Clear guidance for mineral owners

“Never sell your mineral rights.”

You have probably heard this advice from your family time and time again. It’s often passed down from generation to generation to mineral heirs. 

But have you ever stopped to think about where the advice comes from in the first place? 

While the advice largely stems from the hope that oil and gas reserves will be worth more in the future than they are today, there’s a lot more to owning mineral rights—and leveraging them profitably—than your parents or grandparents may have ever shared. 

In this blog, we review three lesser-known considerations for mineral rights owners to inform stronger financial decisions as they pertain to your oil and gas interest. 

The Value of Your Mineral Rights Fluctuates Over Time

Your minerals are another asset on your balance sheet. Making any financial decisions pertaining to your mineral rights without thoroughly understanding their value puts you at a severe disadvantage. 

However, the value of mineral rights fluctuate due to a variety of factors: 

• Where your minerals are located
• Well productivity & the potential for future wells
• Acreage & parcel size
• Type of estate
• Lease history
• Current market conditions
• Commodity prices

This makes it difficult to determine the value of your mineral rights. 

And while the belief that minerals appreciate in value over time is founded in some truth, it’s never guaranteed that they will be worth more tomorrow than they are today. 

However, this doesn’t mean you should necessarily rush to sell your mineral rights. Being aware of the factors that influence mineral value is the first step to understanding their impact on your finances and help you make better financial decisions.  

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Your Mineral Rights Inheritance Determines How They Are Taxed 

Whether you have already inherited mineral rights or you expect to inherit mineral rights in the future, how they come into your possession will influence how they are taxed. 

For instance, if mineral rights are inherited assets as part of a will or estate plan, then they will likely be subject to taxation, depending on the state in which you live and the corresponding estate tax requirements. Mineral ownership can also be passed down to heirs through a lease. 

Because lease terms and taxation laws vary greatly across companies and states, it’s worth consulting an estate planning attorney to consult on your individual inheritance. After all, understanding key ownership details and getting clear about ownership transfer details should be an early step when evaluating how mineral ownership factors into your financial situation.

Selling Isn’t The Only Ways to Tap into Your Minerals’ Value

Once you have a clear understanding of your mineral rights and how they factor into your financial picture, you can confidently decide what to do with them. 

But, selling your mineral interests aren’t your only options.

MLOC—or Mineral Line of Credit—bridges the gap between sitting on and selling mineral rights. Inspired by Home Equity Lines of Credit (HELOC), which allow property owners to tap into home equity to borrow funds, MLOC similarly unlocks equity tied up in your mineral interest without selling your rights. 

MLOC is not a loan. Rather, MLOC is a revolving line of credit secured by real assets and accessible via a card product. Interest rates typically fall somewhere in between that of a personal loan and a credit card, depending on a few factors including the amount of the line of credit. 

Because of the potentially lower interest rate than other, comparable line of credit products, MLOC could provide a means to consolidate debt and reduce interest. It also allows you to quickly turn historically illiquid assets into cash when you need to cover emergency costs, providing peace of mind that you have a financial safety net for whatever life throws at you. 

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Apply for MLOC Today 

If you already collect monthly royalty checks for your minerals, then you could be eligible for MLOC.  There are no hidden monthly, annual, or origination fees, and no impact on your credit score when you apply. 

Learn more about MLOC and apply when you visit frontlands.com. 

If there’s one universal truth when it comes to finance, it’s this:

It’s wise to establish a liquid financial safety net.

No matter how much money you make, what line of work you are in, or how much your assets are worth, having access to cash can give you peace of mind should the unexpected occur. 

Anyone can experience medical emergencies, home repair needs, job loss, or any number of other unforeseen events that require access to funds quickly. 

While mineral owners receiving monthly royalty payments can rely on monthly lease payments, minerals have not historically been considered liquid assets. To tap into the value of mineral assets to build a meaningful financial safety net, mineral owners would traditionally need to sell their mineral interests. 

Talk about sacrificing potentially long-term rewards for short-term gains. 

