Income Multiple
A rule-of-thumb valuation method that multiplies average monthly royalty income by a number of months — commonly between 36 and 72 — to produce a rough value range for producing minerals.
Why it matters when you sell
The income multiple is where most conversations about value begin, and it is useful precisely because it is quick. What it cannot see is decline rate, remaining drilling locations, operator quality or lease terms, and those are what separate the bottom of a range from the top. Treat it as a way to sanity-check an offer rather than as a valuation.
Example
Three recent cheques average $1,170 a month. At 36 months the indicated value is $42,120; at 52, $60,840; at 72, $84,240. That is a plausible band of roughly $42,000 to $84,000 on the same stub. An offer of $38,000 sits below the band entirely. An offer of $61,000 looks reasonable until you learn three additional wells are permitted on the unit, at which point the band itself is understated.
How this varies across the states we serve
Where a given interest lands inside the band depends heavily on basin and on well age. Delaware Basin acreage in New Mexico and core Bakken acreage in North Dakota, with recent completions and remaining locations, tend toward the upper end. Mature conventional production in Oklahoma, Wyoming and Montana, decades into decline with no new drilling nearby, tends toward the lower end and sometimes below it. The multiple is the same arithmetic in each case; the reality it is standing in for is not.
What to have in hand
Run the multiple on your own cheques before responding to any offer. Knowing the band tells you whether a number is inside the range of reasonable outcomes, which is a different and more useful question than whether it sounds like a lot of money.
Going deeper: The 3 Ways to Sell Mineral Rights: Direct, Auction, or Broker
Related terms
Wondering what your interest is worth?
A free consultation looks at your actual wells and lease terms — 6% at closing, cancel anytime, 100% seller-side.
Get a Free Consultation