I own mineral interests on 170 acres +/_ in the above area. Currently under lease to Red Sky Land LLC thru 12/2021 with option for 2 additional years. Have received an inquiry from MayHawk Energy to purchase these mineral rights for up to $6000 per net mineral acre even if the rights are currently leased. I’m not sure if there is active drilling or producing wells in these sections. Anyone dealt with MayHawk?? Any thoughts on fair price per net mineral acre? Thank you for reviewing this post.
My name is Melinda.
My husband and I never sell our mineral property. We’ve done it in the past and wish we had not.
There is a reason someone wants to buy it and from what I’ve seen, you will eventually make more money from production than someone is willing to pay to purchase your minerals. But, it is a personal decision, especially if you need cash very badly. Otherwise, we would hold on to it.
You need some history on the area. BP bought the area from Charter Oak a few years back. Then BP sold to Lime Rock. Red Sky did quite a bit of leasing until late 2019 when the sale happened. Currently, there is no production in 20 and 21. However, the intent was to drill horizontal wells in the area. The amounts of offers are dependent upon the offering companies metrics and what you are already leased at. A lease at 1/4th royalty will get a higher offer than a lease at 1/8th. As to “fair”, the definition is “what a willing and informed seller under no compulsion to sell and a willing and informed buyer under no compulsion to buy agree upon.” Most buyers intend to make a profit, so you need to get informed about the potential for the area, pending wells, etc. Given that we are in a most unusual time period due to the drop in oil prices, there are lots of companies out there buying-if they can afford to.
A few comments. You might want to check your deed to see if you really own 170 acres. With this many generations past the original land grant, unless there was only one person per generation or the minerals were held in an LLC or trust, usually the minerals fractionate. That would be highly unusual to hold 170 acres at this point, but it could be. Your leases may say that, but they usually list the gross acres of the parcel and not the net acres. You would only be able to sell the net acres.
Any time I get an offer, I look the company up on the Better Business Bureau to see if there are any complaints. I look them up on the Secretary of State or other websites to see how long they have been in business. Nothing wrong with a short time, but I look up the principal owners to see if they have experience in the business. I look the owners up on LinkedIn or professional sites. Do they have a web presence or are they Fly by Night? Do they have a website? Are they willing to say who they are? Who is funding them? If they are not willing to share that information, I will not deal with them. I ask if they are willing to put 10 percent of the purchase price in an escrow account as a good faith measure. What third party is holding that escrow for them? Attorney? Accountant? I want a PSA in writing and an agreement that the remainder of the payment will either be paid to the escrow account and my third party who is holding my lease will turn it over when the check clears or it will go to my direct direct deposit account before my third party will be handing over the lease or deed. Never hand over a signed deed without getting paid!
In the meantime, I would look up other buyers on www.okcountryrecords.com and see what general purchase prices are in the area. The deed stamps give a clue as to the price per acre. Deed stamps are calculated at $1.50 per $1000 of transaction. ($21 deed stamp = 21 ÷ 1.5 = 14 x 1,000 = $14,000 transaction price look for sales that have deed stamps, then look at the deed to see if it discloses the net mineral acres. Often deeds will have a generic quarter section description, but may state somewhere in the deed the actual net mineral acreage conveyed. (Thanks to Terrel Shields)) I would call up those buyers and see what they are offering. If you sell your car, are you only going to get one estimate or try several dealers to see what they are offering. I also look up the company offering to buy and see if they flip the lease to someone else. Nothing wrong with that, but I like to know.
I would then consider if the offered price would equal the projected payout of any future wells. What would be my time frame? Do I want to pass on to children? Do I have huge medical bills I have to pay, etc. Does this fit with my overall financial plan?
I would then consider what my capital gains would be on a sale. Do I know the value of the minerals as of the date of purchase or inheritance? Buyers don’t usually mention that little tidbit. How would this affect my taxes this year and quarterly payments for next year? I would talk to my accountant, etc.
Hope that gives you some avenues to pursue.
Excellent wright up M Barnes.
The only thing I would add, and this is just me, is whether the buyer has a physical address. If your only point of conatact is a cell phone, be careful.
Totally agree on that one! You want to deal with a real business that knows what they are doing.
I have been researching mineral rights in Oklahoma and found that some mineral brokerage services list the properties they have for sale, and what they are selling for, on their websites. I found this interesting and could be a good source of information.
Martha - thank you for the excellent information and history in the area. Yes, my net mineral acres are less than the 170 acreage due to the reasons you described. I lack experience in the minerals leasing and sales categories but am looking to simplify my life by possibly selling mineral interests in several OK and TX areas. I do appreciate your thoughtful explanation.
If I were to sell, I would get several offers and take the best one. With product prices down right now, I would be expecting low offers for a while.
I bought and sold minerals a few years ago. Greed and stupidity will be your downfall. 40k an acre, 2.5 nma…so glad I don’t have to deal with idiot mineral owners who don’t understand return on investment. Dumb people
Not sure what your point is but do know return on investment is not near as important as return OF investment.
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