Hi,
That sounds like a good offer especially with oil dropping so much lately.
I’ve had a lot of interest in my property but the offers haven’t been near that amount.
I was pretty surprised myself.
That offer is in the Ball park. Are they calling you or sending letters?
The value in the acreage as I have previously stated is dependent on the number of productive benches. My acreage is approximately 9-10 miles NE of your acreage. I follow the drilling efforts pretty closely. Oxy is our operator and they have just recently started developing many of the benches they have been evaluating over the last 2 years or so. If you look at the data from the recent wells in BLK 51 T7S Sec 11 you will see many recent wells but if you look closer these wells are drilled in the 2nd Bone Springs, 3rd Bone Springs, Hoban, Wolfcamp A and likely Wolfcamp B. That’s the real value of the acreage in this area. If you do the math, the real value in $/NMA is considerably more than any offer you will receive from anybody because they need to turn a considerable profit after purchasing. It makes absolutely no sense to sell unless you have to due to financial hardship. Other wise just enjoy the ride for the next 25 years. 40K/NMA is a drop in the bucket. Good operator's will keep enhancing well design and spacing both horizontally and vertically. This will ultimately increase the number of individual benches even further driving /NMA much higher. Like I said, just enjoy the ride!
Hi Jpeterson, I’ve been following this thread pretty closely as I work Reeves county and know the area well. Lot’s of good points in the conversation thus far. I’ve attached a map of the drilling activity in Reeves County and yes this is good acreage but it is getting close to being on the out skirts of the multi-bench Delaware Basin. In fact, you may not have all the benches present that another contributor on this thread stated. Yes, as technology gets better, production will get better so on and so forth. This area is going to be developed for many years to come but who knows where the price of oil is going to go in the next 5-10 years. We already have an extreme supply glut and not enough demand to push the price up. With the US being a major exporter now, many of the international geopolitical influences that would have affected the price 5-10 years ago just haven’t had the same effects. With all the electric and soon to be self driving cars, the demand for oil is not going to be as great. Now who knows if all this is correct but just food for thought. A decent rule of thumb to go by, should one even consider selling their minerals, at least 3-5X what the lease bonus was is a good place to start, certainly wouldn’t consider taking less than $50k for your minerals. If your acreage was further North or NE or East, I would say you might be able to get even 10X your lease bonus as there is no question there are multiple benches to be exploited. Currently, Centennial is your operator and they’ve recently (1/2020) permitted two 1-mile laterals (5,000 ft), which I’m actually quite surprised at current oil prices, they should be doing at least 1.5 mile - 2-mile laterals (7,500-10,000 ft). Now that your acreage is unitized, Centennial and Noble are going to have to get together if your going to get the benefit of extended laterals. Which means they’ll have to put a Production Sharing Agreement (PSA) in place, which may or may not ever happen. Also, Centennial could potentially sell to Noble or some other major.
VM, thank you for the comprehensive response. The issue with oil price, electrified automobiles, and inventories have all been concerns for me as well, whether justified or not. Since my last response here, I have received yet another offer, this time similar to my first at about 3x original bonus. As I stated above, my initial 36m lease ends in June, so guessing that is what is driving much of this activity. It would be great to have a crystal ball… I don’t need to sell for any reason, so maybe seeing what happens post-June is the best strategy at this point.