I own small acreage mineral rights in Blaine County and recently received a letter from Myrick OK Minerals of Oklahoma City. They are interested in purchasing (not leasing) my mineral rights. Anyone have any information on this company and/or selling mineral rights in general? For example, I leased my rights to Marathon Oil a few years ago for $1200 an acre for 3 years. That lease is now up. If that would be a fair price for leasing rights, what would a fair price be for selling instead? What if a company is willing to pay $3000 or $4000 per acre to lease for 3 years, what would a fair price be to sell instead?
3 x the annual lease is the classic landman method. I see very few sales that are over $3,000 per acre and lease offers tend to be pretty low currently - $600-800 even less. But the attached is $5,100 an acre and was recorded only days ago.
You can go to the courthouse and check. Deed stamps are $1.50 per $1,000 of transaction value. If a deed shows the net mineral acres (say 40) and the deed stamps are $120.00, then $120 ÷ $1.50 = 80. 80 x $1,000 = $80,000 and 40 ÷ into that is $2,000 per acre
Hypothetically, let's say the annual lease offer is $1000 per acre. I guess I don't understand why I would sell the rights for $3000 per acre when I could lease it for $3000 ($1000 x 3 year lease) per acre, retain royalty rights, and potentially do it all over again every few years? What am I missing?
there are assumptions that may not pan out. The price may not be $1000/acre. Dry holes may get drilled and parties lose interest in the area.
or a marginal well gets drilled that pays you less than $100/year.
Oil goes down to $42/bbl ( oh, I guess that one has happened).
Whether to sell or not is a personal decision. But, I don't think you can count on leasing at $1000/acre every three years from now on.
I think you missed the point. If I'm offered the same price to sell the rights as lease them for 3 years, why would I sell? If I lease for 3 years and never make a penny in royalties and nobody ever leases them again...what have I lost by not selling? Nothing if 3 X the annual lease is the classic purchase offer. So, again, what am I missing? Why would anyone ever sell under those terms?
Jerry, you can't find anyone that would pay you $1000 per acre a year to lease your minerals. If someone is offering you $1000 acre for a 3 year lease, that $1000 is for all 3 years.
You are correct, I missed the point. If one were to offer the same price for a lease as a purchase, you should lease instead. But, as Jordan points out, a lease offer of $1000/acre is only $1000 an acre, not $3000.00.
Jordan, it was just a hypothetical number picked out of the air for simplicity sake to ask why one would sell the rights for the same amount as a 3-year lease since Mr Shields said "3 x the annual lease is the classic landman method". Make it $400 an acre if you like. Why would I sell the rights for $1200 an acre, if someone is willing to pay me $1200 an acre to lease for a 3-year period? I would miss out on any royalties if the land produces, and never be able to lease/sell again since I would no longer own the mineral rights.
You've answered your own question several times. Attorney's love people like you who pay them/hour to tell them what to do, and then end up doing what they originally wanted to do. Or, did I miss your point?
I'm not the mineral rights expert here, Pat. Someone is interested in purchasing my rights, and I was trying to figure out what a fair purchase price would be in relation to what I've the leased the rights for. When I'm told here by someone that it should be about the same price either way it leaves me wondering why anyone would sell under those terms as opposed to lease. I figured I must be missing something but perhaps not. I'm not sure what you think I "originally wanted to do" since I don't even know that, except for making a prudent decision.
You are indeed missing something.
You didn’t say how many acres you had in original post, which adds some confusion. However, assuming you have one acre and you lease it for $1,200 an acre, on a three-year lease, that would be $1,200 for three years, not $3,600. Get it?
Thank you, Jordan! What am I missing?
Yes, I get it Linton. The original reply to my query said "3 x the annual lease is the classic landman method" for purchasing . Would that not also be $1200 an acre in the situation you just described?
Linton Tomlin said:
You didn't say how many acres you had in original post, which adds some confusion. However, assuming you have one acre and you lease it for $1,200 an acre, on a three-year lease, that would be $1,200 for three years, not $3,600. Get it?
I’m thinking, in that scenario, it would be $1,200 x 3 = $3,600 for the purchase.
Thanks for clarifying. That would make a little more sense. So it's really not "3 x the annual (1-year) lease" but really 3 x the 3-year lease, or, in other words 9 x the annual (1-year) lease price.
Linton Tomlin said:
I'm thinking, in that scenario, it would be $1,200 x 3 = $3,600 for the purchase.
Hummmmm, okay, I keep seeing this question/miscommunication over and over, and it is confusing in the beginning. And I’m not good at explaining things, be glad you’re not asking me directions! Let me see if I can get you to do some work here. You tell me what the total would be for a two-year lease for three acres @ 1,000/net mineral acre. And what a three-year lease would be @ $1,000/net mineral acre! Linton
Look at it as how long the lease is going to tie up your property if they don’t drill…Linton
Yep, Tom Ed is right! I’m not selling unless it’s my last option, and maybe not even then! Linton