If you are an investor in oil and gas royalties, you may have wondered as to how big the market is. Meaning, how many royalty owners would sell their royalties per year, and how much money are we talking about?
Well, we’ve wondered the same thing and have finally found a good method to compute it.
Texas and Kansas minerals alone are worth about 128 billion dollars. Add into that mix LA, NM, AR, and the states with new shale plays and we estimate the royalties are approximately 260 billion bucks.
These newer royalty owners are not as experienced as Texas owners and do not understand the underlying value as much. Therefore, we will assume they will sell their royalties at a higher rate than Texas. Texas sells royalties at ~0.1% per owner per year. Thus we will assume new state royalty owners sell at ~0.30% per owner per year. Overall, we’ve put conservative numbers on both, and expect this to be the floor. This gives an overall selling rate of 0.002 or 0.2%
So doing the math, 260 billion X 0.002 = $520,000,000 or half a billion dollar market per year.