Investing in Mineral Rights
17th March 2011
Why invest in mineral rights. Because mineral rights in and off themselves can be of value regardless if wells have been drilled on the land. Non producing mineral rights can appreciate significantly as operators move into the area and the prospects of obtaining royalty income for the mineral rights improve. Further royalty income can increase as operators drill more wells on a given piece of land.
On the other hand, leases provide the owner to right to drill wells on particular piece of land (Of course they will have to pay the mineral owners a royalty for any oil and gas obtained). Leases will generally stipulate that a certain number of wells be drilled during a given period, as mineral rights have a vested interest in seeing that their mineral rights are extracted due to the potential for royalties.
Leases can also appreciate significantly as operators move into a particular area and drill successful wells. As leases have a defined term, investment in leases can be very risky as they lease may expire without any wells being drilled on the property. However the returns can be very high. So it’s definitely worth checking into.