we are thinking of selling some minerals we have, 100 acre located 158-99 and 158-98 we have one well producing right now. we were offered $3000 an acre which seems low to me could any please let me now what a good price should be.
we also have minerals in divide county 160-99 we were also offered $3000 an acre. thanks for any help you could give us.
Jerry:
You are located in a very good area and several wells have been drilled with permits outstanding. You failed to give your section location but the area is very active. I don't have access to the production data for these wells but this will be a major factor in your per acre selling price, if you do sell. You are correct in that $3000/acre is extremely low in my opinion for this area. I have no idea the reason behind your idea of selling but in order to establish an appropriate amount, I would calculate what the payout on this well or future wells that might be drilled on your mineral area based on a historical decline curve. By all means take your time and do some serious research before selling.
Jerry,
You are thinking of selling real estate so, Location, Location, Location.
Mr Mallory is correct about evaluating production but don't stop there. The potential for development is extremely valuable to long term buyers. The less risk of future development, the more valuable the minerals.
Look of the definition of "Fair Market Value" and make certain you are an informed and willing seller. With 100 acres in that area, it will be worth some "very serious research" as Mallory says.
Western Divide County is not as valuable as other areas in McKenzie, Williams and Mountrail because of the geology and risk of future development. The difference in the price of acreage I evaluated between the two areas is over 5 times so Location, Location, Location. Sound scientific knowledge doesn't hurt either.
Dear Jerry, I got an offer today for 7 net mineral acres with two wells, they were offering 11000 about 4 years worth of current production. You don’t know the future, cause you could not handle it if you did. So lets talk about history. In 1958 my grand dad and grand mom divorced and he hid all he could from her, including the land I’m talking about, he sold to his best friend and after the divorce the best friend would not sell it back to him. After he died in 61, he sold it to my Grand mother for what he had paid GD for it. In 1978, she sold the land and retained 1/2 the minerals. From the Proceeds, she gave each Grand Child 12000 which she was 89 and wanted to see how we would invest or spend it. I purchased my first home with it. 26,000 assuming 198 house payment. My 5 cousins purchased cars with their share. Then in 2005 a Land man called me and said he wanted to lease that land from me, I said my GM owned some land where your talking, but sold it in 78, he said yes we know that, but she retained 1/2 the minerals and left it to the grand kids. 139 acres. We leased it 1000 an acre, and waited almost 5 years before they drilled, last years checks were 600 a month, cheap, and this years 300 but the price of Natural gas is on the rise now, so next year the royalty checks will go up. Money is money, and when you get it, you will need it. Now 401 K or other investment is going to give you the turns your getting from your Minerals, and if you sell them, you will lose out on other discoveries on the same land below the depth that this company drilled at, and above the finish out. If you sell and take the 300,000 you will have to pay taxes, and then you will try your best to invest the difference at what 2% interests. No I say don’t sell, just keep, your heirs will be glad you did. Some of Richest Oil Familys in Texas sold some Land in 2008 and let the minerals go with the land, thinking they would never drill for Oil or Gas in Tarrant County, to sadly find out there were wrong. I promise you they wish they had not sold it, and you will too. So lets just figure it out, based on my estimates, 4000 a month for 100 acres for gas, if you sell for 3000 an acre they are giving you chicken feed, I suggest you just throw away the letter, and guess what the next one that comes will be larger. They won’t give up, they will keep sending them. And if the price were to get to 12 per 1000, currently then the Gas Companies will drag out 100 rigs to bring to where gas wells sit and drill more. Best to not sell them now, so you have plenty of stories to tell your grand kids.
thanks for the great advise I never throught about the gas.
