Recent years have been a roller coaster for mineral buyers, from record low commodity prices to highs for oil and natural gas in the last year. Going forward, challenges and opportunities will be plentiful.
We expect oil prices between $80 to $120 in 2023 with prices settling around $90 for the year as U.S. production is slow to respond to global demand and the war in Ukraine continues. For mineral owners looking to sell or hedge investments with a partial sale of producing oil assets, the current pricing environment is a good bargaining chip. However, the excessive multiples of 2017 and 2018 have yielded to steadier profit margins with royalty interests attracting 7x on average EBITDA cash flow multiples.
Coming from 2022’s strong prices, natural gas is now on a lower glide path due to ample supply. The center of gravity is shifting from the Haynesville to the Permian, where the economics of associated gas production do not always benefit mineral owners (e.g., Wahab prices have hit negative territory). All signs point to the U.S. transforming into a major exporter of LNG in the next few years, providing sound opportunities in the long term for mineral buyers who can acquire in prime acreage positions that will benefit down the road in Appalachia, Louisiana and Texas.
Mineral buyers face myriad challenges and risks in such a complex market. Determining fair market value for oil and natural gas assets is critical to acquiring at the best price and uplifting margins. Complexities in leases and mineral ownership make it imperative to perform due diligence on every deal, not just big ones. Mineral buyers must also contain acquisition costs as they verify ownership and ensure that costly title defects don’t creep into their portfolios.
Let me share just a few simple strategies and Enverus tools that will bring tremendous firepower to your search for quality acquisition targets and due diligence.
Reaching the Right Mineral Sellers With the Right Revenue
Beginning with the end in mind, mineral buyers need a targeted list of prospects, whether that’s a short list of mineral owners on a tract or a spreadsheet for an entire county to take to the USPS bulk mailing service. Given the volumes of public data to sift through and lack of clarity into fair market value, setting up efficient and profitable outbound lead generation has historically been time, labor and cost intensive.
Enverus Texas Mineral Appraisals is a cloud-based solution that enables mineral buyers to rapidly map, find and evaluate the most valuable mineral, royalty and working interest opportunities, from the Permian and Eagle Ford to the Barnett and Haynesville Shales. It allows acquisition teams to gain a deeper understanding of well production, assess current fair market value, determine the right multiples for acquisitions or divestitures and, finally, export the target list to power prospect outreach.
Additionally, the lease level production reported by operators to the state is allocated to the well level by Enverus, which can then be rolled up for a more accurate analysis of property value.
Verifying Mineral Ownership and Interest Type
With mineral ownership constantly changing hands due to inheritance, conveyances or A&D, interest decimals are split time and again, underscoring the need for mineral buyers to verify a prospect’s ownership and determine if royalty checks are from a lease or non-participating royalty interest. Overlooked title defects and issues are difficult to unravel and time consuming and expensive to fix, so it’s better to figure it out upfront with a simple title check to know exactly what you will be in pay on.
Texas Mineral Appraisals offers comprehensive ownership history that helps with verifying decimals. Extend your pre-acquisition due diligence with Enverus Courthouse, which currently includes documents from 150 Texas and New Mexico counties, with many dating back to sovereignty and continually expanding coverage.
Armed with Courthouse, your team can move rapidly on a deal and gain first mover advantage by searching an abstract survey, section, lot or block to find ownership records. Easily pull up titles in an AOI, search for name references and drop key data on a map, such as mineral deeds in the last six months, conveyances, plats, easements, right of ways and probates. Additionally, Courthouse can be leveraged for competitor research to gain insights on who is buying and aggregating.
Shrinking Your Acquisition Costs
In today’s complex minerals market, running title should be considered no matter the deal size. In the past this meant that mineral buyers needed to personally visit county courthouses to research ownership or hire landmen to run title. Enverus Courthouse provides access to real property records, simplifying and accelerating running title, which leads to lower costs.
For larger or more complex title checks involving multiple landmen and attorneys, Courthouse allows everyone involved to collaborate around runsheets. By working more efficiently with digital courthouse records at their fingertips, land and legal can be more productive, driving a new level of transparency and cost efficiency for mineral buyers.
Watch a recent on-demand webinar with Silas Martin and CEO of Tract, Ashley Gilmore as they share tips and workflows to rapidly verify mineral ownership and identify the right mineral asset.
With the right approach, data and tools, land professionals and mineral buyers will better navigate today’s complex market. Texas Mineral Appraisals and Courthouse empower you to:
- Easily pinpoint quality acquisition targets for lead generation
- Establish fair market value and revenue multiples
- Rapidly screen for risks using digital courthouse records
- Quickly and accurately verify ownership through real property records
- Minimize capital expenditure and time by streamlining title process
For a deeper dive into market drivers that influence mineral investment strategies, download a copy of the 2023 Minerals Market Report. You can also learn how to find the best investment opportunity and allocate resources better with fast mineral valuation and title research. Click link to learn more: Fast-Track Mineral Ownership Research
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