Texas Mineral Rights Ownership

Mineral rights give you ownership of the oil, gas, and other minerals beneath the surface of a piece of land. In Texas, this is most often tied to oil and natural gas.

When you own mineral rights, you have the legal ability to lease, sell, or develop those underground resources. This ownership can be extremely valuable, especially in areas with active drilling.

Many people do not realize that mineral rights can be separated from surface ownership. It is common in Texas for one person to own the land and another to own the minerals underneath it.

Texas is different from many other states. Here, mineral rights are often privately owned, rather than controlled by the government. That means individuals and families have more direct opportunities to benefit from oil and gas production.

If oil or gas is produced from your minerals, you may be entitled to royalty payments. These are usually paid monthly and are based on the value of the oil or gas extracted.

Understanding whether you own mineral rights is the first step. Ownership can be passed down, sold, or leased. Knowing what you own helps you make better decisions and avoid common mistakes.

Mineral rights ownership in Texas moves through clear stages.  These stages reflect what is happening with the minerals or what may happen in the future. Each stage brings different risks, opportunities, and potential income.

Many mineral owners will only experience some of these stages. Others may move through all of them over time. Understanding what stage you are in can help you make better decisions about leasing, selling, or holding.

Non-Leased and Non-Producing

This is the earliest and most inactive stage.

You own the minerals, but no oil or gas company has leased them. No drilling activity is happening, and there is no income being generated.

Some owners stay in this stage for years.  It may be because the area has little drilling activity, or simply because your minerals are in an area with little to no oil and gas potential.

Even if your minerals are non-producing, that does not mean they are worthless. Location matters. Minerals in areas with strong geology or nearby production could become valuable later.

If your minerals are not leased, you have limited options.  You effectively just have to wait for an oil and gas operator to approach you and ask to lease your mineral rights.   At this stage, your mineral rights have the lease amount of value.

Leased but Not Producing

Once your minerals are leased, they move into the next phase. You are still not receiving royalty income, but things are moving in the right direction for your ownership.

The oil or gas company now has the legal right to explore and potentially drill. However, leasing mineral rights does not always lead to drilling. Sometimes a lease expires with no further activity.  In fact, this happens all the time so do not assume getting a lease means that royalty income is around the corner.  You still have a long ways to go.

If drilling is being considered, your leased minerals may move through several development stages before production begins.

Leased – Permits Filed

This means the operator has filed for a drilling permit with the Texas Railroad Commission. Permits are public records and often signal serious intent to drill.

A permit does not guarantee the well will be drilled, but it is a major step forward. It often means the company has secured leases in the area and is lining up the capital, equipment, and crew to move forward.

Owners in this stage should begin preparing for potential development. This includes organizing records, confirming ownership details, and understanding their lease terms.

Leased – DUC (Drilled but Uncompleted) Status Well or Completed 

DUC stands for “drilled but uncompleted.” It means the well has been drilled but has not yet been completed for production.

This is a common stage in today’s oil and gas industry. Companies sometimes delay completion for strategic reasons. These delays can last months or even years, depending on market conditions or infrastructure.

Mineral owners often feel stuck at this stage. The well exists, but income has not started. It is important to stay informed, watch for updates, and keep communication open with the operator if possible.

Once the DUC well is completed, this means the necessary steps have been taken to prepare it for production.

This stage may still involve final testing, pipeline tie-ins, or regulatory approvals. However, it often means royalties are about to begin or have already started.

Important:   This is a critical decision point for a mineral owner.  You will soon receive a division order.  DO NOT SIGN until you understand the decision you are making.  If you sell now, this is when the value is at the peak and you can avoid substantial tax consequences.  Contact us for a free consultation to learn more.

Producing Mineral Rights in Texas

Once the drilling and completion process is complete, oil or gas is being extracted from your minerals and sold. You should be receiving royalty payments based on your lease terms and your net mineral interest.

Wells in Texas can produce for many years. Some will see strong early production, then taper off over time. Others may have multiple wells developed on the same tract over a period of years.

Producing minerals are the most valuable to buyers and investors. They offer steady income, clear production data, and proven reserves. This is often the best time to closely track your payments, review production data, and keep good records for tax or estate planning.

Mineral rights in Texas can range from nearly worthless to extremely valuable. Understanding where your ownership falls on that scale starts with knowing what affects value and how to calculate it.

If you are receiving royalty income, you already have a baseline. If you are not, the value will depend more on location, leasing status, and development potential. Here is what every mineral owner in Texas should know.

