I currently own 25.7 mineral acres in Howard County, Texas that lies within the Wolfberry play. I have a lease that covers 5000 ft and below with a company that has just apparently started drilling (just prior to the expiration of my 3 year lease). I have been receiving offers to purchase these mineral rights from me, and I'm looking for a little guidance if possible. I have a 1/4 royalty contract in place at this time on the future production of this lease, and the initial offer of $3500/mineral acre seems low with all the activity and projections that I have been able to see/research out of this play. Since this well is currently non-producing I understand that it is more of a gamble for the company offering to purchase these rights if my logic is correct. I'm just looking to see if anyone has any insight as to what a ballpark, reasonable, and fair price per mineral acre that I should counter with would be? I was already told by the company making the offer that there is "room to negotiate" from the initial offer. Thanks for any advice that you can provide.
Legal Descripton:
Sec 21
Blk 34
Twn 1N
There are actually 2 leases I have on this property, Surface to 5000, and 5000 and below. I'm only referencing the 5000 and below in my question becuase that it what the offer is specifically for.
Brandon-
Of course it depends on what kind of well they get. Here is an article that gives some hypothetical calculations for a small tract like yours. Generally, if they get an average Wolfberry well, it will produce much more than $3500/acre in royalties. The question is how much you want to "de-risk" and how badly you need the money now instead of on a 20+ year payout.
http://www.mineralrightsforum.com/profiles/blogs/i-may-own-minerals-so-now-what
Mineral and Royalty buyers never offer anywhere near what they are worth. Most of the time they already have "inside information" about a well or minerals in that area.
Get them to email you and send you a hard copy of the document they want you to sign. It will reveal a lot more.
In a lot of cases it takes several months to get your money. Why not wait and see what your first 3 to 5 monthly checks are going to be and then decide from there. You will regret sell these if you do, no matter what the price. Have you ever tried to buy mineral rights? Just don't screw yourself and sell you will regret it!
Brandon, I would go farther and suggest that it would be best to collect the royalty until production stabilized, possibly a year or more down the road. The amount per acre offered to buy my acres has increased, while I have been collecting the first fruits, best production from my wells over the last two years, the implications of that should be obvious. I think the buyers are after all the oil underground and just because you collected a little bit of the royalty from producing one formation, they aren't going to refuse to make money from buying your acres. They can be silly, but not that silly. The offers keep coming whether you want them or not., even after you have collected some royalty.
Brandon, RW's advise is on the right track and I will go even further, without production, your minerals have only speculative value and that only to people who know a lot more about the future value potential than you may know unless you are in the business. With no production now, you have nothing to loose by holding. You can only gain at this point. A year from now you could be smarter than the buyers as you will have some idea of potential future value and can equate that to the alternative of giving it up and selling (or a little of both) . Your family members will also be a lot smarter and maybe come good partners rather than competitors. You will also know a lot more abut your future cash needs and can capably put that into your decision. In an auction without information that is solid, you will only get the best of the worst set of risk evaluated numbers from buyers. Fairness to you or your family will have nothing to do with the offers unless you make the asking price includes your needs and desires.
Contact me in a year, mineral deals is almost all of what I do when I'm not playing.