Cash offers to buy leased mineral rights


#1

I have had several offers to buy mineral rights that are currently on a lease. Would seem to be a conflict, can one even do that?


#2

Don,
I don’t understand why you would feel it might be a conflict to buy leased mineral? It is not much different than selling a building that has a current tenant. The new owner is still held by the terms of any existing leases.


#3

OK, I guess one would need to be sure they disclosed the lease to the buyer.to avoid a nasty surprise.


#4

Absolutely! Chances are that if they are cold calling you trying to buy it, they know as much or more about than you do. You still want to make sure you inform them of everything you know and document as such. Preferably in the deed itself. And prevent them from coming back on you for sloppy title work on their part.

It is usually a good idea to spend a couple hours of attorney fees to draft or review the instrument of conveyance.


#6

I have no intention to sell.


#7

Good! The value of your mineral estate is at least 10X what you have been offered. Never jump on an early offer unless you are in dire straights. EX. I have mineral interests in Glasscock Co., Texas for which I have been offered over the years between 650K to 125K as the price of oil changes from the same people. I worked 55 years in the industry, the last 10 in all these shale plays. I know the value placed on minerals throughout the Permian basin. The offers increased (value and frequency) last quarter when 6 horizontal wells were permitted from the RRC. If you own it, they will come. It’s like vultures to a carcass. I keep a list of the companies that offer to buy and send them my workup based on hard data. They are never heard from again. Remember, its yours, they want it so be a tough trader. I recommend that you never sell.


#8

You sound like a very experienced man in the permian. Our acres are in Lea Co. NM, we have 2330 acres that we get 1percent ORRI if I have heard things right on this Forum that is almost 4 square miles we have been offered 2 Million for that. I believe its worth much more and after reading your comments at least 20 million. our acres are in 26-19S-32E-23-19S-32E- 22-19S-32 We have another section in same area and the oil and gas lease is NM 12412 . I know big things are happening around us but would like your take on true valuation right now and possibilities in the future. Thanks in advance. Timmy D.


#9

Is there an easy way to determine market value when you own an overriding royalty interest (ORRI)? I know it’s not as easy to determine as when you own net mineral acres, since an ORRI is specific to a lease. Is there a general rule of thumb?..such as so many months of production?, lifespan left of producing wells?