Mineral Rights Appraisals

General Mineral Rights Discussion
1

My sister and recently inherited some mineral rights from our Mother. Our accounts are telling us we need to have them appraised. Does any know how this is done? Any help will be appreciated.

2

Doug:

First, you did not state if the appraisal involves "leasing" or "selling" these mineral rights. I would recommend that you do not consider selling these minerals. The monetary worth of mineral rights depends on various things such as the location of the minerals, is the minerals located in a "proven" area where successful wells have been drilled. You might also contact some of the individuals who have minerals in your area in order to find out what they are leasing for. There are various posts on this forum that contain good advice on leasing in regards to lease contents. Again, one of the main things is where your minerals are located.

3

Dear Mr. Carney,

For estate tax purposes, your accountant needs to have the value of the minerals appraised as of the date of death of your Mother. Charles Mallory talked about leasing value but that is totally irrelevant as to what is needed. Your accountant needs the value for an arms length transaction for selling the minerals between equally motivated buyers and sellers so that your accountant can perform a proper inventory of the estate.

This is not a do-it-yourself situation. You must have someone appraise who has credentials that will stand up to scrutiny from the Feds.
4

Thanks for your reply Charles, These mineral rights have been in our family for 20 + years and have been very productive. We don't intend to sell these rights, we just need to have them appraised so the value can be included in the total estate valuation of our Mothers estate. They are located in Weld and Morgan Counties in Colorado. Do you happen to know of anyone in the area we can contact to complete the appraisal?

Thanks,

Doug

charles s mallory said:

Doug:

First, you did not state if the appraisal involves "leasing" or "selling" these mineral rights. I would recommend that you do not consider selling these minerals. The monetary worth of mineral rights depends on various things such as the location of the minerals, is the minerals located in a "proven" area where successful wells have been drilled. You might also contact some of the individuals who have minerals in your area in order to find out what they are leasing for. There are various posts on this forum that contain good advice on leasing in regards to lease contents. Again, one of the main things is where your minerals are located.

5

Mr. Cotten, That is exactly what I'm looking for. As I said in my reponse to Charles Mallory, we are looking for someone in the Colorado area that can complete the appraisal. Do you or anyone else out there know of someone we can contact?

Thanks,

Doug

Buddy Cotten said:

Dear Mr. Carney,

For estate tax purposes, your accountant needs to have the value of the minerals appraised as of the date of death of your Mother. Charles Mallory talked about leasing value but that is totally irrelevant as to what is needed. Your accountant needs the value for an arms length transaction for selling the minerals between equally motivated buyers and sellers so that your accountant can perform a proper inventory of the estate.

This is not a do-it-yourself situation. You must have someone appraise who has credentials that will stand up to scrutiny from the Feds.

Best,

Buddy Cotten

www.cottenoilproperties.com

6

Doug:

I am sorry, but I can't help you in regards to contacts in that area. I'm sure someone on this board can give you some helpful information. Good luck!!

Doug Carney said:

Thanks for your reply Charles, These mineral rights have been in our family for 20 + years and have been very productive. We don't intend to sell these rights, we just need to have them appraised so the value can be included in the total estate valuation of our Mothers estate. They are located in Weld and Morgan Counties in Colorado. Do you happen to know of anyone in the area we can contact to complete the appraisal?

Thanks,

Doug

charles s mallory said:

Doug:

First, you did not state if the appraisal involves "leasing" or "selling" these mineral rights. I would recommend that you do not consider selling these minerals. The monetary worth of mineral rights depends on various things such as the location of the minerals, is the minerals located in a "proven" area where successful wells have been drilled. You might also contact some of the individuals who have minerals in your area in order to find out what they are leasing for. There are various posts on this forum that contain good advice on leasing in regards to lease contents. Again, one of the main things is where your minerals are located.

7

Thanks Charles.

charles s mallory said:

Doug:

I am sorry, but I can't help you in regards to contacts in that area. I'm sure someone on this board can give you some helpful information. Good luck!!

Doug Carney said:

Thanks for your reply Charles, These mineral rights have been in our family for 20 + years and have been very productive. We don't intend to sell these rights, we just need to have them appraised so the value can be included in the total estate valuation of our Mothers estate. They are located in Weld and Morgan Counties in Colorado. Do you happen to know of anyone in the area we can contact to complete the appraisal?

