This is in regards to first year to pay taxes on mineral rights. The tax valuation was completed in July on the Karnes CAD.
If the taxable value is say $400,000 and the well started producing in July 2019…is the value determined from July 2019 to July 2020?
Also, does that mean that I would collect $400,000 in royalities?
The short answer is no and please don`t start spending until there is cash in hand. Your piece depends upon your net mineral ownership, your lease royalty, the other mineral owners and the operator. When royalty checks start keep Uncle Sam in mind.
Thanks. Wasnt going to spend anything until I received a check but trying to understand the tax valuation. The operators tax valuation is over $10 million and the $400k is just our partnerships small peice of the pie
The tax appraisal is the discounted fair market value of the anticipated long-term revenue stream on January 1, 2020 based on the production volumes, decline curve, average of oil and gas prices for the previous 12 months, expected economic life of the well and other factors. It was a calculation of what price you could have sold the well interest for on January 1, 2020. Keep in mind that oil and gas prices are volatile and so the royalties (and annual valuation) will change. The valuation for 2021 will be lower due to the drop in oil prices in 2020. Also the appraisal will take into account whether the production decline in 2020 is faster or slower than anticipated.
Thanks for the feedback
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