Mineral ownership is a unique privilege and opportunity. In a time of exponential change in both the global economy and the oil and gas industry, it is imperative that mineral owners have a complete understanding of their mineral asset portfolio and its full value profile. Massive Minerals empowers mineral owners to optimize the value of their mineral holdings through a comprehensive, concierge-level approach to mineral management.
What we do and how we do it matters.
We take responsibility for everything that impacts your mineral assets. There is no such thing as outside of our job description.
Relentless pursuit of improvement. Regardless of the size or scope of the project, we bring high energy to achieve a positive outcome.
Teamwork. Ensure that all elements of the broader team (Massive Minerals, stakeholders, vendors, etc.) are aligned and mutually supporting one another to achieve the strategic goal.
We foster positive relationships based on trust and respect with the individual professionals at all stakeholders — clients, industry partners, vendors, etc. By taking the time to understand the dynamics of our clients and key stakeholders, we will know best how we can work together to create superior outcomes.
We approach our work with a sense purpose to honor the trust that our clients place in us. This duty to serve extends to our clients, industry partners, and community.
is the Way
Every situation presents an opportunity. Especially challenges in an exponentially changing energy landscape.
Interpreting Fixed vs. Floating Royalty in Texas
Whether a royalty interest is determined to be a fixed percentage of gross production or a fluctuating percentage of the negotiated lease royalty can have major implications for all parties to an oil and gas lease.
In a time of exponential change in both the global economy and the oil and gas industry, it is imperative that mineral owners have a complete understanding of their mineral asset portfolio and its full value profile both today and tomorrow.
Transferring mineral holdings to the next generation is an opportunity to empower future family generations or advance important philanthropic goals. For the unprepared, however, it also holds the potential for catastrophic wealth destruction.
The Texas Natural Resource Code § 91.402 governs the time in which oil and gas operators must pay royalties on oil and gas production. In limited circumstances, operators are allowed to hold funds from production beyond these timelines and place them in a ‘suspense’ (i.e., escrow) account. This primarily occurs when the operator has not received a signed division order authorizing payment, or there is a question as to the mineral owner’s title that has not been resolved after reasonable attempts.
Unfortunately, the occurrence of amounts being held in suspense is not always effectively communicated to the mineral owner, with the result that funds may be held in suspense for years without the mineral owner’s knowledge. This could result in tens, if not hundreds, of thousands of dollars that have gone unpaid. To compound the issue, once funds are held in suspense for a number of years, complications in collecting these unpaid royalties can arise. In Texas, for instance, under the Property Code unpaid or unclaimed royalties may be deemed abandoned and after three years escheated to the State of Texas. In addition, claims for unpaid royalties may be barred by Texas’ four-year statute of limitations that begins running when the royalties are due.
Massive Minerals Management works on behalf of clients to proactively identify any funds held in suspense or escheated to the state. In those case where funds are identified, we work directly with operators to rectify any title or other issues preventing revenue distribution.
While the operator’s potential obligations to the mineral owner are too numerous to cover here, there are three primary value categories that require active oversight:Operator’s Ability to Hold Acreage: Oil and gas leases often restrict the amount of surface acreage and/or the non-producing formations that operators can hold through existing production. In such cases, the operator is generally required to record a release of the lands and depths that are no longer subject to the lease. As an industry standard, actual compliance with these release requirements is generally low. This results in considerable amounts of unleased acreage/depths that appear to be leased as of public record, potentially preventing additional leasing and bonus opportunities.
Operator’s Ability to Pool Acreage/Drill Allocation Wells: Most oil and gas leases place reasonable restrictions on anoperator’s ability to pool acreage into a producing oil or gas unit or drill allocation wells. Though pooling is invalid where minerals are pooled beyond the authorization contained in a lease, it is often incumbent upon the mineral owner to monitor compliance.
Surface Operations: Often, surface use on hydrocarbon-producing lands can yield significant value in terms of agricultural or recreational use. Oil and gas leases place varying degrees of restriction on an operator’s surface use and/or need to remediate the impacts of surface operations. These include surface acre restrictions for drilling sites, the maintenance of fences and roads, usage of water, and the need to return the surface to its original condition after any development.
Massive Minerals Management ensures that where oil and gas leases limit the acreage or depths that operators are allowed to hold from production or pooling, releases are filed of public record so that the relationship of the parties is clear and any potential cloud on the mineral owner’s title is removed. We also review the actual operations to ensure that any surface or subsurface operations are being conducted in compliance with the lease, and that any previous operations and environmental hazards have been appropriately remediated
The Environmental Protection Agency estimates that there are 2.1 million unplugged and abandoned oil and gas wells in the United States. These unplugged and abandoned wells not only cause significant environmental damage and pose public safety hazards, they can materially impact the market value of any tract of land.Environmental concerns from improperly managed operations are not limited to abandoned wells. Improperly mitigated surface drilling locations, tank batteries, production facilities, and frac tanks/ponds can all pose significant risks to health and safety, as well as materially impact your ability to use, develop, or sell your surface.