Chris Wilson said:
Dear Jerry,
I got an offer today for 7 net mineral acres with two wells, they were offering 11000 about 4 years worth of current production. You don't know the future, cause you could not handle it if you did. So lets talk about history. In 1958 my grand dad and grand mom divorced and he hid all he could from her, including the land I'm talking about, he sold to his best friend and after the divorce the best friend would not sell it back to him. After he died in 61, he sold it to my Grand mother for what he had paid GD for it. In 1978, she sold the land and retained 1/2 the minerals. From the Proceeds, she gave each Grand Child 12000 which she was 89 and wanted to see how we would invest or spend it. I purchased my first home with it. 26,000 assuming 198 house payment. My 5 cousins purchased cars with their share. Then in 2005 a Land man called me and said he wanted to lease that land from me, I said my GM owned some land where your talking, but sold it in 78, he said yes we know that, but she retained 1/2 the minerals and left it to the grand kids. 139 acres. We leased it 1000 an acre, and waited almost 5 years before they drilled, last years checks were 600 a month, cheap, and this years 300 but the price of Natural gas is on the rise now, so next year the royalty checks will go up. Money is money, and when you get it, you will need it. Now 401 K or other investment is going to give you the turns your getting from your Minerals, and if you sell them, you will lose out on other discoveries on the same land below the depth that this company drilled at, and above the finish out. If you sell and take the 300,000 you will have to pay taxes, and then you will try your best to invest the difference at what 2% interests. No I say don't sell, just keep, your heirs will be glad you did.
Some of Richest Oil Familys in Texas sold some Land in 2008 and let the minerals go with the land, thinking they would never drill for Oil or Gas in Tarrant County, to sadly find out there were wrong. I promise you they wish they had not sold it, and you will too. So lets just figure it out, based on my estimates, 4000 a month for 100 acres for gas, if you sell for 3000 an acre they are giving you chicken feed, I suggest you just throw away the letter, and guess what the next one that comes will be larger. They won't give up, they will keep sending them. And if the price were to get to 12 per 1000, currently then the Gas Companies will drag out 100 rigs to bring to where gas wells sit and drill more. Best to not sell them now, so you have plenty of stories to tell your grand kids.
thanks for the great advise so Williams would be worth five times as much as divide. do you think that you might be able to put a dollar amount to these minerals. thanks again
charles s mallory said:
Jerry:
You are located in a very good area and several wells have been drilled with permits outstanding. You failed to give your section location but the area is very active. I don't have access to the production data for these wells but this will be a major factor in your per acre selling price, if you do sell. You are correct in that $3000/acre is extremely low in my opinion for this area. I have no idea the reason behind your idea of selling but in order to establish an appropriate amount, I would calculate what the payout on this well or future wells that might be drilled on your mineral area based on a historical decline curve. By all means take your time and do some serious research before selling.
160-99- 25 and 26, 158-99- 13, 158-99-24, 158-99-25, 158-98-7, 158-99-7 -8
charles s mallory said:
Jerry:
You are located in a very good area and several wells have been drilled with permits outstanding. You failed to give your section location but the area is very active. I don't have access to the production data for these wells but this will be a major factor in your per acre selling price, if you do sell. You are correct in that $3000/acre is extremely low in my opinion for this area. I have no idea the reason behind your idea of selling but in order to establish an appropriate amount, I would calculate what the payout on this well or future wells that might be drilled on your mineral area based on a historical decline curve. By all means take your time and do some serious research before selling.
Jerry. I'm subscribing to this thread. Give me a little while to check some things. It's been a hectic day. It is location cubed. If you can give full legal descriptions you will get better information. If you have a better than average for the area well right next door or close by, those acres at least would be worth more. The closer you get to be drilled, it can be argued that the acres are worth more unless there are some lousy wells. People want to participate in wells drilled tomorrow, not 4 years from now, if you see what I mean. I will check back shortly.
Where to start? I hope you were aware that you already have a well in 158-99-25 named STATE 158-99-25A-36-1H with production of 47,422 barrels oil up to February?
Another well in 158-99-7-8 named CPEUSC AUSTIN 17-20-158N-99W with a production of63,993 barrels oil in about a year up to February?
