we own 160 acres of minerals with 3/16. we don't know the true value does anybody have any idea of a fair price per acre should be. we have had offers from 16k per acre to 17 k per acre any help would be appericated
They are doing a lot of drilling right now in 16-10. Unless you are desperately needing money I would not sell my mineral rights.
thank you
I would consider the dollar as not being fair I took the advice of others that are smarter me and held on
At such prices, personally I would jump all over it. I have seen a number of sales that were from $7K to $13K, but there comes a point where the income you get from the mineral may not even equal the amount you get paid for the entire estate.
The typical offer for a lease now is 20%. The EURs for wells there are highly speculative but the IPs have been very high. That means drillers fearful of the earthquakes further N and E, are hoping to avoid having a real issue getting rid of fluids and doing so in the current "hottest" area.
But if the crude prices do not rise above $60, I don't see how a company can make a dime....and that goes for the mineral owner. Do the math. The well(s) in a 640 unit would have to make 1,000,000 bbl. at $45 to produce $13,000 per acre for the mineral owner and that assumes 3/16th and zero post-production expenses. How many wells make a million barrels of oil?
If a well would make 500 BBL per day that would be 15,000 BBLS per month. In 67 months that would be 1,000,000 BBLS of oil. If you wanted quick money you could sell your minerals, or you could keep and have a pretty stable income for a few years. There is really no wrong decision in this I don't think. If you want quick money and have no heirs, you could sell your minerals. Or if you have heirs you could keep your minerals and possible give them some extra income in the future.
I must admit though I have changed my thinking a little on this after I have done some figuring. I don't have a lot of acres and don't have direct heirs, if someone would offer me 15K to 20K an acre I might be tempted to sell.
Actually, with the amount of wells drilled by now they have a pretty accurate EUR for most of the wells in Blaine County, somewhere around 900-950 Mboe (according to Newfields latest update) and even at current prices these wells are profitable, making around a 40% rate of return per well.
I have a hard time imagining anybody currently getting an offer for 16K per net acre BUT if you really got that offer, don't think twice take out your pen and sign on the dotted line because you just got an incredible offer.
With the declines that ALWAYS happen, a well with 500 bbl per day will be making less than 50 b/d in 67 months. I've seen few wells that make 500 IP, that EURs will exceed 500,000. FURTHER, much of that "oil" isn't oil. It is very light "liquids" - propane and ethane which sell for a fraction of heavier oils. AND, the bulk of it all isn't oil but is natural gas which is calculated at a ratio of the BTU content. The price differential is far different from the oil and gas, so the BTU is not a good indicator of the total dollars in a well.
So show me a well with the total EUR of 1,000,000 Barrels of oil equivalent and I will show you a GAS well that makes a little oil.
Gary,
Ha, since I know that I could sell your acreage $18k per nma I'd be happy to offer you $17.5k and net $80k for my troubles....
Fortunately, I am not in the mineral trading business. Therefore, I strongly recommend that you hire or contract with someone to represent your interests. Friend me and I'll send you some recommendations. Also, review some of the posts by Mbarnes on this site. She has posted some information regarding the production in your area that may be of interest. See the post titled "sale of minerals".
Before you commit to selling, please conduct diligent research into the activity in your area. Personally I agree with Paul Edsall. If you do not need the money immediately, then do not sell.
I have been in this business 45 years! I have never, never, never heard of a price this high..ANYWHERE!
put the pencil to it---then SELL!
I think John is reflecting my own observations since 1973. This is really a lot of money. And assuming even a 20% royalty, 5 (100%) x $13,500 = 67,500 an acre. Thus a drilling unit would have to make $43,200,000 to equal that. That is 1,000,000 bbl. of oil at $43...which most of it isn't bringing $43. And that $43 million has to be subject to the time value of money over the 20 years or more life of the wells. The economics makes sense for $120 a barrel oil but I fear the EURs may well be "optimistic" projections and the price may flounder around the $40 mark for years. With the bulk of production in the first years, that means you are selling low for the bulk of production even if prices rebound to $120/bbl in the future.
This only makes sense if you honestly believe the reserves are there and the price improves. This would be a very high risk investment to me, but with the FED killing any interest bearing investment such as bonds, people are taking the risk in stretching for yield. It might work, but again, it looks awfully high risk to me. And if the earthquake problem moves further south and west from the Enid/Guthrie area, then the investment will look poorer by the day.
I like the logic here.
thanks for your input
Gary,
Look at recent presentations by Continental, Newfield and others. They are determining how many wells each section can support. Early results show 4 or more wells are likely in each section. Some are looking at 8 or more. This is why you are seeing the high offers. If the EUR's are 1/2 the 900,000 BOE touted by Newfield then 4 wells would yield 1.8 million BO and 8 would yield 3.6 million BO. That being said, there is still the pricing risk. If prices stay low it might be a long time until all the wells would be drilled. Everybody's situation is different. Just get as much info as you can before making a decision.
thanks for the info
Be careful of rosy scenarios in company literature. If they talk about "resources" or "PUD" proven undeveloped reserves then a company isn't talking about real reserves that show up on the 10-K filing for the SEC.
Art Berman's Petroleum Truth also suggests that many of these pie in the sky estimates (like 900,000 BOE) are a joke, not to mention, 90% of the production is gas, not oil and gas is much cheaper than the BTU ratio.
That is, show me ANY WELL in the past that has actually PRODUCED 900,000 barrels of oil. They are scarce has hen's teeth out of the hundreds of thousands of wells drilled in the United States. To say all your wells or even a significant part of your wells will produce 900,000 barrels of oil is a very optimistic forecast.