My family has working interest in oil & gas leases in Upton County, Texas that my father first obtained in 1957. What would be the best procedure in trying to sell our total interest in Upton County? My siblings and I are all getting up in age and need to sell before we need to start splitting our interests between our many children which would be confusing. Every year we seem to get solicitations in the mail wanting to purchase our interests, but never seems legitimate. I’d appreciate any advise or recommendations. Thanks
The buyer who would have the most to benefit from your interests would be the current operator, as higher working interest helps distribute the G&A of operations more efficiently (usually…). They’d also know the most about it and the operator’s plan, which can work for or against you depending on the asset.
Step 1 would be to ensure you know what you have that you’re selling (easier said than done).
Step 2 is to know the going rate and risk associated with your interests (do you have 150 rod pump wells you’re paying to fix every other month and no room left to drill, or 10 low-maintenance gas wells with potential drilling remaining).
Step 3 would be to market the interests, which your options will depend on the size of the package. Smaller value packages under $30k or so will have a different buyer than >$1M packages.
- Under $30k you’d have trouble making the cost of professional divestiture assistance worth the benefit to the package, so you’d probably go routes like an auction house, negotiating up in-hand unsolicited offers, or reaching out to the other WI partners.
- Larger value packages could easily benefit from a professional evaluation to narrow/up the asking price and look for additional potential in the asset, and to have a well-networked seller market the interests to targeted groups who’d be interested in that type of asset.
- Many people on this forum fall somewhere in-between, and you could really go either way based on your desired time & energy.
Talk to an experienced attorney about creating a limited liability company to own the interest of each sibling, which avoids the need to sell or dividing the interests into many small interests. Each sibling would leave his or her interest in the company to the beneficiaries such siblings desiginates.
Al, where in Upton County are the interests? The market will vary depending on where it is in Upton county. Some areas are valuable, other areas you cannot give them away. Selling a working interest can be complicated. Items you will want to look at before selling are depths owned, well status, outstanding LOEs, P&A liability, Marketing Contracts, Joint Operating Agreements, and other unrecorded instruments binding on the interest.
I’ve finally gotten back home and to my computer so can finally respond to your questions on our family oil & gas interests. The location of our oil and gas lease interests are in a portion of Sections 14, 22, and 24 of Block 40, T-5-S, T&P RR Company Survey in Upton County containing at least 646 acres as shown in two Partial Assignment of Oil & Gas and Mineral Interests from 1984 & 1985. My father’s original Assignment of Overriding Royalty Interest from 1957 states 1920 acres of land, more or less. One of the Partial Assignment of Oil, Gas and Mineral Leases mentions a depth of from 7420’ beneath the surface of the earth to 9500’ beneath the surface, or 100’ below the deepest depth drilled, whichever is the lesser. Our Division Orders only include the legal descriptions and doesn’t mention a depth. Thanks for your comments.
Al, that is an interesting area. It all depends on the depths owned. I’m guessing your father participated in some Spraberry wells back in the day, and therefore those are the depths that are held. Spraberry isn’t the targeted formation down there, but if you were able to get any of the deeper rights, the interests will trade on an undeveloped basis. I’m sure someone would be willing to buy the Spraberry interest, but most people just view it as a plugging liability in that neck of the woods.
Yes most if the older Assignments of oil interests mention the Spraberry formation