Sec 33-6N-5W Grady County


#1

W/2 se/4 nw/4 We currently have a lease expiring next year. Leased for 2k/acre in 2016. Getting offers for 20k to buy each acre we own? Can anyone tell me what is going on this area? What kind of offers are people getting in this area? What would you do? Seems like from what I have been reading it will take a long time to get back the money we would get by just selling our acres. Any help would be great


#2

That seems to be the norm lately for offers in that area. A company named MRC is offering quite a bit . They work for continental.


#3

MRC (The Mineral Resources Company) purchased the last minerals where someone can figure the price per acre and it was $20,000/per NMA for a 3/16 royalty lease. As K11 said, they work for Continental (probably owned by). Continental in their last few presentations expects 4X’s the return on investment. That is better than any others I have seen, but still only 25 cents on the dollar. Granted the estimated return will be spread over an X number of years. But we have kids and grandkids so time is not an issue.


#4

33-6N-5W. You are getting offers because Warwick Jupiter just filed for one additional well in the Mississippian and five more Woodford wells in sec 35 just east of you. Sections 16 & 21 have seven wells just to the north of you. Section 10 has about 9 or 10. TPR and Continental both have pending horizontal cases at the OCC for your section. If they decide the case, you may have a horizontal well by next year.

Personally, I am holding onto everything I own in that part of Grady. I invest the royalties and keep the minerals for the future and hope they will drill more wells. I am a few miles away and we are on our second round of drilling more horizontals. Since our family has seen lean times and good times in the mineral world for 100 years, hanging on is kind of in our blood and we take a long view. I always consider whether additional wells are possible in the future.

There have been some excellent discussions of the pros and cons of selling minerals in Grady County. Scroll through the last six months of Grady discussions and you will get both sides of the issue.


#5

Don:

Don’t you mean to say 4X your investment is $4.00 on a $1.00 investment?

Todd M. Baker


#6

Thanks I appreciate the reponse. We only have 4 acres. Im guessing you have a much more substantial amount of land. If you were us and only had 4 acres would that change your decision to sell?


#7

It’s not so much the amount of acreage amount that matters. From a financial standpoint you should take the NPV of your future expected royalty income stream (can be easier said that done), and compare that with the offer to sell. Then, go with whatever option holds more value. Remember if you sell 1) you will owe capital gains taxes to the IRS, and 2) you can invest the remaining money and keep it growing over time.


#8

Todd: I may be wrong, butI think he meant that if you sell you get only $o.25 on the dollar, and CLR gets the rest. Jim B


#9

We have many tracts that are often quite small-many at much less than 4 acres. For each one, I do what PeakOil says. I look at the NPV at a certain discount for one well, then I look around and see how many wells are being drilled close to me to estimate if I should consider that more wells might be coming. I look up the investor presentations of the companies that are in the area and see what they have plans for (consider them with a grain of salt since they tend to boast about returns). I consider what I might make if I invest the royalties on the wells(s) that I might have and the future possibility of other reservoirs in those tracts. (Yes, I know I pay taxes on the royalties. ) If I chose to sell, (which honestly is rare), then I would get several legitimate bids which had better be higher than the first offer I got, then decide what the future investment return might be on the sales offer minus the capital gains tax. Since we have kids and future grandkids and no looming medical needs, then we usually hang onto acreage. Other folks might have a more pressing need for money now or would rather go on a vacation instead. Everyone has to decide based upon their own needs. Also, you do not have to sell the whole thing. You can sell one acre or up to four acres.


#10

TODD:

Oops! Maybe a little confusing… what I was hoping to convey is that Continental expects to get 4X the money on their investment, i.e., mineral owner gets $0.25 (in this case $20,000/NMA) and Continental gets a $1.00 (in this case $80,000 over a period of time). Why give away something for pennies on the dollar? Unless you have a low risk tolerance…

Personally, in one of my sections, some mineral owners sold their 3/16th royalty minerals for $7,640/NMA… that seemed like the market top at the time for that area. Now, just over 2 years later, we have turned down an offer of $26,500/NMA with a 3/16th royalty. Who knows what it may be worth in another 2 years. NOTE: The mineral buyer @ $7,640/NMA still owns those minerals.

Don Bray