Today, there’s another alternative available to royalty-receiving mineral rights owners who wish to retain ownership of the oil and gas interests: Frontlands Mineral Line of Credit™ (MLOC).

A Mineral Line of Credit is a revolving line of credit built by Frontlands that leverages mineral interest as the underlying credit, empowering mineral rights owners to access value trapped beneath their feet without sacrificing potential future value. 

The Mineral Line of Credit allows mineral rights owners like you to build a financial safety net without selling their rights by providing access to cash when you need it, for as long as you need it. 

But that’s just scratching the surface. There are several benefits of using a Mineral Line of Credit to fund your financial safety net.

Avoid Risking Your Home

Many borrowers think of a HELOC—or home equity line of credit—when they want to access cash quickly. 

HELOCs allow homeowners to borrow money against the equity in their homes. They act like credit cards that the homeowner can draw from as needed and repay over time. 

If this sounds familiar, then you're right. The concept of a HELOC inspired the creation of MLOC, so it's no wonder they may seem to be very similar financial vehicles. 

However, unlike a HELOC, which uses your home as the underlying collateral for your line of credit, MLOC leverages your mineral rights as the underlying collateral—meaning you will not lose your home if you fail to repay the loan. Funding your financial safety net with MLOC instead of a HELOC ensures you will not lose your home if you can't stay on top of payments. 

Leverage Your Royalty Payments to Pay Off a Mineral Line of Credit

Like any collateralized loan, you must stay on top of your payments and make monthly interest payments. Failure to make those minimum payments puts you at risk of losing the collateral you used to secure the line of credit —in this case, your mineral rights. 

However, to open an MLOC, you must receive monthly royalty checks from your producing wells. Because you are receiving royalty checks, you can use that royalty income to pay off your MLOC monthly.  

Discover the Mineral Line of Credit: The Smart Alternative to Selling Your Mineral Rights

With lower interest rates than most traditional credit cards, flexible payment options, and no hidden fees, MLOC is an attractive option for mineral rights owners to create a financial safety net in an emergency. 

See how much your MLOC could be worth by visiting our online calculator.

Whether you need cash fast, would like to bolster your retirement income, or you want to build a financial safety net, gaining access to funds quickly and painlessly is the first step. 

If you’re like most mineral rights owners, you’ve probably thought about ways you can leverage your mineral rights to achieve your financial goals. Traditionally, that means selling your mineral rights to access cash flow. 

However, selling your rights can turn into a lengthy process that may not solve your immediate problem. It could also mean giving up potential future value and sacrificing your family’s legacy. 

With selling your rights off the table, that leaves you with mineral right loans. 

This financing vehicle might sound like a viable option, but there are some risks that you should be aware of as you weigh whether mineral rights loans are the avenue you want to pursue.

Let’s dig in. 

First, What Are Mineral Rights Loans?

Mineral rights loans are a type of financing available to oil and gas owners who are willing to use their mineral rights as collateral. They typically provide a lump sum loan up front that the lender pays back in regular installments over time. 

Taking out a mineral rights loan allows you to retain ownership of your mineral rights while accessing liquidity from your assets. Choosing to take a loan over selling your rights may also have certain tax advantages. 

Sure, it sounds appealing. But mineral rights loans are not without risk and financial trade-offs. 

First, taking out a mineral rights loan puts your ownership at risk if you default on payment. Unfortunately, lending companies have a history of creating highly complicated contracts that can skew in their favor. Not only does this mean potentially contracting legal advice to navigate the loan terms, it means potentially locking yourself in an undesirable situation.

Additionally, leveraging your mineral rights for a loan could mean missing out on potentially larger future earnings if the minerals become more valuable over time. As mineral rights values fluctuate due to various market conditions, taking out a loan during a down market could mean that your loan is worth less than it could be in the future. 

How Do Mineral Rights Loans Differ From Royalty-Based Lending?

It’s worth noting that mineral rights lending is different from royalty-based lending, which is based on future royalty payments generated by your mineral rights. However, these loans come with their own set of risks. 