Jerry, your acres are never far in distance from production. The farther east your acres are the more highly I would value them because the wells farther east produce more gas, most of which is being flared off. Why would I value these acres higher if the gas is just being burned off? Gas provides pressure for the oil to come out of the ground easier. The wells in either township look unexciting producing arout 40k bbl to 70k bbl in a year on average, except for one thing, they all look like they are going to make money.
Jerry, are you being paid for these wells yet? If you sell the new owner is going to get the money that might have gone to you, essentially buying your acres from you, in part, with your own money.
Jerry, I recommend you not sell anything with a producing well on it if you haven't collected the royalty due you yet.
I will save further comment on value until I hear back from you whether you know about these wells. If you are unleased an operator may offer you up to $2,000 per acre just to lease under these wells.
Yes there are certain areas of Williams County that are better than Divide but there are many areas of Divide that are worth many times more than many areas of Williams, McKenzie and Mountrail. There are parts of each county that are just about worthless.
That State well in section 25, is paying around $22 per acre per month, at $3000 it would take over 135 months or over 11 years (with decline more like 15-20 years and these are probably 10-15 year wells) to just make their money back, but I have seen these wells in this exact same area not last very many years. The well will definitely continue to decline to almost nothing and yes they might come in and drill more wells if they make money on this one which will have to include oil prices holding up, that just gives you an idea. Telling this person not to sell could be putting their personal wealth at stake, if oil prices fall they may not drill another well for years and it maybe a 20 year payout, these wells have not been strong enough to justify the replies they are receiving. I think if you say never sell any, it is bad financial advice.
As for nat gas, It seems like some are forgetting how nat gas prices went from over $12 down to like $1.6 and is only back up to just over $4. It went from them saying we were running out of nat gas to saying we have well over 300 years of it here in the US. They said we were running out of oil, has anyone here seen oil production figures for the United States and the onshore and offshore (mainly offshore) fields that are for the first time beginning to be explored worldwide including mainland China and offshore China, and the figures that are being throw around. There is oil everywhere just like they found the same about Nat gas. Every country is now just in the beginning stages of natural gas exploration with multi-stage hydraulic fracing of horizontal wells. I don't know about any one else but all of my wells they are practically giving away my nat gas as no operator is paying me much of nothing per mcf, many of my last checks were only paying $0.40 per mcf. Nat gas in ND is already being paid at a premium.
Those Divide are worth about the same as your Williams depending on Operator, G3 and Continental are better than the other main player in that area so if your leased to them they be worth a little more.
Joe, I must be missing something on the state well or you are in a tax bracket I would dream to be in. I came up with about $45 per month [I even included the month with 6 days as a whole month] before tax using $85 for a barrel of oil and 20% royalty for approximately $630 per acre to date pre tax. Which I figure is fair because there will be taxes if he sells also. If you deduct his royalty from the offer price, he would be getting $2,370 per if he has not been collecting the royalty but paying tax on the whole $3k.
The CPEUSC well is much better 50 bbl oil per acre X 85 = $4,250 X .20 = $850 an acre divided by 12 =$ 70.83 a month pre tax.
Joe, I am not saying you specifically were speaking to me. I would rather talk to someone that just throw things into the air and I hope you do not mind. Yes I know there are other variables than taxes which may cancel out with depletion, but I don't see them altering things more than 10% give or take if you have a good cpa. Possibly Jerry could make a trade buying some real property and avoid the 15% capital gains tax? I don't know that's why I pay a cpa.
I really see nothing wrong with getting off the merry go round when you feel like it, as long as you are in posession of as many facts as you can possibly come by. That is why I suggested that if the acres are not leased, that they probably could be for a decent amount. I also suggested that acres under existing wells should not be sold without collecting the royalty from production to date. I'm just not loving the idea of someone buying my acres from me with up to 20% or more of my own money.
I'm really curious to find out if Jerry was leased and if he knew of the existence of these wells.
