private wealth

Mineral Management – What is it and why is it important?

I am often asked, “What is mineral management and why do I need a mineral manager?”  Or, better yet, “What is a landman and why do I need one?”  

These questions come from individuals who have either inherited mineral interests or are unfamiliar with the nuances associated with the mineral industry itself. Both are legitimate questions to ask. 

But perhaps the better questions are, “What type of mineral management do I need?” and “Do I need a landman or a mineral manager?”

Landman or Mineral Manager?

Every mineral manager is a landman but not every landman can be a mineral manager. These terms are interchanged frequently. Though they are often used synonymously with each other, it’s important to understand what differentiates one from the other.  

What is a Landman?

Twenty years ago, a land manager (landman) used to be someone who ran title, bought leases, and put together deals for the operator of a well and/or wells. Today, landmen have a narrow focus on the one task assigned to them when entering the industry, such as running title, putting a unit together, negotiating a pipeline easement, or dealing with any right-of-way issues. 

Oftentimes, it is a broker who runs titles and takes leases. For the few who are lucky enough to work on the operating side, they may get to manage assets or an area for development, overseeing rigs and the development of various units for their employer. 

Additionally, most spend their careers working in one play or one state and never experience anything other than the rules and regulations that govern where they are. 

What is a Mineral Manager?

Mineral managers, if worth their salt, have ideally worked on both sides of the table and are of extraordinary value.

At Private Wealth, our mineral managers worked with operators for years climbing the ranks to oversee assets in the early stages of their careers. This has served them well in the private mineral management space. Whether working on behalf of high-net-worth clients in the private banks of the world or working for wealthy families outside of the financial world, our mineral managers have the breadth and knowledge to work in any play, county or state. 

Regardless of where a client or mineral interest is located, the assets they manage are more than just an asset to be managed and extrapolated for wealth. Rather, these assets are safeguarded for future generations. 

We know these types of assets may not be the biggest in a portfolio, but they are the most meaningful and should be viewed as such with the care that only an experienced mineral manager can provide.  

Passive Mineral Management vs. Active Mineral Management

When it comes to mineral management, there is a stark contrast between those waiting for events to happen and those who search for ways to optimize revenue. 

Passive mineral management looks like:

  • waiting for lease offers to appear
  • hoping for the development of the mineral interests to ‘potentially’ happen
  • waiting for checks to appear after blindly executing division orders
  • viewing working interests as more of a nuisance than truly understanding the value of participating in a well, etc.

These operators and/or purchasers put in the work. They make sure that wells are drilled, money gets disbursed, and everyone is content at the end of the day.  

We, at Private Wealth, see things differently. We act to protect legacies and enhance generational wealth by pursuing an active management style for minerals. For an active approach to managing mineral interests, you need a wealth management firm on your side of the negotiating table. 

It’s important to find someone who has experience on the operating side, stayed in front of the drill bit, put together units for development, and understands the nuances of participating in a well. The ideal wealth management firm will find ways to optimize revenue for its clients. They’ll audit every lease their client has. The best wealth management firms view each interest as another means to increase revenue, both now and for future generations.  

Technology: A Compliment to Mineral Management

I’ve heard several prospects, who later became clients, say, “I’m not sure what you can do for me because most, if not all, of everything I own is leased.”  

My reply is simply, “Great, now it’s time for us to go to work.” 

So many owners of these types of interests wrongly believe there is no value to add if their interests are all leased up, producing or not. This is simply not true.

Let’s simplify it and think of mineral management as an iceberg. What you see above the water—or in this case, what the client can see their mineral manager doing—is the leasing, executing of division orders, and depositing of checks. 

Beneath the water is most of the iceberg. In our example, it’s all the work done that the client does not see, such as: 

  • the analysis that goes into reviewing each lease, 
  • the analysis that goes into deciding whether to participate in a well or a drilling program, and
  • the mathematical analysis that goes along with the execution of each division order, ensuring the interest that is represented is accurate.

…just to name a handful of the daily tasks taken on by an active mineral manager.

Perhaps, the most critical item for successful mineral management is the understanding of the various aspects of accounting that come with real-time analysis for each check that is processed through a technological platform.  It is important to understand that not each mineral management firm, including the large financial institutions, is made the same way and each one’s technology is very different.  

We developed Private Wealth’s accounting system with the intention of giving a mineral owner access to real-time revenue and production auditing as each check is processed. This means a large number of mineral interests are managed through a system designed to catch errors in both production and revenue. This allows the mineral manager to focus on decision-making that pertains to lease requests or working interest analysis, as previously mentioned.

Complicated Niche – Experts Need Only Apply

At this point, it should be clear that when dealing with mineral interests, one should find an expert who has the background, fortitude, knowledge and breadth to take on any and all interests located throughout the country.  In fact, I would recommend a Certified Professional Landman (CPL), if possible. Otherwise, a Registered Professional Landman (RPL) should suffice if he/she is working toward achieving the level of CPL. 

Designations are there for a reason. One should not take them lightly when choosing a mineral manager to oversee their interests. Take as much care in choosing a mineral manager as you would in choosing an attorney or CPA.  

Your legacy, and your family’s, depends on it.

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