

It is probably a bad idea to take the money because you have medical or other bills – there are other better ways to deal with those issues.  See a lawyer or consumer credit counselor.

Keeping the property gives you something that will last and last — and even pass on to your heirs. Property taxes (on undrilled land) are very, very low in West Virginia so that is not an issue.  And if your property is leased and drilled, the total amount of royalty money you will get over time will far exceed anything that someone will offer you now just to buy it.  Holding on to oil and gas and other mineral properties is more likely than not an investment in a person’s future financial well being, and may even be a chance to have “a ship come in” some day if the mineral tract is leased and drilled, or someone comes along and offers you an even better deal to buy it.

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Updated: June 30, 2020 — 11:56 am
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