I was offered $5800 for 1.6 acres of mineral rights in Custer County Oklahoma. I just received a letter saying a company wanted to combine 28 and 33 township for a well. It doesn’t have anything right now on it but the mineral rights are under lease for 2 more years with option to extend. I don’t know if I should just sell now or wait because I probably won’t get much each month when it starts producing and I don’t know how long it even takes to do that. Any advice would be great. Thanks
Welcome to the forum!
First offers to buy are usually low to see who will bite. If you would like to share the section, township and range, we can help with activity. Custer is having a resurgence with horizontal drilling for the Cherokee formation. The sections are usually spaced at 640 acres, so you may end up getting not only the first well, but subsequent infill horizontal wells. Even small acreage can add up.
Most offers are for use a formula that includes revenue for three to five years discounted for the time value of money. Horizontal wells can be online for decades, so that is a factor to consider. The buyers plan to make a profit off of you. Do you want income for many years or a certain amount up front?
You may be subject to capital gains tax depending upon your federal tax percentage (they never tell you that.) If you have successful wells, then you have federal and state taxes offset somewhat by depletion credits.
Our family waits these sorts of offers out. We have made significantly more on royalties than we would have made on an offer. We have a long game in mind. If this shale reservoir works, then there may be others in the future.
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