Massive Minerals Management works with clients to not only identify these improperly mitigated surface hazards, but more importantly to navigate the contractual relationship with oil and gas operators and administrative procedures with state agencies to eliminate these environmental concerns.
Monthly production volumes provide insight into a number of potential issues and should be closely monitored for many reasons.The most important of these are to identify any potential lease termination issues. Aside from a total cessation of production, un-mitigated low production volumes over time can cause an oil and gas lease to terminate. The failure to timely raise issues or obtain a release in these situations can result in a mineral owner’s inability to exercise its rights, or in the worst-case scenario the operator adversely possessing the right to produce minerals.
An on-going comparative analysis of monthly production volumes can also spot trends short of lease termination that are important for mineral owners. These include negatively-trending cash-flow projections or early indications of reservoir depletion.
Massive Mineral Management tracks production volumes and performs monthly period-over-period analysis (monthly, quarterly, yearly, etc.) to monitor trends and gain valuable insight into likely future outcomes. This analysis is provided on a monthly basis to ensure that clients are kept updated and informed as to the comparative performance of their mineral portfolio.
The presence of a producing well adjacent to a property line could signal that hydrocarbons are being drained from under the neighboring lands. While all states have strong regulatory regimes governing how close a well can be to a neighboring tract to combat drainage, the general rule, known as the Rule of Capture, provides that a drained mineral owner’s remedy is to drill her own well to essentially stop the drainage from occurring.Depending on the state, certain implied covenants exist that may require an offsetting operator to drill an ‘offset well’ to prevent drainage; these implied covenants, however, are difficult to enforce. For this reason, many oil and gas leases contain Offset Production Clauses that expressly define an operator’s duties in the event that a neighboring well is drilled adjacent to a lease line. These clauses often provide that if a producing well is drilled within a certain distance of their lease, the operator is bound to drill an offsetting well, release acreage, or pay compensatory royalties.
Determining whether an offsetting well has been drilled adjacent to your mineral estate requires vigilant monitoring of drilling and production activities for the lands surrounding your tract. Manually performing this process from the available public records is a time-consuming task. Massive Minerals Management utilizes a software-based approach to conduct a constant analysis of offsetting activities that enables us to monitor your entire portfolio in real time in order to identify any potentially draining activity. Should such potentially draining operations occur, we work with operators to determine the appropriate course of action under the terms of the governing oil and gas lease to ensure that clients are fully compensated.
While there has been an informal market for mineral and royalty assets for the past 100 years, the past five years has seen exponential growth from a small private niche into a significant segment of the overall oil and gas industry. This growth has been driven largely by the entrance of both private-equity backed and publicly traded mineral acquisition companies, as well as oil and gas operator backed teams.The emergence of the mineral trade has significantly increased the liquidity options for mineral owners, as they now have an additional opportunity to monetize their mineral interests outside of revenue from production. For one, non-producing minerals can be monetized. Additionally, mineral owners have the opportunity to accelerate a portion of their returns by divesting a percentage of their producing mineral interests to pursue a more diversified investment portfolio, or perhaps to fund personal or philanthropic goals.
Anyone familiar with minerals assets, however, has heard the adage, “Never sell minerals.” There is definite truth in this prescriptive warning. Generally, individuals inherit or acquire minerals at a low or no cost basis. These mineral assets have been passed down by the family, with each generation standing more in the status of caretaker for the generations to come than individual owners or investors considering an asset’s worth.
Though the opportunity to sell your minerals exists, the appropriate question is whether you should consider exercising that option at all. Certainly, the expansion of the mineral market over the past half decade has resulted in mineral valuations that in some cases warrant exploration. Whereas mineral offers were traditionally crude estimations based on recent lease bonus rates or a mere multiple of existing production, today’s reputable mineral acquisition offers are generally backed by a more sophisticated reserves-based analysis.
First Question: Who is the Buyer?
While there is an increasing sophistication to the minerals market, the fairly low to non-existent barrier to entry means that mineral owners are confronted with a wide universe of would-be mineral buyers. These would-be buyers vary enormously based on their level of sophistication and ability to execute the transaction.
Thus, the first question when considering selling your minerals is whether this person or entity is an end-user or a mere broker. This is important for two reasons. The first is the proposed buyer’s actual financial ability to consummate the transaction. Often, mineral brokers will commit to a mineral acquisition on a 30-day closing period with no existing means to fund the sale. If they have not already lined up a buyer, their main focus in the ensuing 30-days is to find a buyer to whom they will flip the acquisition contract on the day of sale. In instances where they are unable to find a buyer within the agreed time frame, the sale is likely to never materialize. The broker’s inability to fund the transaction can result in an owner’s lost opportunity with other sellers, as well as frustrating delays that could manifest into legal disputes.
