Hey, Jeff -
I still don't understand why you want to sell something that didn't cost you anything and is making you so much money and has the potential to make you so much more, but if you want to, I'd say you should expect a lump sum payment of at least 5 years' worth of projected production income based upon an average of the past 90 days worth.
There are other, perhaps more sophisticated ways of determining an amount for such a conveyance, but that's the one I've always used.
I'm certainly not the most educated or experienced in this sort of thing, but I would advise that you only sell the presently existing revenue stream under a Term Royalty Deed, so you don't actually convey away your minerals or permanently convey away your royalty.
Using a Term Royalty Deed, you can even convey away a certain dollar amount of your future income, say 3 times the projected income over the next 5 years. Certainly a 3 to 1 return on their investment would appeal to some revenue stream buyers and the subject revenue stream would come back to you in about 15 years, depending upon declines.
You get to keep your royalty/revenue income streams from any additional wells drilled on your land.
That, and you never actually sell your minerals or permanently convey away your royalties, for which your family's future generations will hold you in high regard.
Hope this helps -
Jeff Bowles said:
Charles Thanks so much for your input. I am not sure I would sell. I am exploring the option. If someone would pay me a fair present value price for my royalty stream I would certainly consider it. I have a decline curve for my wells and I know my gas will flow for many years. The question is what is a fair present value for that future royalty stream. The answer is that it depends on the discount rate used in the present value calculation as well as a guess at future gas prices. I was trying to get a sense of what other people had experienced.
Charles Emery Tooke III said:
Hey Jeff -
I completely agree with DJC. Not to chastise, but it really would be unwise to sell your minerals.
Isn't there something you can do with the income, some tax free or tax deffered investment vehicle, that would address your tax concerns?
Ive been in the oil and gas industry for over 30 years and can show you any number of wells that have been continuously producing since the early 1900's.
Are you sure you want to sell out for what amounts to only 3 to 5 years' worth of income?
If it makes so much sense tax-wise to sell, then why do so many people want to buy your interest?