We own minerals in sections 30-12N-17W and 35,36-13N-18Wof Custer County. We’ve been receiving multiple offers to purchase. We signed a 3 year, 1/5th royalty lease in 2025 on all three sections. What should these be worth?
Two different types of “what are these worth”.
The first is the market value of the sales offers if you sold now. Whatever you are being offered now is a general range of that value based upon current competition. Most buyers use a formula based upon about three to five years of production discounted for the time value of money. Some buyers only pay for current production and others will pay a bit more for wells that are about to be drilled. They intend to make a profit by either flipping the acreage once the new wells are drilled for a higher price or keeping the acreage and the royalties. The question is, do you you want that potential profit and are you willing to wait for it?
That leads to the second value. What is that acreage worth over time? Reign Operating has already filed an OCC case in 30/31-12N-17W for spacing the Cherokee. Territory and Mach have already filed cases for multi-unit horizontal wells for the Cherokee in the northern part of the township. Reign and Crawley also have cases lined up in 29/32 and 28/33 getting ready for additional horizontal wells.
To the north in 13N-18W, Anthem is the main player for horizontal wells. They have OCC cases surrounding 35 & 36, so time will tell on those.
You can sit back and wait for the play that is developing to begin drilling. Think more than one well in the long time frame. They usually drill the first well to hold the sections and then if economic, come back and drill the infill wells like cigars in a box. These horizontal wells last far longer than 3-5 years (although about half of the value is in those early years). You can sell some, sell none, or sell all.