Going rate per acre for working interest


#1

I was originally offered $5200 per acre, but now that the title work is nearing completion, the amount has dropped to $2375. Does anyone have any information on how much is reasonable? We’re talking working interest, not mineral interest. Any input would be greatly appreciated.


#2

There really is not a going rate per acre for a working interest. Each location would have to be valued independently. Exact location, current wells and the future liability of such, target formations, what operator currently operating the well, immediate future expected exploration. If title work made the price drop, I would have to ask why if I was evaluating the value. And their price may have dropped to clean up your title issues.

Too many unknowns for anyone to “correctly” answer here. However, I’m not qualified to evaluate the situation if I had all of the information.

I’d start shopping it to the other Working Interest owners in the well. If you have a working interest, you are entitled to the “pay deck” showing 100% ownership in the well bore. The more informed WI holders might know all of the required info to easily make you an offer.


#3

5,200 is a very good price, I have sold some for 2,700/acre. Price can legitimately change as the geological assessment changes. recently somebody offered me 50/acre then upped it to 100/acre - holding out for 1000/acre
I have heard of Acres in the Permian selling for 25,000/acre.
So the geology and market conditions make huge differences


#4

Thanks, Harry. My buyer is in the ballpark. I appreciate your input.


#5

If you don’t sell, and they drill, you will have an over-riding royalty interest.


#6

Yeah, they’re threatening us with spacing and pooling, but I’ve got a couple of buyers considering buying, so they better hurry up and start the process if they’re going to do it. Their scare tactics won’t work with me.


#7

It sounds like you may be caught up in the terms working interest vs. mineral interest a little too early. If there is no well on your property yet (and your comment that they are “threatening with pooling” you suggests this is the case) then you just have regular mineral rights (not working interest which would indicate you have previously participated in the cost of drilling a well, or revenue interest, which means you did not participate in the cost of drilling a well but are collecting royalty payments from a well drilled on your property).

Next, are you getting offers to outright sell your minerals at that price? Or to lease your minerals for a cash bonus plus a royalty rate?


#8

The current offer we have is on working interest. They are seeking and “Assignment”, which will surrender all of our interest for perpetuity. While this is something we are not opposed to (as a matter of fact, it is our intention to liquidate all of our holdings, since we are tired of the constant paperwork we receive every month sans revenue), we are disappointed with the amount quoted. They’re all over the place with their bonus offers, and we are assuming that is due to geological interpretation of the individual acreages. We’re in a holding pattern while we entertain offers from several sources and while they complete their title work. We have a very sour, negative feeling from all of this, and that’s unfortunate, but perhaps we’re being unrealistic. Hence the origination of my post here. I’d like to know if we’re being naive or just uneducated about the process. We appreciate your input. Two heads are always better than one.


#9

Now I understand. Sometimes these offers to purchase your minerals can be a little tricky when they are worded as offers to purchase your royalty interest. In some cases they make it look like a lease offer, where they even say you will get a “royalty rate” of your existing royalty (which would be something like 3/16th of your 3/16th).
I would recommend you get an independent, third-party, appraisal of your oil and gas properties before you sell.


#11

Get back to you in a bit. Driving right now.


#12

@Tom_Butler

A working interest definition has nothing to do with production. The working interest is the interest created by the execution of an oil and gas lease.

For example, Farmer Jones leases to ABC Oil Company and the lease provides for a 1/8 royalty. Farmer Jones has actually sold his minerals to ABC Oil Company in the nature of a determinable fee. ABC Oil Company now owns an 100% working interest in the lease and an 87.5% net revenue interest in the lease.

I hope this clears up confusion with industry terms.

Best wishes,

Buddy Cotten
Mineral Manager


#15

Thank you, Buddy. That helps a lot. I appreciate your help.