Most prominently, royalty-based lending is repaid directly from royalty cash payments. This means that a specific dollar amount is removed from your royalty payments, decreasing what you bring in from royalty income month-over-month.  

Thankfully, there are other options available to sale-resistant mineral rights owners. 

The Alternative to Mineral Rights Loans: Meet the Mineral Line of Credit 

Unlike a mineral rights loan, the Mineral Line of Credit (MLOC) unlocks equity tied up in property owners’ mineral interest to provide access to funds through a revolving line of credit. 

MLOC acts just like a Home Equity Line of Credit (HELOC), but instead of tapping into your home equity to borrow funds, MLOC uses your mineral interests as the underlying collateral.

With its competitive interest rate, MLOC offers mineral owners the opportunity to consolidate debt and reduce interest from higher-interest credit cards. As MLOC is a revolving line of credit, it provides a flexible safety net to prepare for the unexpected, and can help supplement retirement income. 

While MLOC and mineral rights loans similarly leverage an owners’ mineral interest as the underlying collateral, MLOC could be better suited to individuals who wish to access funds over a longer period of time or ensure they have access to funds for unpredictable expenses. 

Ultimately, picking which product suits your needs requires careful consideration of not just the type of financing, but also the company you’re working with. 

Learn more about our Mineral Line of Credit and get started on your online application today.

Figuring out your mineral rights' worth is one of the trickiest things to do as a mineral rights owner. 

After all, it's not a simple, cut-and-dry calculation. Figuring out your minerals' worth usually involves turning to mineral rights buyers, who consider several complex factors to provide a valuation. Plus, it's common for two different mineral buyers to give you vastly different valuations. 

That means coming to a number you're confident about involves a full run-around to several mineral buyers—who will then inevitably try to sell you on why you should sell them your mineral interest.

It's not an ideal situation. 

To help you understand the inner workings of mineral rights valuations and how mineral buyers arrive at a number, we're exploring the different factors that affect them at any given time. 

What factors go into a mineral rights value calculation?

While mineral buyers consider various complex factors, some elements weigh more heavily than others in a mineral rights value calculation. Here are four of the most important influences: 

Production History

Production is one of the most critical factors in a mineral rights valuation. 

Looking at the history of your minerals provides a holistic view of how consistently your wells will continue to produce. Trends over time can indicate whether a well is declining or remaining stable, which impacts potential future value. 

The type of well also matters as part of this conversation, as it impacts production volume. The two types of wells include:

• Vertical Wells are drilled straight into the ground to extract oil. They generally produce oil at a steady pace and require less maintenance than their horizontal counterparts, making them a more cost-effective way to drill and extract minerals.
• Horizontal Wells are a more recent innovation that involves drilling horizontally to access oil or gas in more difficult geographic areas. Horizontal wells are particularly helpful in fracking, which produces oil and gas at a high production rate for 6-9 months but tends to decline drastically afterward. 

Ultimately, the type of well matters because it impacts minerals' production levels. It influences what the well could produce over time, which trickles into your overall minerals' valuation.  

Geography & Geology

Geography and geology are critical factors that determine minerals' worth.

Geography–or where the minerals are located—goes hand-in-hand with the surrounding area’s geology. For instance, geography influences rock porosity, reservoir depth, proximity to producing basins, and other geological structure considerations. 

These geological factors determine how easy it is to access minerals, which can significantly impact operators’ costs and, therefore, minerals’ valuations.  

Surrounding Infrastructure

Geography plays an obvious role in your minerals’ valuation. 

What’s less obvious, however, is the surrounding infrastructure in any given geographical area.

In order for your wells to be serviceable, infrastructure must be in place—like roads, hotels, and restaurants—for operators to complete the work associated with maintaining wells. 

In other words, if a well isn't serviceable, it's less valuable because operational costs will skyrocket if operators must set up temporary infrastructure for themselves. On the contrary, wells located in highly trafficked areas with good surrounding infrastructure cost less to service, making it a more appealing investment.  

Commodity Prices 

Your mineral rights valuation is closely correlated with market factors, as well. 

