I have received a few offers to purchase my Mineral Rights in the Nacogdoches, Texas area. Should I sell the ASAP before the November election or After?
I am new the the forum and apologise for any lack of protocol.
Thank you
1 Like
I don’t think the election is much of a factor for that relative to whatever other variables/priorities you may have. At least not in any way that anyone here can predict today.
But just my opinion.
Somewhat amusingly its been better to be in energy with a Democrat than a Republican president since 1990s. Most of that is random I think (Covid kinda sunk energy during Trump, 9/11 and subprime during Bush Jr, etc) but there is an element of “people opposed to oil and gas tend to make oil and gas prices go up” involved as well.
2 Likes
In my opinion, rushing to sell tied to perceived politics is not a good idea. It is more important to know what pending activity you might have. Many offers to buy come before drilling and tend to be low ball based upon my offers received. If you give your block, abstract and section, you may get folks that are nearby to comment on the activity. Would hate to have you sell and then find out that you had multiple horizontal wells coming.
Agree that potential election results not a good idea to base a sale decision on.
I have a file for each of property deeds. I file the offers in them. I write the offer amount on the front of the file. It’s fun to my kid’s and now Grand kid’s the fact that I received a ton more money by now selling. I also show them how I could have paid taxes on the sale. Then invested the money and earned dividends on that investment.
So far every offer for royalties was a bad offer. I have sold some working interest and them kept the overriding interest. I did OK on those deals.
If you need the cash, You don’t have to sell all of your interest.
1 Like
Why did you avoid mentioning the income taxes you paid on the revenue you received?
1 Like
From what I have heard, the election results will not highly impact your mineral rights values directly. Even if a more pro-drilling president were to take office (say Trump), then most of the additional drilling and permitting would likely be targeted at federal lands and not impact the Permian basin.
I believe you but its a highly debatable topic. But, I think youre discounting the income taxes that you paid yearly on the production and skipping over the most important factor, taking the proceeds from the lump sum of the mineral sale that could have been invested in the stock market for 20+ years. Since you have grandkids, Im an old fart like you (no offense) and spent about 2 days with my legal pad and calculator to run the numbers on several properties and compared the monthly income after taxes vs selling the minerals and taking all that money into the stock market, I lost money by hanging on to the minerals by a large margin. Every situation is different of course.
Yeah every situation is different. As a whole…
We as a country have gone from making 5mmbd fifteen years ago to making 13mmbd now. Natgas production has also doubled in that time. Both on a pretty steady trend. Expected total reserves in some established areas have gone up by a factor of 100. The total value of royalties/minerals has clearly gone WAY WAY WAY up over that time. So if you are looking back over a longer period of time, then yeah, sure I 100% believe that you were much better off not selling your minerals. In hindsight. I guess if you sold and put all the money in Nvidia then that’s a better choice, but whatever. The flipside of that is the amount of money and random goofs trying to buy your minerals has also gone way way way way up over time. Market overcorrections are real things. One could argue that currently there is more money with a mandate to buy minerals then there are sellers of minerals. This is mostly anecdotal, but I’d guess if you are trying to buy minerals today in an established play, and you are not offering a price that absolute terrifies you, you are not going to get to buy many minerals.
Life is not a hindsight game, and all current investments/ownerships are valued on a going forward basis. Trends don’t continue forever. Just because it was a good idea to invest in Chinese real estate in say 2010 doesn’t mean its a good idea in 2022. Etc. It might very well be a great idea to keep your minerals forever, or this may be the peak feeding frenzy.
Mostly, I don’t know. Off soapbox
But yes, ordinary income tax is going to be worse than LTCG tax.
1 Like
I didn’t get into all the tax details depletion etc. I don’t live off the royalties. That cash flow is invested. So the royalties are highest during the first few years. Than income bought more stocks than the offer price. Now I have gains from both sides. I’ve even leased part of a section and used the lease money to take a working interest in the property. I wished I had taken a larger working interest in that one. But cash flow needed on another non oil & gas project.