Newbie Seeking Help


#1

Hi There,
I am apparently being trolled by folks who want my deceased mother’s oil and gas interests. We apparently own the following:

Township 10 North, Range 60 West, 6th P.M. Section 13: SE/4 Section 23: NE/4, E/2 NW/4, NE/4SW/4, N/2SE/4, NW/4NW/4

…and have been made an offer for ownership of this holding. I am not sure how to determine whether the offer is a fair one, or whether to hold onto it for future. There was discussion of upcoming legislation in incorporated Weld County that might effect areas near Greeley, but this holding is farther north in the “Grover Extension.”

Questions to this forum: how to determine the value of all our holdings in the area (this is only a small portion) and who to contact to determine whether a sale is necessary at this point or do we hold on? I would love a recommendation for a petroleum engineer in the area who might be able to help me better understand the political and actual situation in the area?

Thanks for any advice you have.


#2

I understand, the rights that I have in Weld I have had for years. I am up North and for years to tie the property up I would get $500. for 5 years for a 1/4 section. Then all of a sudden it went up to $8000. for 5 years and now nothing.

So what is it worth? I have been offered $80 k for the rights a few years ago but we don’t need the money and how do you value something that doesn’t have an income.

.I traded for a bunch mineral rights parcels and we valued the parcel as rent value of one year times five

years so $500. Good as any value I guess.

I get letters all the time trying to buy one parcel or another. I consider the assorted mineral rights as a fun thing to have and someday I will leave them to someone younger so they can worry about the value.


#3

Value is often what a willing party is willing to pay–seeking multiple buyer can help determine that. The lack of updated title should not be a cause or reason to sell as most buyers will ask that title be updated before any sale.


#4

The value of your minerals are determined by the amount of recoverable resource that is in the ground. Many times the folks making offers don’t even know what the true cash flow value of the property is. My advice to anyone thinking about leasing, re-leasing, or selling their minerals, is to get a proper engineered valuation done on your property before you start negotiating. DO NOT assume what you are being offered is what your property is worth.


#5

I am a Treasurer of a church in CA that was given mineral rights in CO. They are currently leased, but the lease will be up in October of this year. I agree that a proper engineered valuation should be done, but how do I find a qualified, reputable person to do this? Do any of you have recommendations? We have had several offers to purchase the lease, we do not own the land.


#6

Hey Kaye,

We are one of the few companies that do engineered mineral appraisals for mineral owners. Most other companies will give you a value based on what they want your property to be worth because their ultimate goal is to purchase your property and then sell it for a profit. That isn’t what we do. We provide fully engineered and SEC compliant valuations for the client and in some cases, have partnered with the sellers to get them a better price. Our most recent deal earned the mineral owners over twice as much as what they were being offered. With your minerals possibly becoming un-leased in the near future, you may be in a very good position to re-lease or sell your minerals.

Craig


#7

If you are looking to sell, depending on the size of the minerals, getting an evaluation is probably a good tool when negotiating a sale. When just leasing your minerals, I don’t think you need to get an evaluation done. You are negotiating an up front lease bonus and a royalty rate along with lease language. Hire an attorney to represent you. You don’t need to have an engineered evaluation done for leasing your mineral rights. I don’t blame this guy for promoting his company, but in my opinion and I have dealt with hundreds of leases it is unnecessary to get a engineered evaluation to lease or re-lease your mineral rights. Hire a lawyer (local to the minerals) to negotiate a good per acre bonus price and a good royalty rate and he will also insure you have the right clauses added to your lease form.

Also, please read the tabs under “Mineral Help” at the top of the screen to get some tips on what to do and what not to do when leasing.

Best, Cam


#8

Many lawyers and attorneys use engineered valuations to determine what the lease bonus should be, as it is, or should be, directly correlated to the value of the resource that is being leased. We have seen engineered valuations significantly help numerous mineral owners that were specifically negotiating lease bonuses. However I agree that depending on the size of property, paying to get an engineered appraisal may not always make sense. Which is the problem with most traditional engineered valuations: they can be expensive. In my view it is absolutely worth while checking to see if getting a true valuation makes sense regardless of who conducts it.

Craig


#9

Using an “engineered” value will lead to a low valuation. You need a market valuation based on local sales or other means to supplement any “engineered” values. Sales are market value, production results are market value only when they enclude all property, not just the producing stuff. In areas where mineral rights were selling for $2,000 an acre, I saw just such an “engineered” valuation for less than $200 per acre. I recommend you call the Turrett Company in Denver, (I do not have any affiliation with them except to know one of their principals as a fellow appraiser, who is president of the Colorado NARO (Natl Assoc. of Royalty Owners) and his name is Rob Prentice


#10

Hey Terrel,

So far we have heard that engineered valuations both over- and under-value what people “think” the minerals should be worth. Which camp they are in usually depends on whether they are trying to buy or sell. As you are aware from your geologic background, the value of mineral resources can radically change over a short distance. Which means that an engineered valuation could identify properties that are worth far more (over-valued) or far less (under-valued) relative to the traditional, “I know what it is worth because I know what something nearby sold for a few months ago,” type of valuations. In our opinion, speculators either over-bidding or under-bidding should not be what a mineral owner hangs their hat on when they are thinking about selling something as significant as mineral holdings.

We have provided multiple valuations for NARO (National Association of Royalty Owners) members and have been in contact with several state chapters, including Rob’s. If you would like to ever review or compare your 3P reserve forecasts we would be more than happy to compare the work that our geologists and engineers have done with yours.

Thanks,

Craig