What Impacts the Value of Mineral Rights in Texas

Several key factors determine the value of your mineral rights:

• Royalty Income
  If you are receiving monthly royalty checks, your value is directly tied to that income stream. Most buyers will use that number as the starting point.

• Location
  Minerals located in high-production counties like Midland, Reeves, or Howard are worth more. Even within counties, values can vary based on drilling density and operator interest.

• Lease Status
  Leased minerals usually carry more value than unleased. Minerals that are permitted or located near recent drilling activity are more attractive to buyers.

• Operator and Development Plans
  Minerals leased to top-tier operators are more likely to be developed. If your minerals are tied to a well-run company with an active drilling schedule, value increases.

• Oil and Gas Prices
  The price of oil and gas plays a major role in value. Higher prices increase royalty income, which raises what your minerals are worth.

Rules of Thumb for Mineral Rights Value in Texas

These are general guidelines used throughout the industry to estimate mineral rights value. Actual offers will depend on your specific property, but these benchmarks provide a helpful range.

• Producing Mineral Rights
  Typically worth between three and six times your annual royalty income. For example, if your minerals generate $25,000 per year, they may sell for $75,000 to $150,000. The more stable the well and the longer it is expected to produce, the higher the value.

• Leased but Non-Producing Minerals
  Value is usually based on lease bonus and future drilling potential. In active counties, you might see offers between $2,000 and $5,000 per acre. Minerals in areas with active permits or nearby wells could fetch more.

• Non-Leased, Non-Producing Minerals
  These typically carry the least value. Offers may range from $0 to $1,000 per acre depending on the location. If your minerals are in a remote or undeveloped area, they may not draw any offers at all until activity moves closer.

How to Calculate the Value of Mineral Rights in Texas

If your minerals are producing, calculating a rough value is simple. Multiply your annual royalty income by a factor of 3 to 6.  To determine your annual income, multiple the average of your last 3 royalty statements by 12 to get the annual royalty income.

Here are a few examples:

• Example 1: $10,000 per year in royalties ($833.33/monthly)
  Low estimate: $10,000 x 3 = $30,000
  High estimate: $10,000 x 6 = $60,000
  Estimated value range: $30,000 to $60,000

• Example 2: $40,000 per year in royalties ($3,333.33/monthly)
  Low estimate: $40,000 x 3 = $120,000
  High estimate: $40,000 x 6 = $240,000
  Estimated value range: $120,000 to $240,000

• Example 3: $100,000 per year in royalties ($8,333.33/monthly)
  Low estimate: $100,000 x 3 = $300,000
  High estimate: $100,000 x 6 = $600,000
  Estimated value range: $300,000 to $600,000

These estimates only reflect the current cash flow value. They do not include upside potential. If you have minerals in an area with active permits or in a hot drilling zone, the real market value may be much higher.

Important: You could be making $100/month but your mineral rights are worth $1,000,000!  The royalty income is only part of the equation.

Why Competitive Bidding Matters

Calculating value based on income gives you a starting point. However, the full value of your minerals also includes any upside potential. That means future wells, new permits, or expansion by the operator.

The only way to uncover that upside is by getting competitive bids from buyers. Offers can vary widely depending on what a buyer knows, expects, or plans to do with your minerals. One buyer may only look at your current income, while another sees room for two or three more wells.

Need Help? Get a Free Consultation

If you want a more accurate estimate of what your mineral rights are worth, we can help. Contact us for a free consultation. We will help you evaluate current income, review local drilling activity, and give you a realistic look at both cash flow value and potential upside.

One of the biggest questions mineral owners face is whether to sell their mineral rights. This is not a decision to take lightly. Selling mineral rights can provide a large lump sum of money, but it also means giving up future income and long-term upside.

There is no one right answer for everyone. The best decision depends on your personal financial goals, the condition of your minerals, and what stage of development they are in.  Picking the best time to sell mineral rights is challenging because you can’t time the market.  You should sell when it makes sense for you.

Reasons Some Mineral Owners Decide to Sell

Selling can make sense in a number of situations. Here are some of the most common reasons people choose to sell their mineral rights:

• Immediate cash needs
  Many owners sell to cover major expenses such as medical bills, retirement, paying off debt, or helping children with college or a home purchase.

• Estate planning
  Some owners sell to simplify their estate and avoid dividing fractional interests among heirs. Selling can turn a complex asset into cash that is easier to manage or distribute.

