I have an Aunt who owns mineral rights in both Crockett and Upton counties in Texas. We are located out of state and I am in the process of doing some research for her. She was recently contacted by a Landman representing Trek Oil & Gas and presented with an offer to lease the mineral interests.
The offer is for $125 per net mineral acre for a 3 year term with a 1/5 royalty. It also includes a 2 year option to extend at $75 per net mineral acre. The property in question is for a total of 33 net mineral acres in Crockett County which is only a small part of what she owns the rights to. I'm not sure of the
protocol of this forum, so I didn't want to include the exact description of the tract. I can give a further description if it allowed and will help any of you offer any advice to me.
Although I don't have anything to back it up, that offer seems rather low to me. The Landman also mentioned that he knew of another company that would offer double that amount ($250) per net mineral acre for outright sale of the rights. This would include other land not specified in the lease offer. Again this seems low to me. I have noticed on this forum that many people recommend to never sell your mineral rights.
I apologize for the length of this post. I am just starting to look into this and am trying to find as much information as I can in order to assist my aunt in making the correct decision. I would greatly appreciate any advice or information from the many experts on this forum on how to best proceed with this. Thanks in advance to anyone who takes the time to read this post as well as anyone who is willing to offer any much needed advice.
First of all, do not sell minerals. Period. Lease money alone can amount to far more than $250 per acre over time. We have some mineral acreage that has been leased over and over and over again. Production can make that $250 an acre offer look like pennies. There are countless brokers and others out there that send offers out almost on a daily basis to purchase one's minerals. I get them often and just throw them away. Often that means there is potential in the area and they are looking to make money. A recent conversation with a real estate agent informed me that it is generally understood by people looking to buy farm/ranch acreage that the sale of minerals are NOT included. The offer seems small to me too, but I am not familiar with the property, the counties, surrounding production, etc. I always advise people to ask for 25% royalty. You may not get it, but you can always ask, accept their counter proposal, or turn them down and walk away. This is not uncommon. 25% royalty is not unfair at all, free of all costs of production, transportation, etc. I never allow for extensions. There is no reason why they cannot get things together and drill within the 3 year time frame. If they cannot, then make them lease again. You can also require delay rentals. Email me for more information. Good luck.
Tom:
I am not familiar with the going bonus rates for this particular area but do some research via the Railroad of Texas website and learn what wells have been drilled in your area along with the production amounts. This has big impact on negotiating bonus amounts. The 3 year and 1/5 royalty sounds good to me but the 2 year option does not. You never know what the area will look like in regards to developement that far down the road and if the area becomes "hot" , you are stuck with a very low bonus. I would be leary of this landman if he is giving advice about another company while negotiating for someone else. Sounds like he might have ties with a company involved in puchasing minerals in the area. My advice is not to sign with anyone until you have researched the entire picture and fully understand what you have in regards to minerals.
Mr. Mallory,
Very good advice.
charles s mallory said:
Tom:
I am not familiar with the going bonus rates for this particular area but do some research via the Railroad of Texas website and learn what wells have been drilled in your area along with the production amounts. This has big impact on negotiating bonus amounts. The 3 year and 1/5 royalty sounds good to me but the 2 year option does not. You never know what the area will look like in regards to developement that far down the road and if the area becomes "hot" , you are stuck with a very low bonus. I would be leary of this landman if he is giving advice about another company while negotiating for someone else. Sounds like he might have ties with a company involved in puchasing minerals in the area. My advice is not to sign with anyone until you have researched the entire picture and fully understand what you have in regards to minerals.
Mr. Hicks and Mr. Mallory,
Thank you both for your responses. You have reaffirmed my initial thoughts that this was a lowball offer. I am trying to learn as much as I can about this topic, one in which I am totally unfamiliar.
I certainly agree with both of you gentlemen that the option years should not be included. I will continue to try to find as much information about the property in question as well as the surrounding areas.
Thanks again,
Tom
Tom,
You can call the rail road commission and they can help you figure out if anything is drilling in your area if you have the legals to the property. They may be able to tell you what people are getting for bonus.
Usually if you give an extension, it's about 150% more than what you leased for not less. Don't think this guy knows what he's doing. Sounds like he is looking to buy minerals at basement prices. DO NOT SELL YOUR MINERALS. They may not be worth anything for 50 years and then they figure a new way to produce the sands, you are now making several hundred a day.
Virginia,
Thank you for taking the time to comment on my post. I have looked on the Railroad Commision website a little. There is quite a bit to digest. I will try to find out as much information as I can. It looks like it is unanimous that the extension offer is out of line. Thanks again for your help.
Tom
Tom,
You can call the Railroad commission and they can walk you through the part you need. Otherwise you will be months on there site and still not find what you need. Good luck.
Virginia
No, the land hasn't been leased yet. I am trying to find out what mineral rights she owns in Upton County. This info is not easy to find when you live out of state and she doesn't have any ownership documents.
Actually right now is a good time to sell your minerals. People that say "never sell" have thrown logic/reason out of the window. Oil prices are high right now and mineral values have gone up (ever heard of buy low sell high)? There will be another bust sooner or later...history repeats itself. Once that happens, then buy some minerals and hold on to them. Just something to keep in mind. I am in the business of both buying and selling minerals. There is a company called Yakka that will pay a pretty penny for minerals in most areas of Texas. I'd give them a call if I were you.
SITE ADMINISTRATOR NOTICE: MULTIPLE RESPONSES DELETED. ANYONE HAVING TAKEN PART IN SUCH DIALOGUE IS HEREBY WARNED OF THE RULES UNDER WHICH THIS SITE OPERATES. OTHER VIOLATIONS OF THIS WILL RESULT IN YOUR SUSPENSION FROM THIS SITE.
POLICY:
If you are the type to take offense at someone saying something against you or your opinion - or to create or promote an offense - we highly suggest that you not join. We maintain and hold complete judgement on this matter. If you wonder whether or not you should say it, YOU SHOULD NOT. It's really pretty simple.