Property value question Howard county


#25

One for $30,000.00, & one for $91,000.00 for all of my interest in A-269.


#26

How many acres at that price


#27

As I read the deed, I do not own any mineral rights. I purchased this property, along with other interest at an auction, 16 years ago. Until recently this property appeared to have little value. The party’s interest I purchased came from her grandfather, who bought the interest about 65 years ago. At this point, I have no idea what the owners of the right to lease, have leased for.

Thanks


#28

Unless the deed specifically states that the mineral rights were retained by the seller and not part of the deed, you may have accidentally actually bought them.


#30

Any names of buyers in the $125,000 range? I’ve got approximately 30 acres in northwest Howard county in the Callon Wildhorse area.


#31

It can be frustrating to have someone jump in a forum discussion, drop a line, and then disappear. I suspect what William is referring to is Viper Energy’s published purchase price of minerals from it’s parent company Diamondback. These are highly inflated numbers that require mathematical gymnastics. You can run the numbers pretty easily to come up with a valuation of mineral or royalty acres (they are different) and you’ll never, ever get to $125k an acre. At $25k an acre, you are at the top of the market for Permian acreage, which is what you are seeing. With oil prices in flux and pipeline capacity so limited in the Permian Basin, you’d need stellar acreage to even get that.


#32

I generally agree with “Texas_Owner” that the price to individuals is pushing $25K per net royalty acre, although the offers I receive, on an unsolicited basis, are starting at $10K, but upon conversation ultimately get closer to $25K.

Now, be very careful, the $25K that appears to me to be full pricing for individuals selling non controlling acreage, is based on 'net royalty acres."

to define net royalty acres, lets say you own 10 net mineral acres on a 100 acre tract. You own 10% of the minerals and let say the royalty is a 1/8. Upon production you won 1.25% of the production. Now if the royalty were a 1/4, you own 2.5% of the production. Clearly the payout is quite higher in the second scenario, to the tune of 2x.

At a 1/8 royalty, you have 10 Net Royalty acres. At a 1/4 royalty, you have 20 Net Royalty Acres.

So suppose you are offered $25K per net mineral acre, you would be offered $250,000

But since pricing is based on Net Royalty acre, at a 1/8 royalty the offer is again $250,000 BUT with a 1/4 royalty, and same pricing, the offer should be $500,000.

Big difference and recognize they will pay the least they can to get the acreage…


#33

Thanks for the info! I thought the $125,000 was silly and wanted to call out the one who posted it.


#34

I am so new to this and am considering selling some inherited interests and am so unsure what to do even after reading through some of these. I have 2.5% interest in 160 acres in Howard County on block 32 section 18 in Howard County. The offer letters have been coming in and I really could use the money but don’t know the best way to go about it. Can anyone tell me what my interests might be worth?


#35

Currently, there is lots of activity in this area, which promises to be quite valuable. Unless you need the money right now, you are probably much better off leasing rather than selling. $25K per acre sounds like a lot, but is not. From hard experience-- don’t believe everything you are told and if somebody promises you something, get it in writing. This particularly includes major companies. And don’t allow yourself to be rushed into a deal.


#36

Angie, what township? There are multiple Block 32’s.


#37

I’m sorry, ok I looked back and here is what I’ve found. T1N, A-1168


#39

Just tread through this thread. Even though it was originally posted back in March of last year I found some things interesting. I just visited US Minerals Exchange. I was not that impressed with their website but I like the concept. But it seems that every time people offer a “mineral appraisal” it really is just an offer to buy your minerals, not an independent appraisal of what they are worth. If anyone knows where to get an appraisal from someone that isn’t offering to buy them, I would like to know!


#40

You need to find a registered petroleum engineer that does an independent evaluation that is not working for a buying company. I suspect there is probably a firm in Midland or Dallas/Ft. Worth or Houston that does that sort of thing.


#41

2.5% under 160 acres = 4 acres. Your acreage is in a good neighborhood but it’s held by Encana which is a decent, but not a fantastic Operator. The location helps but the Operator hurts the valuation. If you need the money and had an offer for $60k or more, I’d think that’s a pretty fair offer.

My hang up with hiring Petroleum Engineers, is that they typically take an Operator agnostic approach to valuations and that simply doesn’t work in this environment. You may have the best rock in the Basin, but if you have a crummy Operator that can’t produce that rock, then it doesn’t matter.

It’s perfectly fine to ask lots of questions to several or all of the people you are getting offers from. Go slow and ask plenty of questions. I hope this helps.


#43

WolfT though you probably won’t care for my response, I think it’s worth saying. The people making the offers ARE the people setting the prices. The old adage “it’s only worth what someone will pay” applies here. We’ve owned minerals in Howard since the 1950’s and up until 3 years ago, I couldn’t have gotten $100 an acre because there wasn’t anyone willing to buy them. We are in what I believe to be a bubble in the market right now that could collapse as quickly as it rocketed up.

My experience with US Mineral Exchange has not been good. I can’t say that I would recommend their service.


#44

Your acreage is not necessarily just worth what somebody will pay for it. Somebody is paying for it based on some assumptions about a future annuity. You can, if you wish, just wait and collect that annuity rather than selling it. Assuming all risks/losses/gains associated with the ability/inability to tell exactly what that annuity will be, or if it will even mature. Sure, yeah, if you are going to sell it, then you are left with whatever somebody will pay you. But IMO, the main reason to ask an independent evaluator is to decide IF you should sell at whatever people are offering.

I would hope that any engineering eval would include some basic assumptions about future spud dates that would be reflective of the operator. In general…operator has X units in this county, they will drill Y wells per unit, they are operating Z rigs in the county…there is your drill schedule.

That said…in no way do I think that you should bother with some enginerd over a single digit # of acres. If you need the $, shop it a little bit, take the best price, move on.

Fwiw, Viper calculates things on a REVENUE acre basis. So, when they say $125k per acre they really mean divide that number by 8 to get it to a royalty acre basis. My guess would be that a royalty acre under Encana in Howard County with no permits on it might be worth $10k/NRA to somebody willing to take the development risk.

And yeah, maybe this is a market bubble. There are just too many wells that need to get drilled to make the mineral prices work across the board, and not there just aren’t enough rigs running to do that everywhere. Perhaps.


#45

Thank you for the feedback. I think the real question is the same you get if you win the lottery: should I take the lump sum (and sell the minerals) or the annuity payments (and collect royalties over time)? I guess I am not necessarily interested in the fact that people making the offers ARE the people setting the prices (as Texas_Owner correctly states) but that the offer is equal to or greater than the present value of future royalty payments (which is what NMoilboy is getting at). If I really needed the money right now, it may be different and I would just sell because I need the money, but I want to know what that offer price at which it makes more sense to sell now (and put that money into bonds or real-estate or some other investment) rather than collect royalties into the future. Thanks again for the thoughts! If you have any other ideas please let me know.


#46

Just another idea, you could sell a portion such as 50% to diversify your portfolio and invest elsewhere. In my opinion, you can argue you win either way because you take away the risk of the wells not producing as expected but also are still in the game if they do.


#47

Right. Key point there being that you need to invest your earnings elsewhere! I was talking to friend in the real-estate business and he made me realize that if you sell minerals and buy a house (say a rental property) then you may not pay as much in taxes since you are exchanging one form of real-estate for another. It is just like if you sold a house and used the proceeds to buy another house.