Hello,
We have received thew following:
Re: LOI (Letter of Intent) for Minerals located in Roger Mills County, OK 20-16N-21W
This letter of intent shall serve to evidence an agreement Freeda Trammel Trust holds mineral interests in the above section in Roger Mills County, OK, for sale and conveyance unto “Buyer”, for all rights title and interest.
Does anyone have an idea on how to value these mineral rights? We have an offer, but have no idea whether it is high, low or just right…..
The reason that you are getting the offer is that you have one producing horizontal well Diversified Luther 20-16-21. It is only a one section well. It has been online since 2012. It has about 90,000 mcf left and about 23,000 bbls of oil left in the Tonkawa reservoir. However, there is a both possibility of infill drilling in that reservoir and also a rapid growing Cherokee play which has permits for multi-section wells. Quite a few permits in the township just to the south.
Most first offers are low as they try to catch low-hanging fruit. Many only pay for a discounted cash flow of the current producing well. They intend to make a profit off the acreage, so rarely mention if new wells are about to be drilled or new horizons are being opened up.
You can do nothing and wait and see what happens, you can negotiate for more, sell some an keep some. You can pay an appraiser to get a reasonable value for the current well.
Thanks very much for the response. It is extremely helpful.
Hello,
If we wanted to pay an appraiser to get a reasonable value for the current welll, and perhaps also get a reasonable value for the land / mineral rights, how would we do that? None of us owners have experience in this area, and all of us live in states other than Oklahoma. This property is an inheritance from our grandmother who (long ago) lived in Oklahoma.
I have found a lease for the trust on the OKCountryRecords web site. The area is legally described as “S20 T16N R21W E2 W2”. There are copies of the previous lease (from 2010) available for download for a small fee. If I were to pay the fee to download the previous lease, would I receive any information of value that may help us to evaluate the offer to buy?
The only lease we have a copy of is from 2001. It includes the location description as “E/2 W/2, less and except a certain strip of land 40 feet wide, beginning at the NW corner of the NE/4 SW/4 of Section 20 and running South a distance of 1/2 mile to the SW corner of the SE4/ of Section 20-16 North - 21 West.”
Other places there is a condensed version of
E/2 NW/4 & E/2 SW/7
S-T-R / S-A 20-16N-21W
Hmmmm, yup!
Thanks for your help! You’re great!
Hiring an appraiser would be pointless. How many acres do you own? You could hire an experienced engineer and probaly pay him $1k or so to see what its worth. The value of the current well is pretty easy to determine, take your last 3 months royalty payments, take the average and multiply by 36 (3 years which might be a longshot depending on the well) and youll get a ball park number for that well. If you have another well coming on line, it will likely follow the 1st wells results with a sharper decline in production so should be able to determine its value by looking at your past royalty checks while keeping in mind the 2nd well will likely produce at at lower numbers
There are some mineral buyers listed in the directory. Further, you can google companies that buy minerals and see what offers you get.
We own 40 acres of mineral rights. There is an existing well which use to be highly productive (decades ago) but in all of 2024 it delivered less than $1,000 to us.
We have an offer to sell for $6,600.
Ok, I downloaded the 2009 lease from the OkCountyRecords.com site.
It says the area is more or less 160 acres.
In the valuation, what is more important, the productivity of the existing well (low) or the number of acres? We were always told it was 40 acres, but perhaps it’s 160 acres.
The lease describes the gross acres in which you own a fractional interest. The fractional interest depends on how the acreage has been divided and subdivided over the years. If A owned 100% of 160 acres and had 2 children, then each got 1/2 = 80 net mineral acres. If Child B had 2 heirs, then each would get 1/2 of 1/2 = 1/4 = 40 NMA. Usually offers are priced per NMA so you need to know if you own 10 or 20 or 40 acres because that affects the total sale. With producing acreage, the offer is likely to be 5 or 6 times the current annual revenue. You need to determine if there is active leasing or new well permits in the area which could increase the value.
I own 1/3rd of the land/mineral rights with my relatives being the other two owners. We’re evaluating sell the entire thing and just splitting up the proceeds.
How can I determine if there is active leasing or new well permits in the area? That does seem like a key piece of information. The current lease produced “less than $1,000 of income” in 2024, and the buy offer is $6,600. It seems fair (from what I understand), unless exciting stuff is expected to happen in the near future.
A new Cherokee play is developing in Roger Mills. Your well is in the Tonkawa and is for one section. The new wells are two-three section wells in the new zones. There is active leasing in sections that are open to lease for the Cherokee and Red Fork. There is a rig onsite about six miles from you. Your section could get more infill wells in your current reservoir or it can have new wells in the new reservoir. Just depends upon if you are willing to wait or need funds now. Buyers are swarming the county.
I wouldn’t go by the income of 2024 as a reason to sell. My whole family has told me to never sell my mineral rights. Don’t sell for $6600 it’s not a fair offer. Wells will probably come and the income will increase. I waited over 30 years since 1985 to receive awesome returns in the last 10 years. It’s not really a Hassel if you contact an Attorney. Or do what I did, when the Bonus was unsatisfactory - I just didn’t sign any lease. I got paid in a couple of years with production costs deducted and 100% of oil production - a fat check for $495K. Leave the mineral rights to kids or family, but don’t sell. What $6,600 gonna buy?
Thanks for the comment! My cousin is the one who has been handling the Trust (which holds the mineral rights) for the past decade. It hasn’t returned much in the past ten years, but it was very productive perhaps 25 years ago (I’m not really sure).
What do you mean by “the bonus”? My understanding is the trust leases the rights to a energy company and we receive 3/16ths of the profit, something like that. I don’t know what “Bonus” fits into that plan.
The funds that are paid to mineral owners when signing a lease, a lease bonus. Separate from royalties and paid upon a lease execution.
When you sign a lease, there is a Bonus payment upfront. Most of mine have been $1000’s. You don’t get any more bonuses until they shut down production. Hopefully you’ll get a new lease with better terms. Example, New Lease you get a Bonus and can negotiate the royalty percentage. My leases are usually 1/4 or 25% royalty.with a 3 year term and No Extension when Lease expires. You need to find out when your cousin signed the Lease and if they’ve been producing ever since. OR if he signed new leases. You’re out of the loop and need to see the last Lease the Trust made with the Oil Company. See if it has expired or if it’s still intact. But I wouldn’t sell at this time because you never know when they drill or where. You could be sitting on something or nothing. $6K is way too low.
Whatever the terms and clauses on the old lease, be sure and get a new lease with modern up to date clauses if you can should the old well be finished. Best to get an attorney to help get it right! You do not want any post production costs. If you are still held by the current well, then you may be stuck with the old lease unless there was a depth clause.
You can find out which Sections, Townships & Ranges are being leased by using the RMC County Clerks website. Just search the land description of your property and the sections around the area. Everything pertaining to your search criteria will show starting with the most recent.
Thanks for the discussion everyone. It winds up my cousin signed the papers to sell, so I guess we are done with mineral rights unless the deal for some reason falls through. Appreciate all the assistance, unfortunately I’m the “often overseas” cousin and have never seen the documents or understood the mineral rights topic very well.