Gigantic valuation increases on gas wells

Don’t think 1,400 percent is hyperbole. We received valuations on three gas wells near Toyah. The valuation on one well was 1,400 percent. Another 800+ percent and the other merely 200 percent in valuations. I have not performed the numbers to see what that translates into in terms of tax impact using last years tax rates (which KCAD provides in their tax appraisal notices). If you want to check my numbers one well was valued at $2,931 in 2020. This year it is valued at $44,500. Are these number similar to what others are seeing?

I have not seen it in that range for 2+ year old wells, but definitely increases because gas prices in the Permian improved so much in 2020. With the opening of the additional pipelines, the big discount at Waha has disappeared, and prices paid improved 2x to 3x easily.

We have seen some improvement in royalties this year, but nothing splendid. In 2020, a large portion of our royalty checks were actually adjustments from Apache related to taxes. Our other wells apparently don’t even merit appraisal, which is said for us and makes me wonder if there will be any effort to bring them to life. Still, have a couple of weeks to work on appeal/protest - age of wells, previous revenue not all related to output, etc. I have not even felt like figuring out how this impacts actual tax costs based on last year’s tax rates. Hoping those don’t climb a bunch this year. With these type of increases, rates should decline to provide the entities similar revenue generation.

While the appraisal increases were whopping in percentage, the actual estimated tax increases were not “terrible.” Well yes, a 513 percent increase in taxes is horrible, but the dollars in this case are manageable. Going to look at possibly protesting the valuations based on last year’s performance of the wells and the age of the wells.

Why the huge increase? Assume spike related to the gas price RCAD input in your preliminary “Economic Projection” spreadsheet? Did you examine those spreadsheets for your wells?

Gas price inputs vary dramatically in RCAD’s 3/30/21 preliminary assessments, e.g., $1.42 county average, some wells gas-priced $1.74, others 21₵ Mcf.

If you didn’t retain your 2020 Economic Projections (final 7/28/20) RCAD can send you copies for comparison.

Tax rates are published, .02094535 in 2021, last year .02030035 for combined six entities.

Also learned today that property values of that section and a half of scrub land went up 900 percent. yikes. This property is useless except for the wells on them.

Does anyone know a tax consultant who is protesting valuation in Reeves County this year? My usual guy is not, so I am looking for someone to help us protest valuation, if appropriate. My paperwork says the deadline is 6/21/21 so there is not a lot of time.

I have been looking into find such myself - no luck yet.

not only my surface values went up 1300-1700% but my mineral values were doubled. Fees like a cash grab to me.

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