Is this a real offer?!?

We have just received an offer to purchase our mineral rights (43 and 10 acre tracts) in Culberson County for 1 million 35 thousand dollars. Granted, there are producing wells on both tracts, and we're now receiving an average of $1,500 a month in total royalties for both wells. The largest offer we have received prior to this was about $125,000, and that was before the drop in oil prices. This kind of money would let us retire once a deal is closed.

Of course, that million dollar offer would change, based on the actual percentage of mineral rights that we own. We thought we owned them all, but after doing some research into mineral rights in general, we discovered that is often times not the case. We are considering hiring an appraiser to find out exactly what we have, to possibly give us a better idea of a fair market value for our mineral rights. But, at $500 a day (we're hearing), that might be a bit out of our price range, at least until the price of oil goes up again.

In trying to figure out if this is a for-real offer, I'm running into several entities that are telling us to not sell, as the situation in the Permian Basin is really heating up. And that a lot of regular people are about to become millionaires, based on a new discovery in the Permian Basin.

We live on the East Coast, so if anyone has any insights into what's happening on the ground in Culberson County, we'd appreciate hearing about it. Also, if anyone could suggest a reputable appraiser who might consider a payment plan, we'd appreciate that, as well.

Our properties are:

43 acres - T1S BLK 59 SEC 40 A-2297 T and P RR/Shelton AE Well: Street Sense 40 Unit No. 1H

10 acres - T1S BLK 59 SEC 39 A-2705 T and P RR Well: Stone Street 46 Unit No. 3H

Thanks in advance for any assistance.

Assuming that you own 53 net acres, that is probably a legitimate offer. It works out to $19,528/net mineral acre, which is a reasonably good deal for the buyer considering there is production on both sections, and there is room to put significantly more wells. In addition, Cimarex is the operator, and they are the ones credited with discovering that formation in Culberson County, and are arguably the best at developing it.

The advice to not sell is well-founded. If you want to hedge your bet you could sell a fraction of what you own, but I suspect your property will only increase in value as time goes on. If you want to see what others have been selling for in that area, you could try contacting the forum sponsors.

Best of luck!


Thanks for the reply. Getting into the weeds of mineral rights is new to us, and although being able to retire sooner rather than later is very appealing, we would like to be able to leave something to the nieces and nephews when we go.


remember to talk to a tax professional about what the tax liability is on any mineral interest sale

Thanks for that reminder, Rock Man.

I was assuming the 20% cap gains tax, but maybe there's something different about mineral rights.


The capital gains tax on the sale of minerals is usually around 15%. It can vary depending on your normal tax bracket but for the vast majority of people it will be 15%.

So...after contacting three different companies, it's proving a bit difficult to find someone to "appraise" our interests.

I have explained that perhaps my understanding of "appraising" in this situation is flawed; that maybe what I am looking for is someone to figure out the paperwork and tell me how many actual "net mineral acres" we own. None of the paperwork we have states that plainly.

Am I asking the wrong questions?


As I look at it, "appraising" your mineral interests means evaluating the O&G potential associated with the property.

If you are only trying to figure out the actual mineral interest position, it is basically a "title search" that will dig into the county clerk's files to determine what you actually own.

This can be done by a title attorney or qualified land man or broker

Rock Man,

Thanks, that helps clear up one of the questions. The simple question of net mineral acre sounds like it can be cleared up by a title search by someone on the ground in Texas.

What entity (read: who) would actually "appraise" the O&G potential of our property? If we are interested in selling our mineral rights, we would like to know the potential associated with the property, in order to go into a negotiation in an informed manner.

Thanks so much for your help.

You would need to talk to some O&G professional (geologist or engineer) / consultant who is very familiar with the area to get a valid opinion of potential value for your minerals. And this is much easier said than done since there are a wide range of opinions any consultant would have as to value for minerals.

This is tied to how many intervals could be prospective, number of wells / well spacing per bench / interval, anticipated ultimate recoveries per well, initial rates and decline over time, discounted cash flow, etc.

These wells - assuming there are no mechanical problems - will produce for 25+ years. But with most of the production in the first 3-4 years before the low steady rates set in.

How long have the two wells on you block been on production? Can you tell us which wells these are?

Changing gears - it just dawned on me that your division orders that are tied to the two producing wells should have all the info you need to tell you how many net acres you have in this producing unit. Knowing your royalty percentage being received plus the lease royalty base (e.g. 25%) and the size of the production unit should allow you to back out your net acreage.

And why not just ask the company making this huge offer what your net mineral interest is? They will have to figure this out to properly pay you if you accept any offer. I would not take what they say as gospel but it is at least a number to compare your results to.

P.S. A good O&G technical consultant would charge $1000 to $2000 per day. No telling how many days of work would be needed to get a good opinion on mineral value. And the time will depend on how well the consultant knows the area in question. Research costs money.


I'd be happy to do some online record checking and see if I can help determine the net acres you own. I'll send you a friend request so I can get some info from you.

