On today’s episode we have Will Cullen who is the Vice President at Longpoint Minerals, LLC. Will and I go back to when we both worked for Shell in different roles supporting the Pinedale Anticline asset in Wyoming . He has an extensive background in finance, economics, and Business Development in oil and gas and in minerals specifically. You won’t want to miss this episode because the conversation covers tons of insightful information as to how a large mineral buyer operates and approaches mineral acquisitions, and the current state of the minerals market. We also talk about some really helpful tips for the individual mineral owner to get the most when leasing or selling their minerals. I’m really excited about this conversation because I had a chance to sit down and talk with one of colleagues in the minerals and royalties business, Will Cullen.
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About Will Cullen
Prior to joining LongPoint, Mr. Cullen served in various capacities for Shell beginning in 2007 as a Development Economist followed by a placement into Shell’s A&D group as Manager M&A and Commercial Finance. In 2015, Cullen was appointed as MLP Business Analysis Lead. Before his career with Shell, he owned and operated Highland Minerals & Royalties and was in Institutional Sales with Petrie Parkman. He joined the FourPoint Energy team in 2016, as the Vice President of Business Development and immediately helped the team launch LongPoint Minerals and LongPoint Minerals II. Since 2016, LongPoint has closed over 1,200 transactions and acquired over 127,000 Net Royalty Acres in Oklahoma and Texas. Will Cullen holds a Bachelor of Fine Arts from Montana State University and an MBA and a MS in Finance from the University of Denver.
In this Episode, we Talk about Longpoint Minerals and Their Approach to Investing in Minerals:
- How Will got started in the oil and gas and mineral rights business.
- How did the company get started.
- What is the strategy of LongPoint Minerals LLC.
- What is the breakdown of the type of sellers they work with.
- What basins they currently focus on.
- What are some of the criteria they use when looking at whether or not to invest in a particular basin.
- What makes LongPoint Minerals different from your typical large mineral company.
- What does the LongPoint Minerals portfolio look like today and how has it evolved over the past 3 years.
- What does the deal flow coming into LongPoint look like in terms of their success rate.
- How many opportunities do they have to look at in order to close one deal, and how many they end up passing on because they don’t meet their investment criteria.
Why Minerals are Worth More if There is Clear Line of Sight to Near Term Drilling Activity
- Since mineral owners aren’t in control of when wells are drilled, investors look for properties where there are approved drilling permits. We discuss why most mineral companies focus on buying minerals just ahead of the drill bit where they see permits and/or rigs on location.
- How minerals are valued and why timing is everything.
- We also talk about why the operator matters and what is the ideal type of operator buyers look for.
- We also talk about how companies look at potential scenarios that would inform likely timing of when wells come online when they look at a property.
- How it can be frustrating when mineral owners hear of other offers in their area but they aren’t getting similar offers, and why this occurs.
The Current State of the Market for Minerals and Royalties
With everything going on right now in the industry and all of the geopolitical events affecting the price of oil and natural gas, I know that a lot of you are probably wondering what to expect over the next year or two.
The consensus seems to be that the oil and gas industry, especially with respect to the shale operators, has weakened over the past 12 months or so. We talk about how the decrease in spending by shale operators is affecting the valuation of minerals in today’s market.
We discuss:
- The take on the near-term outlook for the minerals market, and where does Will see it going in the next 12-24 months.
- What factors are currently affecting commodity prices and what needs to happen in order for prices to increase.
- The effects of lower prices on the types of buyers that are still active and how this might actually be a good thing for mineral owners.
Strategies to Get the Most When Leasing Your Minerals
All things being equal, you always hear that a tract leased at 25% royalty is worth twice as much as if it were leased at a 12.5% royalty. As a result, the most common advice when leasing minerals is to go for the highest royalty rate possible. We talk about why this may not always be the best thing to do if you own a large interest in a Drilling Spacing Unit (DSU) and ways you can influence an operator to drill your acreage first.
We also cover:
- How to optimize lease bonus payment vs. royalty rate when negotiating a lease.
- When taking a lower royalty rate might be a good idea
Tips for Mineral and Royalty Owners to Get the Most if You Sell
We wrap up with a discussion on how mineral owners can help themselves when working with mineral buyers. First of all, it depends on each person’s individual situation and most owners may get the most value from holding on to their minerals for the long term if wells are eventually drilled. That said, everyone has a reason for wanting to sell to trade some or all of the risk of future development for a lump sum of cash.
- The things that a mineral owner can do in order to maximize value from their minerals should they ever sell.
- The things that mineral owners should NOT to do or that would put them at a disadvantage when trying to get top dollar for their property.
Click here for our FREE Mineral Rights Valuation Resource Guide.
How to Contact Will or Longpoint Minerals:
- Longpoint Minerals
- Phone: 303.290.0990
- Will’s email
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