My brother and I leased 3 interests in Anderson County last month. This week we have an offer to buy. The total acreage is 25.82 and we are being offered $40k. Input would be appreciated.
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What is the location of your mineral interests (survey name and abstract number)? Who are you leased with?
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Our family minerals in Anderson have gotten a lot of attention with lease and offers over the last few months. I’d say that’s about the range we have been seeing on a price per acre basis.
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The latest lease offers in the Expand/Mitsui target areas are including bonuses exceeding $1,000 per NMA.
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Nice offer numbers.
But still low in the whole scope things. Confirmed sales of minerals in Nacogdoches County earlier this year were over twice that amount per NMA. That was in a proven and previously drilled HV Hz area.
And during the HV boom several years ago, offers were over $10,000 per NMA
Whoever is trying to buy minerals here is looking to get in early. And hope that mineral owners will grab the money now instead of sitting and waiting to see if a well will be drilled.
Quick math shows a 30 BCF well would be kicking off total unit (640-700 acres) royalties (assuming 25% royalty, $2.50 gas and cost-free lease) of over $25,000 or more per NMA.
But it would take many years to get this revenue.
So, do you sell and take money today? Or hold, hope that well is drilled (and it could be several wells per drilling unit or may never happen) and take the money over a long term (i.e. 15-25 years or more)?
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I think you are exactly correct rock_man, is a time/value money question. It’s also a willingness to gamble on if the play actually works out or not. No one ever said you can’t also counter their offer and see if they willing buyer bites. Ah, the age old question…To sell or not to sell!
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Thank you for replying. The surveys are A-551, A-263 & A-1098. They are leased to Vanna. Thanks for your help.
Sorry, I forgot the survey names. A-551 is James Moore. A-263 is Robert Erwin. A-714 is Charles Stibbins and A-1098 is M.A. Davey. Thanks.
Those surveys are definitely in the Mitsui/Expand target area. If 25.82 is your net acres, then the purchase offer is about $1,500 per NMA. That is very low (see Rockman’s post above).
Vanna is leasing for Mitsui, but their drilling plans for the area aren’t known at this time. However, if one or more successful wells are drilled in your areas, then the potential is there to make a lot more than $1,500 per NMA.
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I’d say you could probably get closer to 2500-3k per NMA. Typically I believe the rule of thumb has been 3x lease bonus as a purchase price, but as Alan mentioned some places bonus prices are going for $1k + per NMA. I’m not sure what your lease bonus was as a price per NMA, but that should give you a rough idea. Hope any of this helps any!
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If they offered you that then it’s worth way more. If you can hold out do so. They ll come with a better offer
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You bring up the mineral sales in proven areas, what were the mineral sale amounts in unproven areas like the poster is talking about?
During the HZ Boom offfers in the proven area were $10k per acre, now down to $3,200 an acre, it takes a lot of gas to make up for that. You completely lost me with your math on the same acreage now being worth $25k an acre? If it takes 15-25 years of production to make money on the offer the company presents you, its not even a question at that point, you run to the bank, cash the check and invest it.
Mr. Herrington, Since our posts last week, the party making the offer has come up with additional interests, from a list I supplied, they want to offer on. They are A-548, A-714 & A-551 which was mentioned in the initial offer. Do you know if these new ones are in the same area? Also, should I try to hire a landman to help in the valuation?
If it cost 30 million dollars to drill and complete a Bossier/Haynesville horizontal well you could only drill about 33 or 34 of them with your Billion Dollars!
551 and 714 are definitely in the target area. 548 is southeast of Elkhart in the Salmon area. This location is considerably east of where Mitsui and Expand had been leasing, but Drake Exploration (leasing for Expand) just recorded some leases in the Salmon area last Friday.
Looks like whoever is giving you purchase offers is following the latest leasing trends.
What is the name of the company giving you these purchases offers?
True about cost to D&C a new well, but one also has to consider the per well cash flow at 30+ Million CF of gas per day and how that impacts future drilling costs.
Definitely big boy poker going on here!
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Mr. Herrington, I’d rather not say yet. However, interestingly, they raised their offer by $1k/acre today.
Dixie Lake, Horizon Minerals, and Palm Royalty have been purchasing mineral interest in Anderson County in recent months. It would be to your advantage to get at least two of them competing for your minerals if you are truly interested in selling.
Question: If a gas well (Bossier/Haynesville) is producing on a daily basis 35 MCF/Day with no decline (for calculating purposes). With gas at $4.00 and not taking out any expenses such as leases or paying any mineral or royalty owners calculating on Gross how long do any of you calculate that the payout would be? This is theory only?
I will add to the formula.
35 MMCF per day flat @ $3 gas price ($4 minus gathering costs / midstream costs) x 92.5% (taxes) x 87.5% (LOE / Operating expenses) x 75% NRI (25% royalty) gives you about $64,000 net to the operator per day.
At $25 Million D&C costs, this works out to about 13 months to payout.
Lots of moving parts in this very rough calculation. Biggest wild card factors are actual gas price for each MCF produced (after midstream related deductions) and NRI (each 1% NRI works out to $2000 per day in net revenue)
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