Seller Beware!!! The Pitfalls To Be Aware Of In Mineral Sales & Leasing
Over seventeen years of advising on the sale of Haynesville Shale minerals, I’ve learned a thing or two about the process. I see and participate in enough sale offers and negotiations to have a pretty good idea of the value of minerals by specific location. Details matter as to fair market value. Not just by location but by the terms of the underlying lease or leases.
Most recently, it has become clear to me just how interconnected are the mineral companies that make offers to purchase your mineral rights. For those with professional assistance, this is likely no surprise but those without that assistance are likely unknowing in how mineral companies communicate and cooperate with one another to make a purchase.
Several instances that I have been witness to lately confirm this interconnectedness. When companies compete for the same mineral interest, they often talk about it among themselves. The focus is to pay as little as possible. That is because they flip those acquisitions to other companies for a profit. That makes acquiring mineral rights as cheap as possible the means to achieve the highest profit. A mineral acquisition may get flipped multiple times before it ends up with a mineral company that seeks to hold it long term.
When an interested seller shares the amount of offers received and the company or companies that have made those offers, the connection and cooperation between mineral companies can become a problem for achieving the best sales price. I think for many this is not obviously a potential problem so they freely provide that information. Here’s what mineral companies can do with that knowledge. Think of the mineral space as a pyramid with a small number of buyers at the top with tremendous amounts of capital to deploy. At each lower level are other mineral companies who are funded by those at the top of the pyramid. The offers you receive come from the lowest level of that pyramid. Those companies follow the acquisition menu provide by those at the top and do the basic research to find mineral owners with assets that fit the acquisition strategy. Then those lowest level companies send offer letters or make phone calls to mineral owners.
When an offer receives a response, the mineral companies seek to strike up a dialogue to determine if there is a willing seller and just how little the offer needs to be to get an agreement to sell. Where there are multiple offers, the mineral companies want to learn as much as possible about the companies under consideration and the amount of their offers. Think about what happens when two companies are pursuing the same sale and are funded by the same mineral company higher up the pyramid. That funding company does not want to be bidding against itself. Therefore, the collusion begins. I have seen companies stop making better offers so that an associated company can be the top offer. If you were to follow the mineral deeds recorded in the public record as I do, you would see how those companies share in the purchase of mineral rights. One company will make the offer and get the purchase but the mineral deed will split the minerals among two or more companies. Then those companies will assign all or a portion of the minerals they acquire to one or more other companies. The mineral acquisition makes its way up the pyramid. I can follow multiple assignments from the company that buys the minerals to the company that does the funding and holds the minerals long term.
The collusion that exists in the mineral space works to keep sellers from taking the middle men out of the equation in search of a better sales price. I’ve experimented with attempting this as have some of my savvy mineral clients who have the benefit of deep knowledge and the help of experienced professionals. Neither they nor the average mineral owner has a chance to accomplish this. The cooperation and interconnectedness of the mineral space does not allow for it.
If you ever consider a sale, be wise. Get professional help and do not under any circumstance share detailed information with mineral companies making you offers.
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Replies to This Discussion
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Permalink Reply by Skip Peel - Mineral Consultant on
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I think it worth a reply in this thread to address a situation that I have run across several times and am dealing with currently. Since about 2006 to 2007 companies that take O&G leases stopped recording the full lease in the public record. Legislation was passed to allow a memorandum of lease to be recorded in its place. The memorandum does not provide important lease terms such as the royalty. This allows the industry to keep lease terms confidential and hide them from mineral owners considering a lease.
In some cases a mineral owner under a lease is not the sole owner and the lease may have been executed by someone else. Everyone in that situation should have a copy of the full lease in their possession in order to know their rights and be in a position to manage their interest separately from other co-owners. If you fit this description please get a copy of the lease and maintain it in your mineral file along with the other important documents.
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Permalink Reply by Skip Peel - Mineral Consultant on
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This is a lessor Beware post. A client considering a lease from a minor Haynesville operator shared a copy of their proposed lease that contained a no cost royalty clause. The clause listed a number of common post productions. The Exhibit A clause was titled, Royalty – No Deductions, and listed cost of transportation, gathering, treating and dehydration. Sound good? Sound like you will not be charged post production deductions? Think again. That clause contained language to the effect “except in the case that those services were provided by a non-affiliated third party”.
The operator in question that has been a Haynesville operator for years does not build, own or operate those services in the vast majority of cases. So, they are almost always provide by third parties. In the possible instance where that operator might actually build the gathering system and the treating facilities and the compression and dehydration, the history of the Haynesville tells us that they would sell it to a third party to fund more leasing and more wells.
Only the local O&G law firms that are familiar with this would know this. The vast majority of mineral owners considering lease offers should get help. Very few would know this and would be mad when their royalty was reduced by post production deductions even though they thought theie lease prohibited that.
Lessors Beware!!!
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Permalink Reply by Skip Peel - Mineral Consultant on
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I'd like to start off 2026 with a suggestion to new members to read through this discussion thread. Even if it may not pertain to you it might be helpful for a friend, neighbor or family member.
As competition among mineral companies increases and the Haynesville minerals available to acquire decreases, mineral owners will be seeing more aggressive offers.
Mineral owners in "step out" areas with no previous Haynesville production may be receiving lease offers for the first time. As the remaining undrilled well slots in the established Haynesville fairway decline, operators will be looking to prove up new acreage. No one should sign a lease without spending some time to inform their decision and considering whether to seek professional advice.
Good luck in 2026.
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Permalink Reply by Skip Peel - Mineral Consultant
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2026 will see an increase in competition for Haynesville minerals. I have already seen offers to purchase mineral interests that top those of 2025 which is stunning for me as I have tracked offers now approaching eighteen years. I would offer a couple of thoughts for those who may consider a sale in 2026.
You can sell a portion of your mineral interest or sell 100%. The industry historically have traded on one eighth interests. A seller could sell half, sell a quarter or any multiple of an eighth to raise money while retaining future royalty income. There are capital gains tax advantages to a sale of your mineral rights.
Co-owners in minerals can act independently. Many mineral tracts have multiple owners. Each of those co-owners may act on their own or cooperate with other co-owners. In many cases, the more acreage offered at sale increases the seller's negotiating position and increases the price at sale.
Always be careful about sharing details with mineral companies as I have stressed a number of times in this discussion. Do take the time to get a unit survey that covers your mineral interest. Use it to know your accurate tract acreage. Use it to determine if your eight digit payment decimal is accurate. There are many incorrect payment decimals that together are multi-million dollar mistakes. It is okay to share the eight digit decimal with buyers as that is what they are buying.
Always be willing to ask questions and reach out for help. Good luck.
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