Someone Wants to Buy Your Minerals. Here's How to Size Them Up.

The letter usually looks friendly. Nice letterhead. A number with a comma in it. Sometimes a check already made out to you, and a deed already filled in. All you have to do is sign, get it notarized, and mail it back.

After twenty-five years of practicing law, I've come to appreciate a well-written offer letter the way a cattleman appreciates a well-built fence: I admire the work, and I want to know who built it and what it's meant to keep in.

Selling minerals can be a perfectly good decision. But you're selling something that may pay for generations, to someone who does this for a living, usually after they've done far more homework on your minerals than you have. Here's how to even that out.

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First, know who's likely writing to you

Mineral buyers come in a few types, and it helps to know which one you're dealing with:

• Mineral funds and investment companies. Often backed by private equity or institutional money. They buy large portfolios and are usually well-informed about what's being drilled.
• Aggregators and smaller buyers. Buy smaller interests in bulk, often by mail. Some are solid. Some make low offers and play the odds.
• Flippers and brokers. Try to get you under contract and then resell the contract to someone else for more. Your minerals become their inventory.
• Operators. Occasionally buy minerals in areas they're developing.
• Individuals. Sometimes local investors, sometimes the neighbor's nephew who just read a book.

None of these is automatically bad. But a buyer who won't tell you which one they are has already told you something.

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Step 1: Find out who the company really is

Look up the business entity. Every company doing business in Oklahoma or Texas should be registered with the state.

• Oklahoma: search the Oklahoma Secretary of State's business entity records.
• Texas: search the Texas Comptroller's franchise tax account status, or the Secretary of State's records.

Check:

• When was it formed? An LLC formed three weeks ago may be a special-purpose shell, or a company with no track record at all.
• Who are the officers, managers, or registered agent? Look those names up too.
• Is it in good standing?

Search the county records. Search the county clerk's records for the buyer's name as grantee. That shows you how many mineral deeds they've recorded, where, and how recently. A buyer suddenly recording deeds all around your land is a buyer who knows something about your land.

Search the courts. In Oklahoma, OSCN (the Oklahoma State Courts Network) lets you search court cases for free. Texas court records vary by county. Look for lawsuits involving the buyer, especially by sellers.

Search the internet. Search the company name with words like "complaint," "lawsuit," and "mineral owners." Mineral owner forums can be very candid.

Ask them directly:

• How long have you been buying minerals?
• Are you buying for yourselves, or for someone else?
• Will you resell this contract to another buyer before closing?
• Can you give me references from other sellers?

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Step 2: Figure out why they want your minerals, now

Buyers aren't sending letters at random. Usually something happened: a new permit, a pooling application, a spacing order, a new well on the next section. Before you consider any number, look at what's going on around your land.

• Oklahoma: check the Corporation Commission's well records and case dockets for new permits, spacing, pooling, or increased density applications in your section and nearby ones.
• Texas: check the Railroad Commission's public map viewer and drilling permits for activity near your tract.
• Check your own production. If you're already getting checks, look at whether production or the number of wells has increased.

If activity is picking up, your minerals may be worth more next year than they are today. That's exactly why someone wants to buy them this year.

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Step 3: Judge whether the offer is fair

Know what you're being offered. Offers are often quoted per net mineral acre or as a multiple of your monthly royalty income. Make sure you know which, and convert it to a total dollar figure so you're comparing apples to apples.

Know what you're earning. Pull your last 12 to 24 months of royalty statements. A single month can be misleading. Our free royalty calculator can help you check your decimal and estimate income.

Get more than one offer. This is the single best protection you have. Some owners also use online mineral auction platforms to get competing bids. Compare the terms, not just the headline number.

Be wary of offers that change. A buyer who offers one number in the letter and a lower one "after title review" may have planned it that way.

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Step 4: Watch for these red flags

Pressure and deadlines. "This offer expires in 10 days." Minerals have been in the ground for a few hundred million years. They'll keep through the weekend.

Payment by sight draft. Some buyers pay with a draft instead of a check. You sign the deed, the buyer sends the deed and a draft to a bank, and the buyer has 30, 60, or 90 days to decide whether to pay. Meanwhile your signed deed is out in the world. If the buyer backs out, or worse, records the deed without paying, you've got a problem. Prefer payment by wire or cashier's check at closing, or through an escrow or closing agent.

A deed that covers more than the offer. Read the deed itself, not just the letter. Watch for:

• "All of my interest in ___ County" or similar catch-all language. This can sweep in minerals you didn't know you owned or didn't mean to sell.
• Royalties and bonuses already accrued being transferred along with the minerals, including suspended funds you're owed.
• A legal description that's broader than the tract you discussed.

A check that comes with the letter. Some buyers mail a check with the offer. Depositing it may be treated as accepting their terms. Don't cash anything until you've decided.

They want your Social Security number before there's a deal. They'll need tax information to close, but not to make an offer.

They won't answer simple questions. Who's the buyer? Are you reselling this? When and how will I be paid? If you can't get straight answers before closing, don't expect better after.

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Step 5: Questions to ask before you sign anything

1. What exactly are you buying: which county, tract, and interest, and what percentage?
2. Does the sale include accrued royalties or suspended funds? (Usually, it shouldn't.)
3. How will I be paid, and when? Wire, cashier's check, or draft?
4. Who's handling the closing? Is there an escrow?
5. Who pays for title work, recording, and notary fees?
6. Is the price firm, or can it change after title review? Under what conditions?
7. Are you buying for yourself, or will you assign this contract?

Get every answer in writing.

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The bottom line

Selling your minerals is a big decision, and it's usually permanent. A good buyer will be glad to answer your questions, give you time, and pay at closing. A buyer who rushes you, dodges questions, or sends a deed bigger than the deal is telling you something, and it isn't "thank you."

Do your homework, get more than one offer, and read the deed before the letter.

If you've received an offer and want help organizing what you know, start with our mineral owner intake form.

Landownersignal does not provide legal, tax, or financial advice. This article is general information for Texas and Oklahoma mineral owners. Every offer and every interest is different.