Whether oil costs $50 or $100 per barrel will influence your minerals' valuation because as prices increase, your minerals become more valuable. 

Additionally, prices impact how oil operators service your wells. When prices are high, operators are more likely to capitalize on the opportunity to earn more from the commodity by sending more resources to service the wells. Because this increases production, high prices tend to mean higher values. 

The Simplest Way to Estimate Your Mineral Valuation 

Accurately calculating minerals' worth requires highly specialized expertise spanning several disciplines, including finance, geology, legal, engineering, managing operators, and much more. That makes it incredibly difficult to calculate your valuation without the help of a specialized team. 

However, if you're looking for a highly simplistic estimate, there is a straightforward calculation. Multiply your last month's royalty check by 30-50 to estimate a potential range you could expect to see from valuation experts. 

Keep in mind that this is a highly simplified way to estimate your minerals' worth. The best way to get a correct assessment is to contact several mineral buyers and collect estimates. You will receive a wide range of valuations, but working with several potential buyers will give you a strong understanding of what different firms value and how easy they could be to work with. 

How to Tap into Your Minerals’ Value Without Selling

Informed, educated mineral rights owners should know their minerals' worth. It's a challenging process, but it's well worth the effort, as it can help you make informed decisions about your mineral rights. 

Determining your minerals’ valuation is the first step to deciding whether to sell or hold your mineral rights. 

For example, it's common for mineral rights owners to sell their mineral interest to cover significant expenses, fund their lifestyles, or simply create a financial safety net. But you should know what your minerals are worth before making such an important financial decision.

But selling isn’t the only way to access liquidity trapped in your mineral rights. 

Frontlands’ Mineral Line of Credit—MLOC—allows mineral owners to borrow against their mineral rights. MLOC works like a credit card, letting you access cash when you need it and paying interest only on what you use. 

MLOC is the smart alternative to selling your minerals. Learn more about applying today. 

‍‍“Never sell your mineral rights!”

It’s common for families that own mineral rights to pass this wisdom down from generation to generation. For those with valuable oil and gas reserves on their property, owning mineral rights can feel like protecting a precious family heirloom. 

However, this advice can become difficult to follow during periods of financial hardship. Especially as interest rates and debt climb higher in today’s challenging economic environment, selling your mineral rights may start to look like a viable solution to a growing financial problem. 

So the question remains: is heeding generational advice a good enough reason to hold onto potentially valuable resources? 

It may not be. But there are five compelling reasons you should hold onto your mineral rights.

Maintain Flexibility 

Holding onto your mineral rights now gives you the option to sell later down the road if your financial situation changes.

Especially if your unique mineral rights are well positioned to appreciate in value, holding onto potential future value could provide a reasonable safety net. Additionally, diversifying the source of your emergency funds provides further protection against market volatility and fluctuating oil and gas demand. 

Avoid Changes to Your Tax Situation

Whether you collect royalty income or sell your mineral rights, you will encounter tax implications. Selling mineral rights will require you to pay capital gains tax on the amount the value increased since your inheritance.  However, collecting royalties subjects you to income tax. 

Ultimately, if you wish to avoid changes to your taxes and the complexities that come with tax optimization, holding on to your mineral rights will ensure your tax process stays status quo year-to-year. 

Maintain Control Over Your Property 

Depending on your estate type, your mineral rights and surface rights could be tied together. 

For instance, selling a unified estate means forgoing ownership of your mineral and surface rights. Selling a severed estate means mineral and surface rights exist separately. 

Retaining control of your unified estate allows you to have more control over how the land is used and developed, while selling can often lead to activities that the surface owner may not support or find disruptive. 

Continue Collecting Royalty Payments

Retaining ownership over your mineral rights means you can continue—or explore—leasing your rights and collecting royalty payments. 

Royalties provide a steady income stream each month, based on the amount of oil and gas your land produces. In turn, you receive a portion of the income based on the terms of your lease agreement. 

