We have inherited mineral rights and own about 200 acres of mineral rights in Ohio and for about 6 years have had a lease agreement with a company that isn't paying us very much every year. We have just been approached by a couple different companies that want to buy our mineral rights. The offers have not been the same at all, one offered 200,00.00 up to 2 million from others.. Obviously we don't have a clue what we are doing. Should we sell or lease or what? If we keep the mineral rights, how do we know that they will be worth anything years to come? We have lots of questions and need lots of good advice. Please help!
Cassie, Companies regularly send out offers to buy minerals. Typically (though not always) the amount offered is 1/5th to 1/3rd of the real value. They are seeking people who are either unaware of the real value, or who have a dire need for cash now.
If the unsolicited offers on your minerals range between $200,000 and $2 million you have homework to do. The high offer may be fair, or it may be a come on to get you tied up. I'd suggest you seek some professional landmen in Ohio to perform a formal appraisal for you. They should be able to determine what current production is and assess the likelihood of future drilling. I'm unsure of the cost but it may be a fraction of what you might potentially "leave on the table" if you just go with the offers in hand. If nothing else you're buying some peace of mind. Don't be in a rush to sell. Make sure you're getting a fair deal and are comfortable with the decision. Good Luck.
Cassie, it sounds like you have assets of substantial value and the lease or sale is business, and evidently business that you know little about. You probably wouldn't want to jump into the business of selling medical equipment if you didn't know much about it and I believe that oil and gas is far more complicated. I believe that this means that you need to do much research. You should probably hire someone to help you but that will not excuse you from learning something about the business because you need to know enough to make sure that whoever you hire does a good job. Eastern MT is telling the truth that the usual "good" offers are 1/5 to 1/3 of the value but many offers are far less than this value. If you sell, you only get one shot at this and you must make it count. When you have a good idea of what your minerals are worth, you should list them for sale or lease and solicit many offers. I also would not sell the minerals while they were under lease because I believe that a lease diminishes the sale value to anyone who would rather participate in the drilling of any wells. Your lease could also diminish the value to anyone who may intend to lease your minerals themselves because they could get a lease at better terms than you could. Clear title and unemcumbered, your minerals will have their maximum worth. You make your own luck in oil and gas by being informed, that said I wish you the best luck possible.
I am starting to do some research, and wow there is a lot to learn! Thank you!
r w kennedy said:
Cassie, it sounds like you have assets of substantial value and the lease or sale is business, and evidently business that you know little about. You probably wouldn't want to jump into the business of selling medical equipment if you didn't know much about it and I believe that oil and gas is far more complicated. I believe that this means that you need to do much research. You should probably hire someone to help you but that will not excuse you from learning something about the business because you need to know enough to make sure that whoever you hire does a good job. Eastern MT is telling the truth that the usual "good" offers are 1/5 to 1/3 of the value but many offers are far less than this value. If you sell, you only get one shot at this and you must make it count. When you have a good idea of what your minerals are worth, you should list them for sale or lease and solicit many offers. I also would not sell the minerals while they were under lease because I believe that a lease diminishes the sale value to anyone who would rather participate in the drilling of any wells. Your lease could also diminish the value to anyone who may intend to lease your minerals themselves because they could get a lease at better terms than you could. Clear title and unemcumbered, your minerals will have their maximum worth. You make your own luck in oil and gas by being informed, that said I wish you the best luck possible.
Thank you, could you give me any direction on how to find the professional landman to help us?
Eastern MT said:
Cassie, Companies regularly send out offers to buy minerals. Typically (though not always) the amount offered is 1/5th to 1/3rd of the real value. They are seeking people who are either unaware of the real value, or who have a dire need for cash now.
If the unsolicited offers on your minerals range between $200,000 and $2 million you have homework to do. The high offer may be fair, or it may be a come on to get you tied up. I'd suggest you seek some professional landmen in Ohio to perform a formal appraisal for you. They should be able to determine what current production is and assess the likelihood of future drilling. I'm unsure of the cost but it may be a fraction of what you might potentially "leave on the table" if you just go with the offers in hand. If nothing else you're buying some peace of mind. Don't be in a rush to sell. Make sure you're getting a fair deal and are comfortable with the decision. Good Luck.
Another thing you may want to consider is that you may not really know what they are worth, and based on some of the offers, the offerors aren't sure either. I think some of the replys you got here are interesting, and meant to help you, but there are always going to be things that you can't calculate, such as the actual productivity or the longevity of a well that hasn't been drilled yet. The offer of 2 million may not be fair at all. It's also possible that the offer is way too high. It's not as easy as figuring out how much a house is worth. You can hire a pro, but in the end it will just be an opinion or educated guess on their part. No one has a crystal ball where it comes to the value of minerals.
The world is filled with people who wish they had done this, or wish that they had done that. You don't need to wish. You can be an instant millionaire. The buyer may or may not recoup their investment. You can follow the advice here and proceed with caution. That may or may not inure to your advantage. The high offer may be taken off the table. Good luck.