Joe, I can do nothing but agree with you in your point that these wells will not pay $3,000 per acre in short order but I am also a little more optimistic than you. At 20% royalty I think those acres may produce as much as $15,000 per acre in royalty over the next 30 years or so and I think the buyer thinks so too and if they can get paid for production to date that could sweeten things a bit.
Another little thought hits me. If Jerry's buyer is not the operator, the operator of the two wells may like to bid on those acres also and I would always rather have 2 buyers rather than one. Just idle thoughts because it's late and I'm tired.
r w,
I was going to say you get up very very early but you said it's late so you must not have even been to bed yet.
Joe, I do think that these [spacings] will produce for 30 years, because they do not have the field pressure of other areas the oil will take awhile to come out.
For my factoring I used the total production through February divided by the number of months, including the first month that only consisted of 6 days. If you are only going to figure from the last most depleted month, what about the months previous? Don't they count too? Do not their dollars count towards figuring when you will recover $3,000?
These are relatively new wells, I would think it more likely that they leased for more than 1/8 because either people had 5 year or longer leases, and the operators did not know exactly what was down there in 2008 in the midst of the frenzy, or these people have been through more than one lease cycle and had a chance to learn to bargain.
The reason why I wonder if Jerry even knew the wells were there? I come across people weekly who never leased and have wells, or did lease and have had wells for more than a year they do not know about.
I stated my figure for barrel of oil at $85, about the average my oil sold for over the last 5 years.
Joe, if there are older wells in the area that are not doing well, I believe that the completion techniques of the earlier wells are to blame. Believe me, it makes a difference. I have more than a handful of wells drilled in late 2007, early 2008 and newer wells in the same area produce twice the amount of oil.
Joe, I am an observer of nature. When I see a flock of animals move at an accelerated pace, I don't need to see the predator to know that one is there, there is a reason for most things. Operators are systematically drilling areas exactly like this, 1/3 to 2/3 of the townships in question have been drilled, look at the GIS map. If the operator thought the wells were that bad, there would probably only be three test wells or less in each township. Watch the geese Joe. If you look long enough you will see the reason why they are running.
If there is no profit in these areas, why are there so many wells?
r w ,
Why would someone figure initial production on a well that has declined by over 60% to figure future payout on $3000 per acre, why would it count unless he is selling past production and if so why don't you figure giving them any bonus he already collected and maybe his first born also. Also why would someone use the past price of oil instead of what they are paying right now, today, that is like adding his past production that you did and he didn't sell 1 1/2 year ago. I'd love to figure the past on Nat gas prices on my valuation of some of my minerals. r w, you use figures like our government uses, they call it fuzzy math but whatever you want to call it, your giving him 20 % royalty why not figure at 30%, your exaggerating to fit what you want, giving 20 % when I know many only got a 1/8 and few got a 1/5, new well has nothing to do with royalty, I know I just purchased many tracts in many states and some were just leased some had new wells and a ton of them are for a 1/8th they do it every day in many states, your using past revenue or production to jack up the amount a well will produce in the future, production is and will continue to decline. I have looked at 100's of these wells in this area over the past year as I have seen them come up for sale and bid on them and I can guarantee if these were worth the money you say they are prices would not be near where they are selling at, buyers who believe in the valuations like you would run the price up 10 times what they are selling for and still think they would double their money, but they are not doing that, do you wonder why. I see people in this forum talking about revenues on future wells all over being exaggerated, one guy was talking a mineral acre worth over 100k and they should all be billionaires, reality is normally not as exciting. Watch the geese?, there are guys coming on this forum with minerals just a few miles from these begging someone to lease their minerals because their lease expired and no one wants to lease it. If you want to see your geese look at all the millions of dry holes nationwide, just because someone does something doesn't mean they were right, dang, you'd think you never seen or heard of a dry hole before. Heck there are more than 20 dry holes within a few miles of this section 25, did you see any geese by those dry holes and by what you say the operators just couldn't be wrong, right, perhaps they seen the geese too?
