We are new to the forum. My wife recently inherited a little over 10 acres of mineral rights in Blk 1 Sec 37. It has one horizontal well that just started producing. It averaged about 300 barrels of production per day in July. The rights have been leased. We have just been offered $13,750/acre to sell. We are trying to figure out if it would be better to keep all of the acres or sell part. Any opinions on whether to sell or not and on the offer would be much appreciated.
Have you compared the offer to the royalty payments you have gotten, if any? Also, need to see if you own more "gross" acres, which raises the issue of whether they might be able to drill more wells. The area is also a "stacked" play, meaning they may be able to drill multiple wells in the future at different depths.
In short, the general wisdom is don't sell minerals unless you need the money, or need to diversify your assets. If you have to sell, see if you can only sell the royalty in this one well and keep the minerals on future wells.
based on my recent experience in Reeves and without investigating the potential of the well and future development of Sec. 37, I think the offer is but a minor amount of its true value at sale and depending on the operator's technical ability and plans, a minuscule part of future value of the lease.
Congratulations. Best do some value research before considering a sale.
We have only received one royalty check so far and it was less than $1,000. The next one should be higher. Between the legal work the last time we went through leasing the rights and the estate, I'm pretty sure that these are the only minerals we own. It started out as 200 acres many years ago and has steadily been split among the heirs.
I had read a little about the "stacked" play. Any idea how many layers there are in that area. Right now they are pumping out of the Wolfgang.
Thank you for your reply. The more I try to educate myself about mineral rights, the more confused I seem to get. Anadarko is the operator of the well so I would think that they know what they are doing.
There is room in this section for quite a few Wolfcamp wells. The Wolfcamp formation is thick. So some wells will be drilled at the same depth, while others will be drilled in deeper depths. You could eventually see 8 or more wells. Anadarko is in the Permian for the long run.
- Don't look a gift horse in the mouth!
- If you can't afford to pay your mortgage or buy next week's groceries, and are close to applying for indigent status, then consider selling.
- Do you think that someone who wants your asset is going to make you an offer for what the asset is actually worth?
Good luck,
Pat
Thank you everyone for your help and opinions. After all of the responses, we have decided to hold on the the rights.
wise choice!! i am in same boat with acreage in Loving County
Mr. Tutt,
This is a very hot area, so please do not sell them without fielding a lot of offers if you really need the cash. I think that ~$10k to ~$20k per acre is usually a solid offer, but you will be getting large royalty checks for the next few months off this new producer. A lot of private equity mineral buying firms are being pressured to overpay right now. You could always sell half and keep the other half (hedge your bets a little). If you aren't in a pinch for the cash, I advise you hold on to them and see what happens! Congratulations!
Jimmy Wright, CPL, CMM
I too have mineral interests in both Reeves and Loving County. Block 33, H&TC Railway Company Survey, Loving County and Block 3, H&GN Railway Company Survey, Reeves County. I don't know if its in Reeves or Loving County, but I've read of mineral rights sales in excess of $40,000 per acre. Is it possible to get that much in Reeves and/or Loving? I've come to believe a lot of the offers that come through the mail are companies wanting to buy low and flip the rights. Who are they flipping to? Who would be a good resource to engage for an offer on our mineral rights? Thanks in advance.