I was offered $10,000.00 MNA for section 34-09N-07W in Grady Co. Please give me some advice. Thank you in advance for your time.
What royalty does the letter state for that price? There is a lot of vague language in some of those letters
You are about to get a horizontal well. That is why you are getting the offer. The well will spud in section 3-8N-7W (~35%) and go north into section 34 (~65%). Many letters go out offering to buy right before a well is drilled. They hope you don’t know about the well. The well is positioned at the far east side of the sections, leaving room for plenty of additional wells should they choose to do that down the road.
If you have no reason to sell, then hang tight and collect your royalties in about a year. If you do need to sell, then be aware that first offers are usually low and don’t forget that you might have to pay capital gains tax, so the offers aren’t always as good as they seem at first glance.
What do u think the value in this area
I think the value of 34-9N-7W is probably higher than $10,000/ac. I would have to clarify what royalty goes with the offer. Is that $10,000 for a 1/8th royalty, 3/16ths 1/5 or for a 1/4th? Totally different answer for each royalty case. I look at the long term value of acreage and what potential future drilling may be and I understand the risks of that. I would look at the current production of wells in the area, what the operators are saying they plan to do in the future, what improving technology can bring to the table, what current engineering decline curves would predict. I would run the economics of the decline curves with several price scenarios, calculate what my capital gains tax would be, etc. I would look at what a royalty stream for one well, multiple wells would be over the next forty years and then how I could invest that money (after paying the resultant taxes). I would look at whether I had a large amount of acres or a very small amount of acres that are really not worth my time to keep track of. Not a simple answer.
If you just want out, then you may have a different concept of what you think might be fair.
Thank you for your advice i was hoping to get 13000 ro 14000 mna but its for 3/16 lease
If that is what you want and you are happy, then the would be what it is worth to you. Just remember that if you have no documentation to state the value of the acreage when you received it, you may be taxed capital gains for the whole amount of the sales. If you have a value, then you may be taxed on the difference in your original value and the sold value. Most folks forget that and get an ugly IRS surprise. Don’t forget the state taxes if they pertain to you as well.
When i bring up 13 to 14000 for mna in that section they think im crazy so do you know if anyone has sold mna around that area
I do not know anyone selling in that area. The market went down over the last few weeks due to the drop in oil prices, so that will have an effect on offers right now.
Not many mineral deeds being filed in section 34-9N-7W … just more examples that the longer you hold the more per acre you will get when you sell.
Jul - 2018 deed filed for 5/NMA @ $10,300/acre - total $51,500
Jan - 2017 deed filed for 70/NMA @ just under $6,380/acre - total $446,500
Sep - 2016 deed filed for 86.67/NMA @ just under $2,540/acre - total $212,500
What were the royalty rates on those?
Jul - 2018 deed filed for 5/NMA @ $10,300/acre - total $51,500 (lease date 4/2016 @ 3/16th)
Jan - 2017 deed filed for 70/NMA @ just under $6,380/acre - total $446,500 (lease date 10/2016 @ 3/16th)
Sep - 2016 deed filed for 86.67/NMA @ just under $2,540/acre - total $212,500 (unleased - lease had just expired)