Protected: How to Assess and Value Debtor Mineral Interests: A Guide for Bankruptcy Trustees

When a bankruptcy trustee suspects the presence of mineral rights, the goal shifts from simple asset discovery to professional valuation. The following guide outlines the documents and questions necessary to build a comprehensive data packet that can be shared with a proven mineral buyer for a formal evaluation or offer. Phase 1: The Information Request (To Debtor's Counsel) Standard schedules often lack the granularity needed for a professional buyer to provide an accurate offer. Request these specific items to bridge that gap: Document RequestedCritical Data for the Mineral BuyerMineral Revenue Pay StubsThe Gold Standard. These list the (1) Well Name; (2) County/Legal Description; and (3) Decimal Interest (the actual percentage of revenue). Even a tiny decimal like 0.000140 can be highly valuable in a prolific well.Division OrdersThe legal contract confirming the debtor’s share of production. This is the definitive proof of ownership and percentage used by buyers to calculate future cash flow.Administrative NoticesRecent filings from the Oklahoma Corporation Commission (OCC), Texas Railroad Commission (RRC), or New Mexico Oil Conservation Division (OCD). These include "Pooling Orders" or "Applications to Drill," signaling immediate future value.Current Oil & Gas LeasesDetails the primary term and royalty rate (e.g., 3/16ths vs. 1/4). A buyer needs to know if the lease is about to expire, which could trigger a new "lease bonus" for the estate.Last 2 Years of 1099-MISCProvides a historical baseline of annual income, allowing the buyer to apply "cash flow multiples" for a quick valuation. Phase 2: Strategic Questions for the §341 Meeting Use the §341 Meeting to extract "soft data" that might not appear in the paperwork but would be highly relevant to a buyer's evaluation. Uncovering Hidden Value & "Decimal" Clarity: "You listed a 'small' interest. Do you have pay stubs showing your decimal interest? Even if the checks are small, the percentage you own in a high-volume unit is what matters to a buyer." "Is your interest currently in 'suspense'? (Meaning the oil company is holding the money because of a title issue). If so, do you have the letter explaining why?" Identifying Future "Upside" via Regulatory Notices: "Have you received any certified mail from the OCC (OK), RRC (TX), or OCD (NM) regarding 'Spacing,' 'Pooling,' or 'Permits to Drill'?" "Are there new horizontal wells being drilled in your township? Have you seen any large drilling rigs near the property recently?" Gauging Market Demand: "Have you received any unsolicited offers to buy or lease your minerals in the last 12 months? Who sent them and what was the price offered per acre?" Why This Data Matters to a Proven Buyer A professional mineral buyer isn't just buying "land"; they are buying a projected revenue stream. The Decimal Interest allows the buyer to calculate exactly how much of the well's daily production belongs to the estate. Administrative Notices allow the buyer's engineers to see if the operator is planning to drill "offset" wells, which could double or triple the value of the asset overnight. By gathering these specific items, the trustee provides the buyer with everything needed to perform a Discounted Cash Flow (DCF) analysis, resulting in a more accurate—and often higher—offer for the creditors. Sample Email Requesting Information from Debtor's Counsel Sample_email_to_be_sent_to_debtor_counselDownload

Protected: How to Assess and Value Debtor Mineral Interests: A Guide for Bankruptcy Trustees

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