Delaware Mineral Exploration License - Option to Lease
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FAQ
February 12, 2019The Formula. Decimal Interest = (Net Mineral Acres ÷ Drilling Unit Acres) x Royalty Rate.Finding Your Net Mineral Acres. Your net mineral acreage is found in the Mineral Deeds or other property deed information.Finding the Drilling Unit Acres.Finding Your Royalty Rate.Where to Find More Information.
If you have mineral rights, you have several options available to help you profit from them. These include: 1) leasing the minerals; 2) selling all or a portion of the minerals; and 3) participating in development of the minerals.
Non-producing minerals are typically valued as the number of net mineral acres (NMA) you own multiplied by the typical lease bonus rate.
Mineral rights can be divided by specific mineral commodities. For example, one company can own the mineral rights to coal, while another company owns the oil and gas rights. Consequently, it is important to know which minerals are included in a mineral deed. Some deeds specify that all minerals are included.
As a mineral rights value rule of thumb, the 3X cash flow method is often used. To calculate mineral rights value, multiply the 12-month trailing cash flow by 3. For a property with royalty rights, a 5X multiple provides a more accurate valuation (stout.com).
When it comes to mineral rights, the standard admonition has long been consistent and emphatic: Avoid selling them. After all, simply owning mineral rights costs you nothing. There are no liability risks, and in most cases, taxes are assessed only on properties that are actively producing oil or gas.
The convention is to simply multiply the trailing 12-month cash flow figure generated by the subject property or collection of properties by three (3) and the result presumably represents the market value of such properties.
Investing your money earned from your mineral rights can be endlessly rewarding. When done correctly, the investment will often pay itself off and can provide you another source of income, be used to pay off a mortgage, or be used to start a college fund for your children or grandchildren.
With the proper due diligence and professional help, mineral rights investments can be versatile and profitable additions to your investment portfolio. These instruments can be a source of large net cash returns, passive income, and additional assets to your estate planning.
As a mineral rights value rule of thumb, the 3X cash flow method is often used. To calculate mineral rights value, multiply the 12-month trailing cash flow by 3. For a property with royalty rights, a 5X multiple provides a more accurate valuation (stout.com).