One last suggestion. If you feel like paying a pro, don't tell him about the offers. It may influence what he tells you they are worth. Just wait and see what he comes up with. If he tells you they are worth 1 mil, it will be up to you to come clean with the mineral buyer. No, maybe you shouldn't do that.
Thank you
Dave Quincy said:
One last suggestion. If you feel like paying a pro, don't tell him about the offers. It may influence what he tells you they are worth. Just wait and see what he comes up with. If he tells you they are worth 1 mil, it will be up to you to come clean with the mineral buyer. No, maybe you shouldn't do that.
You're welcome. Is it a crap shoot? Hell yes..
If you do get a good offer that you like, I would sell only half and keep the other half.
Cassie, we own minerals in well over 100 counties in 16 states and would never consider selling acreage other than by utilizing an auction. That doesnt mean that I would advise selling. It just depends on your situation. That said, if you want to pursue that option we can help you weigh the pros and cons. Feel free to send a friend request if you would like.
What if the bids don't approach the highest offer that she has on the table? Can she say to the highest bidder, "No, that's okay, the two million sounded better?"
Most auctions have the option of setting a reserve price which could be done at 2 million or any amount. However, most auctions do charge for the listing (especially in reserve auctions) and a % of the sales price ranging from around 2 to 10% depending on the place of auction and sale price. I will say that $10,000/acre sale price sounds pretty nice for non-producing mineral rights! There are not too many places in the country where mineral rights go for that high!
Yep, and there could be zero bids at that reserve price.
No matter what someone says they were offered, they will still get the negative type replies.
Dear Ms. Strain,
There is some basic research that needs to be performed.
First is to find out if the properties lie within the boundaries of the Marcellus or Utica shales. Oil and Gas is like any other type of property. It is all about location and at what price a willing seller and a willing buyer are willing to transact.
Second is to find out what the lease positions are surrounding your properties. Also, activity in your Township and adjoining Townships.
Third, always assume the buyer has superior knowledge. He knows something that you do not know.
There are ways to sweep some of your chips off the table -- depending on your immediate financial situation -- and strategies can be developed to maximize your upside potential.
You have to be careful as well to not always be so careful that you miss out on a good opportunity.
She has more than one offer, and one offer does seem high. $10,000 an acre.
Don't overanalyze it. Hire three "pros", and you will most likely get 3 different opinions.
Go ahead and sell. Keep the family farm. Invest the 2 million wisely and watch it grow.
Definitely put some into the stock market right now. It's at an all time high.
Don't always assume that the buyer knows some big secret that you don't. Many buyers buy because that's the business they are in, and want to get a position in different areas. It's called trend buying.
Quite often it is hit or miss. A 2 million dollar check signed over to you is a hit.
Take the offer.
For everyone in these discussions....
Do NOT do business with Ferrell Oil out of Oklahoma City. We had an offer to purchase minerals in Grady County, 11-03-06. Jim Meyer with Ferrell said he represents a college endowment fund and wanted to purchase our property for the school. We negotiated a purchase contract with them and was asked to fax it to them with our signature so they could show it to the school to get funding to close the purchase. He said it would take 30 days to do a title opinion. They, however, never did sign the contract and return it to us.
As it turns out, they are a broker and do not purchase property for their clientele rather than look for a buyer once you agree to sell to Ferrell Oil. They will want to issue you a 30 day bank draft and if they can't find a buyer for your property in those 30 days, they just don't pay the draft. We negotiated to be paid by ACH/Wire Transfer.
We will find another buyer but DO NOT do business with Ferrell Oil out of Oklahoma City unless you want to sit around, be lied to and then never get the deal closed.
Also be wary of them doing business under another name.
Thank you!
M. D. Wood said:
For everyone in these discussions....
Do NOT do business with Ferrell Oil out of Oklahoma City. We had an offer to purchase minerals in Grady County, 11-03-06. Jim Meyer with Ferrell said he represents a college endowment fund and wanted to purchase our property for the school. We negotiated a purchase contract with them and was asked to fax it to them with our signature so they could show it to the school to get funding to close the purchase. He said it would take 30 days to do a title opinion. They, however, never did sign the contract and return it to us.
As it turns out, they are a broker and do not purchase property for their clientele rather than look for a buyer once you agree to sell to Ferrell Oil. They will want to issue you a 30 day bank draft and if they can't find a buyer for your property in those 30 days, they just don't pay the draft. We negotiated to be paid by ACH/Wire Transfer.
We will find another buyer but DO NOT do business with Ferrell Oil out of Oklahoma City unless you want to sit around, be lied to and then never get the deal closed.
Also be wary of them doing business under another name.
Cassie I am in the never sell my minerals camp, the reason is I don't have a clue. For me I would rather keep it and gamble insted of wondering if I made a mistake selling. Once it is gone it is gone.