Purchasing additional mineral rights

I would imagine with all the activity in Williams Country that purchasing mineral rights would be nearly impossible, and probably unaffordable.

Just for fun, let's say a person was interested in doing so....how do you find any that are for sale, how do you valuate them, and what does the market look like?....(if there is a market)...

Mr. Wileson, It depends on what you are looking for, if you have some investment money you don't mind having tied up for 3-5 years. There are many people in ND now who have wells that are 4 years old which have already declined and they think it's over, that their one well has gone down to 50 or 60 bbl of oil a day and they will never see a significant check from their minerals again. Professionals offer to buy producing minerals as a factor of 36 to 60 months royalty, on wells that could produce for another 300 months or more, for that one well.

Many companies search for these properties through mass mailing, usually concentrating their efforts in the most productive areas. All they need is one uninformed mineral owner and they have hit the jackpot. I think the number of jackpots they hit in such areas are small because it IS a good area and I think people tend to learn more about and hold on to property that has paid them handsomely in the past. Few hits but these companies send out tens of thousands of letters several times a year, with a spread like that they are bound to get a few hits and a few is all they need to make the effort worthwhile.

If you pay the equivalent of 36 to 60 months royalty, there is a good chance you will get your money back in that time frame, if you don't there is always the next 20 years and of course you will be getting some of your money back monthly through royalty. Not a bad deal in itself, but there is more! What about the next well? The next well was no part of your purchase calculations and if/when it happens, it alone can return the purchase price within 2 years with the flush production from a new well. Now you are really making money. Also consider buying where there is Bakken and Three Forks produceable zones but only one well, the mineral owner may not realise that the other zone even exists.

If I were to buy minerals as a small investor, I would bypass the best producing areas, the cost would be so high I couldn't afford more than a few acres even if I found someone who wished to sell. I would concentrate on the merely good areas, that I think really would return the 700,000 barrel average per well that is so frequently trumpeted.

I personally would be searching out minerals that are in spacings that are currently getting drilled with that second well, just as the companies that buy minerals do, because many owners have no idea that they are getting a second well because the operator tells them nothing. I also think I can spot where the rig is going to likely drill the next infil well in an area. Once I found the likely candidate from looking at the GIS map, finding operator and production information from the NDIC O&G Division $50 year subscription, I would then find every lease in that drill spacing with my NDRIN Recorders Network subscription $25 per month, from which I would gleen names and addresses of the owner/lessors so I could contact them.

I don't think the risk would be very high doing this, nor the cost extremely high. I would consider the greatest risk would be that it might talke longer to get my money back than I thought but I would eventually get it back in an area that if being drilled with infil wells.

Finding the area to seek sellers in, look at alot of wells on your NDRIN subscription to learn what to look for. Positive signs would be wells drilled in McKenzie county with file numbers in the 16k to 18k series with only one well and IP's in the 700 bbl to 1100 bbl range, especially if you see a rig symbol on the GIS mapfor that spacing meaning there is a well being drilled now that the owner does not know about.

Now for the disclaimer, I don't buy mineral rights, not that I think there is anything wrong with it, I just don't have the venture capital. I think anyone who applied themselves and stuck to one region could learn to recognize their target opportunities in 3 to 6 months. Pick your first purchases well and you will have a couple years to recover your money through royalty while you gain more experience. I haven't talked to a CPA about it but there ought to be some nifty deductions, depletion on your royaly and ploughing the royalty back into more mineral acre purchases, I think the business has potential.