More importantly, divesting mineral assets to a broker is likely to result in a sub-optimal price. Certainly, brokers constitute a valuable function in the overall mineral market, in some cases creating or sustaining markets by ensuring a certain amount of deal flow between owners and end-users. As with utilizing any middle-man in a transaction, however, conducting a mineral transaction through a broker likely results in a lower price to the seller and higher price to the buyer. Without experience and an understanding of the mineral market, individual sellers approached with an offer are generally unable to discern the differences between these brokers and the end-user.
What is the Valuation?
The most important piece of data in a potential offer is the proposed price – what is the price the putative buyer is offering to pay? It is imperative that this price be compared against a realistic valuation of the mineral asset to be sold based on solid engineering and market principles, in order to ensure that fair market value is being achieved.
Comparative Analysis of the Offer v. Asset Value
It is not enough to simply know the price offered, however. In order to make an informed decision on whether to divest all or a portion of your mineral estate, it is imperative that you have a complete understanding of the underlying value of your asset. On a basic level, this includes an analysis of existing production, the likely future outcomes based on actual or likely decline rates from wells producing your minerals (i.e. type-curves), as well as reasonable assumptions regarding commodity price fluctuations.
When weighing a divestiture, it is important that your economic consider the full range of future outcomes – what is potential for, or likelihood of, additional drilling and production from your mineral assets? Commonly, this is known as the identifying the base case, development case, and best-case scenarios for future development activity, as defined primarily by the number of new wells to be drilled.
Once the range of potential future outcomes is identified, an economic evaluation will then look at the facts unique to your situation. These considerations include: What does past performance tell us about this particular operator’s likely ability to execute a successful development program? Based on available information about the operator, what are the reasonable expectations as to the development pace and timing for those future operations? How do the various sensitivities as to commodity price and initial production rates impact the valuation?
A reputable, reserves-based economic projection performed by a qualified petroleum engineer or geologist will answer these questions, and provide a solid basis for ascribing value to your mineral asset. This data-based valuation should form the basis for any potential divestiture decisions.
Once a reserves-based analysis has been conducted, any potential offer should be weighed against the prevailing market rate for minerals in the area. When considering an offer, a mineral owner should compare recent similar transactions in the area, particularly in terms of price. It is here – in pricing similar transactions – that the opaqueness of the mineral market places the highest premium on information. Relationships in the industry and access to market rates create real competitive advantage.
The “Why”: Why Sell?
Dependent on the price, selling all or a portion of your mineral assets can be a worthwhile undertaking. Before parting with these valuable assets, however, it is imperative that the mineral owner consider their own personal “why” for doing the deal. Will the funds from the sale be used to diversify an investment portfolio, and perhaps de-lever the owner’s position off of commodities dependence? Will the divestiture enable a time-sensitive investment or philanthropic venture?
Concierge-level stewardship of your mineral resources
We tailor our approach based on your unique circumstances and goals. We will walk you through every step of the process, starting from evaluating your mineral assets to ensuring everything is structured to maximize your assets’ value. At Massive Minerals, we offer the following services:
Originally from East Texas, Ben and his family now call San Antonio home. After graduating in 2006 from St. Mary’s University’s dual-degree Master’s and Juris Doctor program, Ben began his career in the oil and gas industry as a field landman putting together drilling prospects in deep South Texas and along the Gulf Coast. Soon thereafter, Ben moved in-house with a large private exploration company focused on developing the Barnett Shale, where he managed all land aspects of a two-rig drilling program for Johnson, Parker, and Hood counties.
For the past decade, Ben has represented exploration companies and mineral owners throughout all phases of exploration and development. Drawing upon the depth of experience and broad network developed in this time, Ben recognizing the pressing need for a professional, concierge-level approach to managing valuable mineral assets on behalf of their owners. Initially managing his own interests and those of friends and family, this market void eventually led to the formation of Massive Minerals Management in 2020.
“In a time of exponential change in both the global economy and the oil and gas industry, it is imperative that mineral owners have a complete understanding of their mineral asset portfolio and its full value profile both today and tomorrow.”
BEN HOLLIDAY, PRESIDENT OF MASSIVE MINERALS
“Massive Minerals Management has been critical in tracking production and identifying areas of underpayment. They have identified our interests in several wells that were not in active pay status and quickly worked with the operator to remedy those situations.”
“Massive was able to build a relationship with one of our operators in West Texas and quickly recover over $100,000.00 in suspended royalties, including some amounts that we didn’t realize were owed.”
TEXAS ENERGY INTERNATIONAL
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San Antonio, Texas 78209
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