“What is my property worth?” “How did you come up with your offer?”
These are common questions we get when talking to owners of oil and gas minerals and royalties. Many companies use the “cash-flow multiple” method of valuation (i.e. multiply your average monthly income by 36 months, or multiply your lease signing bonus by 3x). This method is straightforward and easy to understand, but it does not capture the value of future income from your property.
Unlike most mineral and royalty acquisition companies, we have a full-time staff of petroleum engineers, geologists, and landmen that work together to accurately understand the value of your interests. Our team is made up of technical experts — we’ve deployed over $650M for exploration and production into Wyoming alone. Our operational experience enables us to incorporate income from both existing wells AND income from future wells in our mineral and royalty valuations. Here’s what that looks like:
§ Existing Wells: The income stream(s) from existing well(s) are valued based on the volume of hydrocarbons a well produces over its lifespan. After a well has been online for at least 6 months, Flat River Minerals is able to predict the monthly production volumes for its remaining life span. Existing and forecasted commodity pricing are then tied to production months to calculate future revenues.
§ Future Wells: Your future income will be driven by four things: 1) price, 2) geology, 3) engineering, and 4) drill timing. Geology and engineering drive the development plans of every operator, which is why Flat River Minerals has its own technical team to determine if your interests fall within one of these development plans, and when. If Flat River Minerals believes new wells will be drilled on your land at some point in the future, it will apply forecasted commodity pricing to a well’s monthly flow streams, beginning at the anticipated date of first production (which may be more than 10 years away).