Joe, I think you are totally discounting the fact that $850 in the first year is a good start on $3k. Last I checked oil was selling for $89 [just looked, $89.80] a barrel. You also totally discount any future exploration. I also believe that the operator will figure out how to improve the return from wells in areas like this.
I suppose I should say something about the royalty issue, you say 1/8 and I say more. I say more because people I talk to in areas that are sadly less promising are turning their noses up at 1/6 royalty. I'm not going to look up 100 leases in the area just so I can say I'm right, so we will just have to disagree on that point. If we were talking Wyoming, Montana, Colorado or Kansas, I might see your point, but we're talikg North Dakota.
Joe, I don't know how much you have studied the geology but I think there is more oil there than you give credit for. The problem is there isn't as much gas to go along with it. That oil is not going to come out of the gtound fast as we would all like, but that does not mean it is not there. I know you buy and sell hoping for a shorter term gratification but sometimes if you have a slow performer that has potential, you'd do well to stick with it.
I also will stick to what I said about Jerry making sure he collected his royalty first if he should sell, because if he didn't it would constitute his selling his most valuable [producing] acres for the least amount. Buyers can keep their first borns, last thing we need around here is more mouths to feed when the buyer seems well heeled enough to feed them himself.
Joe I did not extrapolate from the initial or best month of production, while you appear to want to ignore that 25% or more of the $3,000 per acre under the producing wells has already been recovered when you extrapolate from only the last month. My looking back over the last 5 years of my production also included the 2009 disastrously low prices and the blip from last year of someone screaming that oil was selling for 55 dollars in ND....for about a week. I wasn't impressed.
I have no idea why you are comparing natural gas prices to bakken oil. Did you look at the GIS map in the townships we are talking about? See alot of dry holes? I sure did look and I didn't see them. I don't see what bringing up dry holes in a different township and range from more than 21 years ago, has to do with the particular areas we are talking about, today. I think you are reaching.
thanks for the response I sure am getting a hole lot of advise, yes I know about the two wells and have been getting royalty checks all along. We have two areas leased to Hess located at 158-99 -13 and 158-98 -7 the lease is up 5/2014. They seem to be drilling around this area so more than likely Hess might drill a well. I believe people are saying do your research before doing any thing. I am trying to figure out what the advice that I am getting really means, seems like some say keep the minerals and others seem like they are saying $3000 is a good price. I guess that I will just see what other advise I get before selling. I really do appreciate all the reply that I am getting
r w kennedy said:
Where to start? I hope you were aware that you already have a well in 158-99-25 named STATE 158-99-25A-36-1H with production of 47,422 barrels oil up to February?
Another well in 158-99-7-8 named CPEUSC AUSTIN 17-20-158N-99W with a production of63,993 barrels oil in about a year up to February?
Jerry, your acres are never far in distance from production. The farther east your acres are the more highly I would value them because the wells farther east produce more gas, most of which is being flared off. Why would I value these acres higher if the gas is just being burned off? Gas provides pressure for the oil to come out of the ground easier. The wells in either township look unexciting producing arout 40k bbl to 70k bbl in a year on average, except for one thing, they all look like they are going to make money.
Jerry, are you being paid for these wells yet? If you sell the new owner is going to get the money that might have gone to you, essentially buying your acres from you, in part, with your own money.
Jerry, I recommend you not sell anything with a producing well on it if you haven't collected the royalty due you yet.
I will save further comment on value until I hear back from you whether you know about these wells. If you are unleased an operator may offer you up to $2,000 per acre just to lease under these wells.
Jerry:
Bottom line when the smoke all clears, these are your minerals and do with them what you think is best. Everyone has their personal opinion and mine has always been to hold my mineral interest but I'm not in dire need of immediate cash. Lots of good responses to your original post but I think Mr. Gary Hutchinson hits the nail on the head. Again, good look in whatever your actions may be.