• Market timing
  If oil and gas prices are strong or activity is picking up in your area, you may receive high-value offers. Some owners choose to take advantage of the market and cash in.

• Risk avoidance
  Oil and gas production is not guaranteed. Some owners would rather receive a lump sum now than take the risk of declining production or future uncertainty.

Reasons to Hold Your Mineral Rights

There are also good reasons to hold on to your minerals. Many families benefit from long-term royalty income, and some want to preserve their minerals for future generations.

• Royalty Income
  Producing minerals can provide a monthly income stream for years. Some wells continue to produce for decades, even if amounts decline over time.  While that income is likely to be very inconsistent, it still provides a source of income.

• Potential for new wells
  If your minerals are in a highly active area, you may see new drilling or increased production in the future. This upside is lost if you sell.  This is why you should always get competitive bids to ensure you find buyers who are willing to pay for that upside potential.

• Low financial need
  If you do not need the money now and are comfortable with the uncertainty, holding can be a reasonable long-term strategy.

How to Think About Value

Selling mineral rights is a trade-off. You are exchanging a future income stream and unknown upside for a known lump sum right now. The key is knowing what your minerals are worth and whether the offer you receive reflects that value.

It is also important to know where you are in the development timeline. Selling before any activity starts often means accepting a lower amount. Selling when production has started or when permits are filed can bring in stronger offers.  However, if permits are filed and no drilling occurs the value can also drop dramatically.  It’s a risk either way.

Even if you are not ready to sell, getting a sense of your market value can help you prepare. It allows you to compare future offers, watch for red flags, and make confident decisions.

Bottom Line: Sell When It Makes Sense for You

The decision to sell mineral rights should be based on your own goals, not just on market trends or unsolicited offers. There is no perfect time that applies to everyone. Some owners benefit most by selling during active drilling. Others prefer to hold for long-term royalty income.

Ask yourself what makes the most sense for your situation. Do you need immediate cash for something important? Would a lump sum bring more peace of mind than waiting on royalty checks? Or do you see value in holding and passing the minerals to the next generation?

There is no wrong answer, as long as it fits your financial picture and personal priorities. The key is making the decision with full understanding of what you own and what it may be worth.

If you are weighing your options, we are here to help. Reach out for a free consultation. We can help you review your ownership, current market conditions, and potential offers to make sure you are making the right move at the right time for you.

Selling your mineral rights is a big decision. It can unlock immediate value and help you turn an uncertain asset into a secure financial outcome. The process does not have to be complicated, but you do need to approach it the right way.

Here are the three key steps to selling your mineral rights in Texas the smart way.

1. Gather Your Documentation

Before you list your minerals for sale, you need to know what you own and have the paperwork ready. Buyers will want to review the basic details before they make an offer.

Start by collecting your royalty statements from the past three to six months. These give buyers a clear picture of current income, which is the foundation of most valuations.

If your minerals are leased but your producing royalty income, you should locate your lease agreement including all pages. This includes the royalty rate and other terms that impact the value of your interest. In some cases, you may also need the order for payment or division order, especially if the well is already producing.

Having these documents in place builds trust with buyers and helps you avoid delays later in the process.

2. Choose a Qualified Mineral Rights Broker

A professional mineral rights broker will make the biggest difference in how much you get from the sale. Selling mineral rights is not like selling a house. You need someone who knows how to reach the right buyers and create competition for your minerals.

The best brokers market your minerals to a wide group of active, verified buyers. They screen offers, answer questions, and help guide you through the process. Most importantly, they work for you and not the buyer.

Avoid anyone who offers to “help you sell” but is actually a buyer themselves. These groups often try to flip your minerals to someone else for a profit. You want someone on your side who will bring you the highest offer, not the fastest deal.

3. Get Competitive Bids and Close the Sale

Once your minerals are on the market, buyers will begin reviewing your documentation and submitting offers. The goal is not just to get one offer, it is to get multiple offers so you can compare them and choose the strongest one.

After you select a mineral buyer, the title process begins. The buyer will confirm ownership, prepare the deed, and set up closing. You will sign documents, and the buyer will transfer payment, typically by wire. Most closings happen in about 30 days.

This process is straightforward when you have the right help. A broker will keep things on track, ensure the paperwork is accurate, and help protect your interest throughout.

Alternative Ways to Sell Mineral Rights

Some mineral owners try to sell on their own. Others accept the first offer they receive. These methods may seem simple, but they usually lead to poor results.

