We closed on a transaction last week on interest in Reeves county. Received $13,100/nma. The transaction price came in right in line with the 3-4x royalty rate rule of thumb. What we received via auction was 80% premium to the highest letter we had received cold.
We used a broker, Lee Caple. His website: https://capleroyalty.com.
I had a client that wanted to sell their mineral rights.
Closing was at $37,500 per nma
Buddy,
Do you mind disclosing the name of the company that paid the $37,500 per nma? Call me crazy, but I have a very hard time believing that statement is accurate. Yes, there are transactions taking place for that type of money, but those transactions are leasehold transactions in which the purchaser is acquiring leasehold rights as well as production that brings along great PDP value. Purchasing an individuals mineral rights and paying $37,500 is not only difficult to believe but borderline blasphemy. However, I certainly hope that you can prove me wrong!
I look at what the well has paid out in about 16 months, knowing the first year is usually the most prolific and then extrapolate that out to 20 years. I don't see how anyone would make a reasonable return on buying at that kind of price. What am I missing
Further investigation confirms the large amounts are for real. Lots of considerations if one decides to sell all or part of their holdings.
Pretty much a given that the amounts being offered in the mailings are lower as it's just one buyer. Working with brokers, such as mentioned in this thread already or with outfits like the US Mineral Exchange, exposes the rights to multiple possible buyers depending on the broker and their contacts. Fees through brokers for the sale can run anywhere from 6 to 10% depending on the broker.
The low ball offers are just fishing for the one in a thousand who foolishly bites, the profit for the buyer is huge and makes it well worth sending out thousands of letters.
There is room to put dozens of wells in a section.
David,
Can you explain what you mean by "3-4x royalty rate rule of thumb"
thanks
FYI, I have passed up $25K per acre a couple of times now.
Hey, , Stephen, long time since I’ve seen you around. Would you mind refreshing us with where those properties are located! Sure would appreciate it. Linton
I should add that I have production on my acreage, so the "high" number is not for an undrilled tract.
Section 258, Blk 13, about 9 miles south of Pecos. Oxy is our operator, fyi.
Thanks Stephen! Linton
I did some calculations based on Resolute's investor presentation. (http://www.resoluteenergy.com/downloads/April%202017%20IR%20Presentation.pdf)
The PV10 for a long-lateral Delaware Basin type well is $18 million. This assumes a drilling cost of $8.5 million and uses the Dec 30 strip price. This means the value of the revenue is $26.5 million (18 + 8.5). 25% of that figure is $6,625,000 (assuming 25% royalty). If the unit is 1280 acres, the value per nma is $5,176 for a single well in the unit. The plan is to drill 16 -24 wells in the unit. Using the lower number of 16 wells, the value per nma is $82,812 ($5,176 per nma per well x 16 wells). The overall PV10 would be lower depending on how soon the additional wells are drilled, but these calculations show why someone could easily pay more than $25,000 per nma (or more).
That area is worth significantly more than $1,300/NMA. You might try reaching out to the forum sponsors to see what prices they've seen in that area. http://marketplace.mineralrightsforum.com/ad-category/minerals-management-consultants/
Oh my goodness, I meant to type 13000. an acre!! Oops! Jamie
Take a look at the development plan at the investor presentation link I provided.
Yes, one can't put dozens of well side-by-side at the same depth, but they are staggering them deeper in the formation.
It's called a "wine rack" since the cross section perpendicular to the axis of the horizontal wells appears as bottles of wine in a rack. The plan is for two rows of 8 in the Wolfcamp A and one row in the Wolfcamp B.
I, too, was very surprised when I first saw the plan, but that is what they've begun to do on our acreage in Block 2.
It's quite a change from earlier development programs. My engineer friends tell me that it's partly a result from newer fracking using slickwater (little guar or gel) that creates a higher concentration of fractures nearer the wellbore. There is less interference between wellbores so they can be closer while still maximizing production efficiency.
This type of development won't work everywhere, but as a mineral owner, I'm very happy to see the progress that has been made in the last couple of years. EUR estimates are much higher now, and, in the future, we'll see more discoveries such as EOG's recent well across the river in Loving County that might double the typical EUR previously seen in this region of the Delaware Basin. Another operator acquired nearby acreage last year at an average price of $37,000 per nma. That price is now seen as a bargain.
The family has mineral rights in Reeves Co Block 13 Section 289. Is there anything going on in this area? Has anyone had any lease offers lately? Thanks for any information. Karen
Karen,
I see no new permitted locations on the GIS Map for your area at this time. The well 33638 in Section 305 was completed in Sept. 2013. Completion Report showed 564 BOPD/697,000 cubic feet gas per day. Link to Production Data on well 33638: http://webapps2.rrc.state.tx.us/EWA/specificLeaseQueryAction.do?tab=init&viewType=prodAndTotalDisp&methodToCall=fromGisViewer&pdqSearchArgs.paramValue=|2=03|3=2016|4=02|5=2017|103=44764|6=O|102=08|8=specificLease|204=district|9=dispDetails|10=0
GIS Map of Reeves County Section 289/Block 13/A-333:
Clint Liles
Thanks Clint. I appreciate your response.