I recently had a full petroleum engineering study done on a section I own minerals in. The acreage is in Reeves County and veteran PE, Scott Hickman did the reserve study. It cost me just under $4K but gave me an estimate of recoverable oil in place on our acreage. I have passed up a seven figure number and wanted to know if I was making a good decision. Also, for tax purposes I was trying to establish a property value as I was receiving a step up in basis with the passing of my wife and transfer of ownership into my name.

Do your due diligence and don't get in a hurry is my advice.

If you are in fact interested in selling and offers are coming in, I would love the opportunity to speak with you.

Hi, Traveler:

First off, I would suggest that you do determine exactly what the mineral interest is that you do own. As you indicated, this just involves a records search and someone reputable, be it an attorney, professional landman or title company, can usually do this for you without too great an expense, especially given the sum of money you have been offered. Remember that almost all mineral deeds and leases contain a clause stating that you warrant and agree to defend title to what you you have leased or sold them.

It is very common these days for the lease or deed to read that you are leasing/selling "all (or a fraction, such as "one-half") of your right, title and interest in and to . . ." certain tracts. I like this language better than that specifying a decimal interest (i,e., "a .03756 interest in and to . . .") ownership.

As I'm sure you are aware by now, a lot of the responses are from mineral buyers, brokers or landmen. If you are seriously wanting to sell, this can be a good thing, as you'll usually wind up with a multiple offers.

I would recommend that you be very careful, though, as there are bad apples as well as very good ones in this business. Some really know their business and can be very helpful to you at all stages of a potential transaction. Others know little about what they are doing, have no professional credentials and just see an opportunity to make an easy, quick buck. The problem is how does someone like yourself on the East Coast with little real knowledge of the petroleum industry separate the wheat from the chaff, so to speak.

The Texas Counties of Culberson, Reeves, Loving, western Ward and far western Winkler, plus parts of southern Lea and Eddy Counties in New Mexico, make up the Permian's extremely prolific Southern Delaware Basin play. It is without question one of the hottest onshore unconventional resource plays in the world right now. So there has definitely formed a "boom" mentality in that region, and everyone wants a piece of the pie.

Be sure to ask for detailed information about the individual/company you are dealing with in each case, get verifiable legitimate references and require verifiable information as to who the actual end buyer is. Find out how long the the parties involved gave been in business and if they do have professional credentials, check them out. Remember that someone who is brokering acreage or speculating that they can promptly turn your minerals for a profit will more often be offering you a lower price per net mineral acre than someone who is, or represents exclusively, an end buyer.

I would strongly recommend that you ("Grantor") do not sign a mineral deed to any party ("Grantee") without getting paid at the time of signing, preferably with a cashier's check. An instrument that used to be sent in the mail with a lease or deed in the past that protected everyone is called a "sight draft", but I haven't been paid using one of those in years. If someone offers you a deal you decide to accept, and they want you to sign a deed and then give them days, weeks or more before they have to pay you, I strongly suggest you don't do it. Remember that a buyer will often need time to do "due dilligence" after you come to a verbal agreement. However, a less than scrupulous party may really not have funding to buy your minerals and need the executed deed from you to try to find it. And they may never get it, keeping your minerals tied up for a long, long time.

I hope you find some of this information helpful. I know it does not address the question of "what is it worth?". Geological and engineering studies or reserves estimates are usually expensive and complex. Further, they are only as good as the assumptions that underlying the numbers. Numbers can "prove" anything, given the right assumptions. This is not to say that such studies cannot be valuable, but the cost on for an interest no larger than what you described would probably be prohibitive. The best I could recommend would be to watch websites like this and compare what you are being offered with what other mineral owners say they have been paid or offered. You don't want to give your minerals away, but holding out for more than anyone else is getting might not be the wisest move, either, if you think you do want to sell. And remember, just because someone got a certain amount for their minerals in a section a mile or two over from you, it doesn't that yours is worth the same. It could be less, or it could be more. Many buyers are very "tract specific" as to how much they offer.

What is important is that you get what the minerals are worth to you, based on what you value. You indicated that the money might help you retire earlier than you could otherwise. You also indicated that you might like to retain something to pass on to your descendants or heirs. Selling part and keeping part might go a long way towards achieving both goals. I almost never sell all my mineral interest in a given property, if I sell any at all.

Good luck!!!

My mother in law just received an offer for ~$600k for her 3.6% royalty interest in the Hawk 4 Well 2 in Section 4, Block 58, Township 2 T&P RR Co. Survey, Culberson County (Producing Zone- Cherry Canyon and Brushy Canyon (Delaware Mountain Group); Not Unitized(lease well)). There are two other wells in that section (Bronco and Harrier ) that are producing. We are curious to determine what is going on. We recognize that we should determine what rights the proposal includes - e.g., if we were to sell the rights in the Hawk well, would this include all rights in the section?

Normally an offer to purchase minerals would be for all rights / all depths - not just a single wellbore.

Purchasers are looking long term when a lot more wells are drilled on the block that they are acquiring

Thanks. That is what I was thinking. Not a good deal here!

These deals in my opinion all come down to individual cash need - do you need / want the money now or are you OK with taking it over the next 20 to 30+ years.

Of course, you can always sell part and keep the rest.