Mineral Values

My Mother is getting offers to buy her 53 nma in converse county. She is 85 years old and the land has been leased but no income other than bonus for 50 years. She is a never sell anything mentality, but has asked us to help her figure out if it might be smart to sell and if so how do we figure out what the right price would be?

Sec 13 E/2 W/2, W/2 E/2 Township 33N R69W, 6th PM

Might be wise to talk to her accountant. If she sells, she may have capital gains tax. If she passes the minerals to the next generation by her will, then the next generation may have a more favorable tax situation. If there are offers to buy, then you need to find out if drilling is pending then the royalties may be more valuable than the purchase offer.

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This map shows your Mother’s minerals in yellow. This isn’t the hottest area but there are still wells being drilled. The closest well to the west were drilled 5-6 years ago and aren’t that great, but the longer wells just to the NE and North are only about a year old and look pretty decent. Anadarko has several permits to drill under these minerals. I assume the minerals are already leased? I would think they would be. You don’t say how much has been offered, but here is a quick and dirty way to look at this:

Spacing Unit Size = 1280 acres

Spacing Unit Participation = 53/1280 = 4.14%

Royalty Percentage = 15%

Recovery/well = 350,000 bbls

Royalty/well = 350,000 x 4.14% x 15% = 2,174 bbls

There could be as many as 4 wells eventually drilled in the Unit, so the minerals might generate more than 8,000 bbls of oil over the life of the wells which would be 20-30 years.

At $50/bbl that would be $400,000 or $7500/acre.

Before you go out and spend that money, let me point out the following:

  • Exactly, zero wells have been drilled on the minerals thus far
  • There is no guarantee that any will ever be drilled. Way more wells are permitted than drilled.
  • There is no certainty as to how much oil the wells will produce if they do get drilled.
  • There is absolutely no way to predict what the price of oil will be.

This is a classic “Bird-in-the-Hand” scenario and you should consider your options carefully. Given the potential value involved, you should really consider engaging a qualified professional to help you with your decision.

PETRA0124132258.pdf (67.0 KB)


Thank you everyone for you help! I truly appreciate it.