Section 3 4N 6W Grady County Mineral value

Curious if any of you have received offers for purchasing Mineral Rights? We have received an offer for $16,000

Gale- $16k/acre or total for your interest?

The offer is for 16k/ per acre. Gale

Pretty good offer if based on 3/16ths royalty. The section will have to produce around 1.1 million barrels of oil at an average price of $50.00 to provide that on a per acre basis.

Todd, Curious what formula you use for that calculation. Here’s my take: Assume it’s probable operator would pay at or near 16K/nma for the entire 640 unit ($10,240,000) then average cost to complete one section lateral near $12,000,000 so all in for around $23,000,000?
1.1 million barrels at $50 over the life of the well would yield $55,000,000 so roughly double investment.

In the ballpark?

Carl- 1 acre at 3/16ths royalty is 0.00029297. Divide $16,000 by 0.00029297 = $54,600,000. Divide that by $50 oil & you have 1,092,000 barrels. To be fair with the numbers, I divide again by 95% to account for gross production taxes and you get about 1.1 million barrels. So the purchaser is behind a lot of oil to BREAK EVEN.

That section is mostly gas, so don’t use the oil estimates only. And consider that you have eight wells. Original increased density documents estimated 55.3 BCF gas remaining after the Cheyenne 1-10X3H well (8.9 BCF) and Cheyenne 2-10X3H well (12.4 BCF). At the time, they did not give the oil estimates. 76.6 BCF for gas. (I take those with a grain of salt.)

You have six more wells which spud in 10 and go north into 3. Approximately 75% of the wells are in 3. Each well is slightly different. Are you already in pay status for the new wells? (3,4,5,6,7,8-10X3H)

I did quick looks at the decline curves for the wells and it looks like #1 and 2 were damaged by the child wells, but have stabilized. The others are doing fairly well. Some middle wells slightly lower due to the later wells. Last production report is March 2019 in one source and April in another.

They want to buy your remaining production and any future wells.

Carl- use $2.5 for gas & you will get 25 BCF to break even.

That makes sense. Thx

Any future wells? I don’t know about that. This is about as developed as it will ever be, especially in such a gas prone area.

For $16k an acre? Check if you have royalties in suspense, sign a Mineral Deed with language stating you are owed all royalties prior to effective date etc, and take off like you stole something. Based on production, buyer has some catching up to do to make his investment back.

Be wary of any offers that say “up to” as they are usually much lower in the final offer. Bait and switch is very common.

If it were my acreage, I would hang onto it.

Thank you to everyone for your replies and clarifications. Gale