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Oil/Gas/Mineral Rights Valuation



Last year I sold my royalty/mineral interest in a producing unit in Texas.  This was an interest that I inherited from my mother in 2011.  The property had oil and gas production for a number of years prior to the time I inherited it, and was still in production when I sold it.  My accountant wants to know the value of the royalty/mineral interest at the time I inherited it.  How would I determine that?

Thank you.

I believe this to be more of a financial question than an oil and gas question.  But, I will give you the basis for which borrowers and banks work this problem out.  The application to one individual royalty owner would make this process a largely uneconomic undertaking.

An oil company has engineers that use industry data to determine the approximate value of the oil or gas in the well, the average extraction rate and the projected price over the next year.  The bank determines whether they agree with our "guesses" and then books a value.

That is the only way to determine a value at inheritance.  The other and simpler option is to consider that anything is only worth what someone would pay for it.  If this year you sold for $1000 and you have received $100 in royalty since you acquired the interest then a value of the interest would be the difference of $900 adjusted for inflation.

Hope this assists some.  


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Cliff Williams


I will try to answer any question you have. Even if I reject a question, I still will give a shot at what I would do in your position. The only questions I will not take a shot at would be a highly technical engineering or geological question. I am beginning to see quite a few questions from land men and other oil companies and that doesn't matter to me either. I will attempt to help.


I am an oil and gas attorney that has been in the business for more than 20 years. I have held a series 22 and 63 securities license, been in oil and gas operations, land man, division order analyst all prior to obtaining my law degree. Today, I typically write title opinions verifying ownership of oil and gas minerals, assist landowners in negotiations on oil, gas and mineral leases, easements and conveyances. I also assist oil and gas companies with the sale of working interest ownership as well as common business law issues.

State Bar of Texas, Member of the Tarrant County Bar and the Dallas County Bar Associations.

Multiple oil and gas topical columns on

I have a B.S. degree which I rely upon more than my Business Mgmt degree or Law degree...

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