First time post, looks like a lot of great information and advice given here in the forums. I currently own mineral rights in 24 16N 14W, Dewey Co, OK which has two producing wells; Preston and a malti Brothers Horizontal wells. My question is I have received phone calls and sale agreements for $10,000+ per mineral acre for a 20% royalty which I have not accepted and will not accept, I have not received any information regarding any new drilling from Continental and these purchase offers seem to continue to increase. I understand the offers are based on future play and earnings potential but if production has not increased as the yields continue to deplete why would the offers continue to increase. Just curious to what may be in the works or what the potential future earnings may be based on the reserve of oil/gas play.
You will find the answer in the SEC, IRS, USGS, FTC,definitions for fiscal reporting of" RESERVES". In your case, the wells not only represent Proved Producing Reserves, but Proved Non-Producing Reserves. Based on the science of decline cures for the wells both the PPR and PNR Reserves are ratifying the previous estimates as the inventories of defined Reserves become more defined, the values become more defined. In accounting terms, the NPV increased because the discount rate adjusted for risk became lower. Hedge fund managers live and die on being able to understand how to measure risk of recovery and prices against Proven Reserves.
The economic limit will be based on geologic and production potential not on competitive bids.
Gary L Hutchinson
Gary thank you for your response and analysis. Your explanation is very understandable and why the values have increased as the potential formations (NPR) become more understood or at lest what fund managers anticpate the future values to be. We will see what happens in the future, if I recall in all of my paperwork there is still a significant amount of play. For my benefit I am optimistic that they will continue to access and recover the remaining play with additional wells and only time will tell. Thank you for your references as well.
Some areas are just being held back due to lack of pipeline capacity. Lots of natural gas in that area.