Reeves County Texas - Any Ideas on Value?

General Mineral Rights Discussion
1

I need help. My aging in-laws inherited a .667 NMA interest in 160 acres located in Section 136, Block 13 Reeves County, Texas. They asked me (their son-in-law) for help. They have received an offer to buy the interest from a Landman and we have no idea if it currently producing or what it is worth. Anybody want to weigh in on this??? I realize that this is a very small fractional interest but they need to understand what they have before they make a decision.

2

Jeff,

It does not appear to be a producing section. It is in Southern Reeves, which is not exactly known for the best production, but there has been some recent activity in the area.

Fee free to send me a private message to discuss more.

Thanks

3

The Landman offered $1,800 NMA or $1,200 to by the fractional interest. Is that a good price?

4

Clayton Williams has been extending leases in Section 136. Primexx permitted a well in Section 105 which is adjacent section to the west in July 2016. If your in-laws are not under lease, they can likely get this bonus rate. Tell them to at least negotiate for a much higher price if they insist on selling.

5

EXPLAIN THE BONUS RATE TO ME PLEASE? They don't necessarily want to sell, the Landman simply looked them up and sent them a contract with a draft at a price - unsolicited - so it makes us wonder what is it worth? Would they be better off leasing and if so how much do they ask for in a lease?

6
A bonus is consideration one receives in addition to the royalty granted by an oil lease. The bonus would typically be for "x" dollars per acre. The royalty would be 3/16ths up to 1/4. You would want more dollars per acre bonus and higher royalty. I imagine a 25% royalty and a $2000+/acre bonus might be something you could be able to negotiate IF a company wanted to lease your relatives' minerals. So I believe TennisDaze is saying that you might be able to lease the minerals for as much as the buyer is offering to pay to buy them. If you lease and do not sell and a well is drilled, then the mineral owners would get a fraction [royalty] of the oil produced over the life of the well(s) drilled. Rough back of napkin math: 2/3 nma with a 25% royalty on 1,000,000 barrels of oil produced over a number of years in a 640 acre unit with an average realized price (assuming no deductions) of $50/bbl would be .667/640 x .25 x 1,000,000 x $50 = $13,027. Note that there is no guarantee a million barrels will be produced and that production will spread out over many months. It could be considerably less than that. Unless you have an attorney or some expert help with the lease, it could have deductions which would cut into this total a good bit. Also the above equation does not allow for the sale of gas, etc. which the well might produce in addition to crude oil. Also read up on Apache's "Alpine High" http://www.ogj.com/articles/2016/09/apache-notes-new-resource-with-...