Our family mineral trust has approximately 1,000 mineral acres scattered across the Permian Basin. We are considering selling all or some of these mineral interests. They are located in Reeves, Ward, Winkler, Loving, Pecos, Midland and Crane Counties.
What is the best way to proceed in a situation like this? Naturally, we want to get top dollar.
We have gotten dozens of unsolicited offers through the mail. I realize those are most likely brokers and middlemen.
Many thanks for any advice or guidance.
The advice of never to sell is not sound advice. No one knows your situation better than you. You have to take into account how will there be production or how much is it now producing. If there is no production how long are you willing to wait, if there is production long will it take to produce what the offer is.
Always try to deal with a company or individual who is dealing in an arms length transaction.
Suggest you inventory the properties as to where they are by County, Block and Section. If in production or not. Find a local investment banker who works in oil and gas investments, and have several review the portfolio to determine what their opinion of an auction would bring.
If you mean 1000 net mineral acres, I would advertise a package that large. The advice about starting with an inventory is a good one. If you are determined to sell it all, then you may want to avoid letting buyers cherry pick the best properties. There are several sites that advertise packages.
As for the selling/not selling debate, I think there are three broad categories when you should consider selling:
1) you need the money;
2) you need to diversify your assets into things other than minerals;
3) you have a small number and size of mineral properties and do not want to invest the time in it to learn how to mange them (not applicable to you, sounds like).
I am not in favor of trying to time the market. If you look at the 100 year history of mineral values, the arrow is a pretty consistent up.
Thank you for all the replies, Gentlemen.
Here is what I have been told by numerous people who have contacted me in this regard;
1. While there are hundreds of brokers/middlemen, there are only 5-6 equity firms that are actually doing the buying; and
2. We should only let one broker show the deal around. I was told that if the end buyers see these properties from more than one source, they will "get scared" and it will lower the price.
Are those accurate statements?
Once again, thank you for all the feedback. This is a huge decision for us and we want to make all the right moves.
Paul,
It definitely would be good to limit the ways it gets shopped to the end buyers to expedite the process. Middlemen/brokers often over-commit to whether they can deliver a property and so a buyer may see it from multiple sources and they have to flesh out who can actually deliver the deal. This may cause confusion and issues with the buyer based on their trust level with the broker, but I wouldn't say the buyers would get scared and lower their offers. I tell my land management students all the time--the answer is almost always "it depends". In this case, it depends mostly on the size (both gross and net), location (both geographic and depth), status (open or leased), type (100% fee rights, subject to NPRI burdens, etc), and activity (are there existing permits on the lands or in the area) of your property. The most important thing you can do is to feel comfortable with the broker that they are going to provide you counsel to get what you truly want and help get the best price without pressuring you into taking an offer just so they can get paid. Many brokers get paid by taking the price you are willing to take and shopping it to their buyers at a different price. This gives them room to negotiate on both ends. Others take a commission (paid by either the buyer or the seller) based on a percentage of the total price or a flat fee per acre. I personally prefer to set a price that the seller is happy to sell at then split any profits over that amount. It incentivizes the broker, makes the seller feel they are getting at least what they wanted, and the buyer is happy to pay the total price all-in (no separate fee to the broker).