Do not fall into these traps.  We have seen mineral owners leave massive amounts of money on the table.  Don’t let that be you!

Here are two of the most common mistakes we see.

Accepting an Offer You Received in the Mail

If you have mineral rights in Texas, chances are good you have received a postcard or letter offering to buy them. These offers are usually low, sometimes dramatically so.

The companies sending them are not trying to pay you fair market value. They are hoping you will accept the offer without doing any research. These groups often buy low and resell quickly to someone else for more money.

By accepting one of these blind offers, you are leaving value on the table. You miss out on competitive bidding and may not even know what your minerals are truly worth.

Reach Out to Buyers on Your Own

Some owners try to contact buyers directly. They may call a few names they find online or talk to someone local. This rarely results in the best price.

Here’s why it usually does not work:

• You do not have access to enough qualified buyers

• You may not understand how to present your minerals properly

• There is no professional escrow or title process in place

• You are trusting a buyer to explain your value to you

Selling minerals is a technical transaction. Without guidance, you can easily sell for less than your rights are worth. That is why most sellers work with a broker or advisor who understands the market, knows how to negotiate, and can handle the paperwork and closing process.

Whether you are collecting royalty income or thinking about selling your oil and gas royalties, taxes play a big role in what you keep. Many mineral owners are surprised at how taxes affect both monthly payments and lump-sum sales.

If your minerals are producing, the royalty income is treated as ordinary income and taxed at your regular income tax rate. You will usually receive a 1099-MISC at the end of the year showing how much you were paid. This royalty income is fully taxable as ordinary income (highest tax rate) and must be reported on your federal tax return.

Selling your mineral rights is treated differently. In most cases, a sale is taxed as a capital gain rather than ordinary income. That often results in a lower tax rate, especially if you have held the rights for more than a year.

If you inherited your mineral rights, the tax situation is even more favorable. In most cases, your cost basis is “stepped up” to the market value at the time of inheritance. That means if you sell shortly after inheriting, you may owe little to no capital gains tax at all. For many people who inherited minerals and are not receiving significant income, selling becomes a very financially sound decision.

Mineral owners may also qualify for a depletion deduction if their minerals are producing. This can reduce taxable income, but it is best handled by a CPA who understands oil and gas taxation.

No matter your situation, it is important to keep records of your royalty income, lease agreements, and any documents related to a sale. Good documentation makes tax reporting easier and helps avoid costly mistakes.

If you are unsure about the tax impact of selling your minerals, talk to a tax professional before closing a deal. You may be able to reduce your tax liability or take advantage of benefits you did not know you qualified for.

Texas is not just a top energy state. It is the energy state.

If you own minerals in Texas, you are in a completely different category than most mineral owners across the country. From production volume to private ownership and investor demand, Texas leads the way in every category that matters.

Texas vs Other Top Oil Producing States

Texas ranks number one in oil production by a wide margin. It produced more than 1.8 billion barrels of crude oil, making up roughly 43 percent of all oil production in the United States.

Here is how the top five oil-producing states compare:

1. Texas – 1.8 billion barrels

2. New Mexico – 610 million barrels

3. North Dakota – 379 million barrels

4. Colorado – 175 million barrels

5. Oklahoma – 163 million barrels

Texas produces more than double the combined total of North Dakota, Colorado, and Oklahoma. That scale alone makes Texas the most active and valuable mineral rights market in the country.

In natural gas, Texas also ranks first, producing more than 10 trillion cubic feet annually. No other state has the same level of private mineral ownership combined with such large-scale production.

Why Texas Minerals Are More Valuable

In many other states, a large portion of mineral rights are owned by the federal government or by the state itself. That limits opportunities for private mineral owners.

Texas is different. Most minerals are privately owned, especially in West Texas and South Texas. This creates a competitive and open market where individual owners can lease or sell directly to operators or investors.

The state is also home to the Permian Basin, one of the most productive oil fields in the world. Counties like Midland, Martin, and Loving regularly lead the country in monthly oil production.

If you own mineral rights in Texas, especially in one of these high-production counties, you are in one of the most valuable positions a mineral owner can be in nationwide.

Whether you are collecting royalties, holding unleased acreage, or thinking about selling your mineral rights in Texas, understanding your position is the first step. Value depends on location, income, and timing but the right guidance can make all the difference.

If you want help evaluating your mineral rights, understanding current market value, or exploring the option to sell, we are here to help.

Contact us today for a free consultation and let us help you make a confident and informed decision about your Texas mineral rights.