Producing and Non-Producing Mineral Rights

If you are purchasing mineral rights or an oil and gas lease, one of the first things to know is whether or not the mineral rights you are purchasing are currently producing or non-producing.  In this article, we will both define and help you understand the value and differences between producing and non-producing mineral rights.

What are Producing Mineral Rights?

Producing mineral rights can be defined as minerals that are currently under production, being extracted from the land’s subsurface and creating monthly revenue.  When evaluating the purchase of producing mineral rights, it is easy to see their value by analyzing the existing cash flow reports as well as the property information (such as development plans and engineering reports) in order to make a well-informed decision.

What are Non-Producing Mineral Rights?

Non-producing mineral rights can be defined as mineral rights that currently have no cash flow associated with them.  The value of non-producing mineral rights is generally determined by a price per net acre multiplier.  With constant shifts in the market, the value of net acres of non-producing minerals rights is determined by factors like production history, proximity to producing wells, and the overall geography/geology of the area.

Which Kind of Mineral Rights are More Valuable?

In general, producing mineral rights are valued higher than non-producing mineral rights.  This makes perfect sense if you equate the mineral rights as if they were an apartment building.  Obviously, it would be much more valuable to purchase an apartment building full of monthly-paying tenants, rather than an empty building which will be filled with renters in the future.

Should I Buy Producing or Non-Producing Mineral Rights?

Depending on your individual circumstances, buying currently producing or non-producing mineral rights could be a good investment. Non-producing mineral rights are usually viewed as an option for the future, whereas currently producing mineral rights come with an undeniably valuable immediate monthly cash flow.  If you want to learn more about proven revenue streams through mineral rights and oil and gas royalties, contact Ranger Minerals today.