If you wish to continue receiving this monthly payment, then holding onto your mineral rights and keeping your royalty payments predictable may make the most financial sense for your unique situation. 

Retain Potential Future Value

Minerals generally appreciate over time. As current market conditions cause a slowdown in production, demand for minerals is on the rise. In fact, Goldman Sachs estimates that oil demand will peak by the year 2030 and remain steady through 2035. 

But what goes up could come down—and that means your minerals may not always appreciate in value. Market conditions—and several other factors—weigh heavily on the value of your mineral rights: 

• Your property’s unique geography & location
• Well productivity & the potential for future wells
• Acreage & parcel size
• Type of estate

While retaining your mineral rights could mean holding onto potential future value, it’s difficult to time the market and maximize your returns. 

Consider Your Unique Financial Circumstances

Sometimes, it is a good idea to sell your mineral rights. Everyone’s situation is unique and there are times when selling may make the most financial sense for you and your family. 

It’s also important to consider that oil and gas are finite resources. Wells will eventually run dry. If you are leasing your mineral rights and accepting royalty payments, it’s possible the value of your mineral rights could be depreciating as your reserves are used up. 

However, there is another way to tap into the value of your minerals without selling your rights. 

Introducing The Mineral Line of Credit

The Mineral Line of Credit (MLOC) bridges the gap between sitting on and selling mineral rights. Mineral owners can now access liquidity trapped in the ground by way of a revolving line of credit. Account holders have the flexibility to use as much or as little of their line of credit as needed. 

Learn more and apply for a Mineral Line of Credit with no impact on your credit score today. 

Debt consolidation is never a straightforward process. 

From researching debt consolidation plans to choosing the proper investment vehicle to implementing your plan from soup to nuts, navigating debt consolidation can be overwhelming. 

After all, debt consolidation can take several forms. Depending on your unique financial situation, there are likely several options on the table—which can make it challenging to weigh the pros and cons of each to make a confident, informed decision. 

Plus, poor credit, lack of collateral, or high debt makes securing an attractive debt consolidation plan even more difficult. 

Borrowers often turn to home equity lines of credit–or HELOCs–to access funds at a more attractive rate than traditional credit cards. But offering your home as collateral and failing to meet payment obligations is risky. 

Thankfully, there’s a new option available to those who want to consolidate their debt while paying off monthly payments with incoming royalty payments from their assets. It’s called a Mineral Line of Credit. 

Mineral Line of Credit–or MLOC–is a revolving line of credit that uses your mineral rights as the underlying collateral. It lets mineral rights owners unlock the liquidity trapped in their oil and gas interests without selling away their rights.

There are several benefits to using an Mineral Line of Credit to consolidate debt:

Lower Interest Rate

‍Like a credit card, MLOC offers lower interest rates than most traditional credit cards and other high-interest debt consolidation vehicles. In fact, the Frontlands Mineral Line of Credit is 5-10 percentage points lower than a average credit card.

Additionally, you only pay interest on the amount you use, not your total credit. This lets you use the funds you need and save the rest for a rainy day without worrying about unnecessary costs. 

Flexibility

‍MLOC is not a loan; it is a revolving line of credit. This means you decide how you use your funds within legal guardrails. 

MLOC also provides flexible repayment options to mineral rights owners. For  instance, if you receive royalty payments from productive wells on your property, you may be able to use those funds to pay your monthly MLOC payments. 

Plus, a revolving line of credit allows you to borrow funds, repay them, and borrow the same amount again and again without needing to reapply for funds the way you would for a loan. 

Access Funds Without Offering Your Home as Collateral

‍Most borrowers who wish to access an asset-backed line of credit look toward HELOCs as a solution. However, borrowers with mineral rights are in a unique position to access a revolving line of credit without offering their home as collateral—which can be seen as a risky financial decision. 

Get started with MLOC 

MLOC is a revolutionary solution for mineral owners who wish to consolidate their debt. By tapping into liquidity trapped in your oil and gas interests, MLOC lets you keep your minerals while unlocking cash. 

Find out if you qualify for MLOC by applying today.