Why should I sell my mineral rights?
Many people will tell you that you should never sell your mineral rights. But, it's important to understand that the decision of whether or not to sell mineral rights depends ultimately on your personal situation. The decision to sell mineral rights comes down to whether you have a financial need to sell or you just don't want to wait around for drilling to occur, if ever. It has to take some amount of interest in an area to get your mineral rights leased, after its leased, the property needs to be permitted, after the permitting, you need drilling, after drilling, you want fracing; every single step in this timeline has an amount risk and uncertainty associated with whether or not it will make it to the next step. The main reasons to sell mineral rights are outlined bellow:
- Asset Management: One very worthwhile reason to sell mineral rights involves the structuring of one's asset portfolio. The old adage in the world of Finance and Economics is that you should never put all of your eggs in one basket; this certainly applies to the world of Oil & Gas. Too much of one asset class opens up investors to extreme risks when faced with an unexpected and unpredictable event. A sale of mineral rights can be turned over into something less volatile and less dependent on ever changing commodity prices and global supply fluctuations. Furthermore, a sale of mineral rights in exchange for something less aggressive and more liquid helps guarantee the safety of your nest egg for retirement. Timing is important to mention here as well, you may just not want to wait around for the 5-10+ years it will take for royalties to start accruing from your mineral rights.
- Political Perspective: Many folks now a days believe the world is on its way out of fossil fuels and into renewable energy, and therefore do not see a future for the Oil & Gas industry. If you lean in this direction, it does not make sense to hold on to mineral rights when you believe they will devalue over time. Others are morally opposed to the industry as a whole and do not desire to have part of their portfolio allocated toward the production of hydrocarbons.
- Financial Need: The final and most important section here is that of financial need. If you find yourself in dire financial straits, selling mineral rights can end or help alleviate your problems. Some find themselves having trouble making home payments or unforeseen medical bills come up or indebtedness stockpiles, selling your mineral rights can be a boon to your financial situation and your quality of life, lifting away those financial pressures.
The bottom line here is that everyone's situation is different; to that end, no one can really tell you whether you should or should not sell your mineral rights, that is for you to decide.