I recently received a letter from Royalty Clearinghouse to buy our interest in a producing well in western KS. The well has been producing since fall of 2010 and has declined about 40% from where it started. Even though the offer is good we are not considering it.
My reason for posting here is: are these offers a scam? I am not sure if they are wanting to buy the royalty on that well OR our mineral interests in that 160 acres. They said in letter they may call me and if they do I will ask more questions.
A few words from more knowledgable people in this forum would be appreciated
Ron: The best advice from the Certified Minerals Manager's I know is to discard these offers. It is also common sense when you try to evaluate how these outfits value your producing royalty interest. A similar letter to yours that I received two days ago says for me to send them my last three monthly royalty payments for them to assess. How nice is that? In our case the Unit we are in is going to have an EOR project starting next year. The Company estimates over the life of the Unit's project it will yield about 60% of original oil in place. So it pays to know the value of your minerals past and future to determine whether or not to entertain any of these type buyout offers. I know there is a legitimate purpose of many of these firms but from experience the offers we get show that these outfits either have no clue as to value but I will bet they do and more likely than not know there is much greater value.
Ron,
In the 30+ years that I've owned portions of wells in Ks, I've received hundreds of unsolicited offers to purchase my interests in one county or another. Like Mike suggests, I discarded all of them because I know the respective values to me and it was my time and money at risk in getting the wells drilled in the first place. As a professional minerals manager (I don't know what a "Certified Minerals Manager is) I think I know more about the mineral potential than a computer search engine.
However, if you inherited 160 acres of minerals and think you might give up long term income for income now, it may be worth your while to hire a local independent consulting geologist or petroleum engineer to evaluate the long term potential based on current developments and not just past performance. If that risk discounted amount is above your near term income needs, look for a few buyers and negotiate a purchase and sale agreement that suits your needs. (A few of us do this for clients through law firms) Stay away front he form of deals offered by mail. Many are scams and really an attempt to tie up your minerals for a long time while they negotiate a lower price than offered while they find a buyer. The buyers are like anyone else, in the business to make a profit.
Figure out what you want and then protect yourself at all times.
Thanks, Mike and Gary - that is about what I suspected. I did not put in question that they were asking for stubs of past 3 months. My brother and sister and I have no plans to sell anyway, I just wanted someone to confirm the information both of you provided. thanks