November 2020 Purchase Offer

Hello,

I am a fist time poster as I just stumbled upon this forum in my research.

I recently received a purchase offer for my Mineral Rights in Howard County. However, the most recent leasing company, who is also drilling, just sold their interest to a different company. That has caused the buyer who offered to purchase my rights cut their original offer, by almost half. The buyer is claiming it is due to the uncertainty of the new leasing company.

In addition to the reduction of the offer, the idea of a Well Bore Lease was brought up in addition to the reduced purchase price. I am not familiar with this at all. Any help would be appreciated. No documents have been signed. Just a offer letter and phone conversation.

I can give specifics if it will help, but since this is my first time posting I don’t know the proper etiquette as far a naming specific companies, acreage, offer price etc.

Thank you in advance for any assistance of guidance to find more information.

Welcome to the forum. There have been quite a few postings on offers in Howard County. Use the magnifying glass at the top to search for them.
Proceed with caution. Anyone who offers plans on making a profit off of you. Not saying that is bad, just that this is a business proposition. Learn about the area, what pending drilling is coming (or not), what royalties you might already be due, etc. Catch up on the other postings as they have some good comments.

Thank you for the sound advice Martha.

These mineral rights have been in my family for several decades. I inherited mine about 12 years ago. I am familiar with the industry but still a novice at any rate. There have been several offers over the years, all I felt did not warrant serious consideration at the time.

This offer was the highest by far (possible red flag) and comes at an interesting time in this economy and political climate (NOT meant to be a political discussion AT ALL). This latest offer is a bit different as it came in the middle of a lease transfer to a different company AND current royalty checks are being received but no indication if drilling will continue or not. I am trying to figure out the de-valuation of the rights due to the new lease owners or if its just a scare tactic by the offering company. Also trying to get familiar with a Well Bore Lease.

Thanks again for any and recommendations and suggestions to further research my situation, which also includes lots of relatives asking the same questions.

Do you know what Section and Block your minerals are in?

Hi Cecil,

Yes I do! West Half (W/2) of Section 41 Block 31.

Does this help?

Cutting your offer in half because the outfit drilling the wells is changing is BALONEY. (not sure if they would let me get away with the other language I was thinking in my head) If a well is in the process of getting drilled or has already been drilled there is no reason at all for them to cut the offer.

I have never heard of a Well Bore Lease, but I am familiar with people selling well bore interests. Essentially, you sell your interest in the well (or wells) and the royalties from it, but retain all other rights.

There are 4 different 'Block 31’s in Howard County. Do you have a Township number? Would be something like Township 1 S or written shorthand as ‘T1S’

That is an old trick by landmen. Float out a fairly high offer then when you seem interested, cut it by half to see if you are desperate or will sell cheap. Don’t bite. I have often replied with, “A neighbor is a Geologist with Chevron and he claims this is a HOT area and the play is picking up prices” and reply with their their original offer +25%.

Just to play devil’s advocate here, I think the valuation of certain interests are definitely contingent on who’s operating the well. Not everyone company has a great tract record, and a lot of that is directly correlated with what kind of ship they run. If they aren’t in great shape financially, the likelihood of them pinstriping a section with additional wells is much less likely. One of the variables to mineral transactions is speculation, and the big guys up stairs don’t like to bet big long term payouts on operators who haven’t had success before.

In this case, it looks like the broker thought he/she was able to get a higher amount that what their client or the market was willing to pay for, and had to rescind the offer to market value with themselves built in.

When you say “wellbore lease” I think the broker or landman is referring to a “term assignment”. This means they will “buy your royalty” for x amount of years at a price that is comfortable for today, because they are gambling on prices going up at some point in time.

If this is something you are interested in, WATCH THE LANGUAGE. It’s worth it to have someone savvy look over it and make sure there are no quick outs or any language that is over-binding.

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