Thanks,

Doug

charles s mallory said:

Doug:

First, you did not state if the appraisal involves "leasing" or "selling" these mineral rights. I would recommend that you do not consider selling these minerals. The monetary worth of mineral rights depends on various things such as the location of the minerals, is the minerals located in a "proven" area where successful wells have been drilled. You might also contact some of the individuals who have minerals in your area in order to find out what they are leasing for. There are various posts on this forum that contain good advice on leasing in regards to lease contents. Again, one of the main things is where your minerals are located.

8

There are several methods acceptable to the IRS. I use them both in my appraisals and allow the CPA to select the one that he wishes to use.

Doug Carney said:

Mr. Cotten, That is exactly what I'm looking for. As I said in my reponse to Charles Mallory, we are looking for someone in the Colorado area that can complete the appraisal. Do you or anyone else out there know of someone we can contact?

Thanks,

Doug

Buddy Cotten said:

Dear Mr. Carney,

For estate tax purposes, your accountant needs to have the value of the minerals appraised as of the date of death of your Mother. Charles Mallory talked about leasing value but that is totally irrelevant as to what is needed. Your accountant needs the value for an arms length transaction for selling the minerals between equally motivated buyers and sellers so that your accountant can perform a proper inventory of the estate.

This is not a do-it-yourself situation. You must have someone appraise who has credentials that will stand up to scrutiny from the Feds.

Best,

Buddy Cotten

www.cottenoilproperties.com

9

Is this something you could do for us?

Buddy Cotten said:

There are several methods acceptable to the IRS. I use them both in my appraisals and allow the CPA to select the one that he wishes to use.

Best,

Buddy Cotten

www.cottenoilproperties.com

Doug Carney said:

Mr. Cotten, That is exactly what I'm looking for. As I said in my reponse to Charles Mallory, we are looking for someone in the Colorado area that can complete the appraisal. Do you or anyone else out there know of someone we can contact?

Thanks,

Doug

Buddy Cotten said:

Dear Mr. Carney,

For estate tax purposes, your accountant needs to have the value of the minerals appraised as of the date of death of your Mother. Charles Mallory talked about leasing value but that is totally irrelevant as to what is needed. Your accountant needs the value for an arms length transaction for selling the minerals between equally motivated buyers and sellers so that your accountant can perform a proper inventory of the estate.

This is not a do-it-yourself situation. You must have someone appraise who has credentials that will stand up to scrutiny from the Feds.

Best,

Buddy Cotten

www.cottenoilproperties.com

10

Doug, I do this sort of thing on a large scale (tens of millions to hundreds of millions $) using geologic reserves, well decline curves, and product price projections applied to economics through discounted cash flow and internal rates of return… I have also been classified as an expert in mineral economics… You may not need any of this depending on the scope of your holdings… Give me a call if you want and perhaps I can make this very easy and simple for you and your CPA, GARY HUTCHINSON 303-279-4113

11

Thanks Gary. I’ll try and connect with you today.

Gary L. Hutchinson said:

Doug,
I do this sort of thing on a large scale (tens of millions to hundreds of millions $) using geologic reserves, well decline curves, and product price projections applied to economics through discounted cash flow and internal rates of return..
I have also been classified as an expert in mineral economics..
You may not need any of this depending on the scope of your holdings..
Give me a call if you want and perhaps I can make this very easy and simple for you and your CPA,,
GARY HUTCHINSON
303-279-4113
12

I understand it is better to appraise the mineral rights before production begins, their are just looking for the value for estate tax purpose. If its not producing the appraisal will be low regardless of lease status, you cant appraise the unknown. It is what it is, unproven mineral rights.

13

Thanks for your comments DeeAnn, these wells have been producing 25 - 30 years so they have an established track record. We just need an appraisal to establish the cost basis at the time of our Mothers death so we can close out the estate.

Doug

DeeAnn Solberg said:

I understand it is better to appraise the mineral rights before production begins, their are just looking for the value for estate tax purpose. If its not producing the appraisal will be low regardless of lease status, you cant appraise the unknown. It is what it is, unproven mineral rights.