Have an offer for 1000 an acre. Is this fair or should I hold out?
Where are they?
Normally, I would say never sell your mineral rights. BUT, every situation is different. If they drill in your section over the lifetime of the well, you will make more money.
If you have more than just a few acres, maybe you could sell 1/4 or 1/2 of it.
At least never accept the first offer. A long time ago someone told me “the first person to mention money, loses.”
240 NW 1/4 N1/2 SW 1/4 of Section 34 Township 2 North Range 6W 50 NW of the SW 1/2 NE 1/4 of the NW 1/4 of Section 8 Township 1 North Range 6 West 60 NE 1/4 and the NW 1/2 of SE 1/4 of Section 12 Township 2 North Range 7 West
Where are they? Thank you Mr. McKenzie.
Another consideration is if this offer is for leased or unleased acres. If the acres are at present unleased, I would subtract the amount that I think I could lease the acres for from the amount offered. If unleased they may buy your acres and lease them to someone for 1/3 or more of the purchase price and if a well is drilled recover the rest of the purchase price with the first check. As Mr. Underwood says, we don’t know your situation. If the acres were subject to a fresh 5 year lease at 1/6 royalty for example, without beneficial clauses such as pugh/depth severance clause, I would expect low offers and I would not consider them to be out of line as the purchaser will be bound to a lease that would not be as valuable to them as the lease they could have negotiated and certainly not as good as the acres being unleased which they could sell to the operator and retain an override. As with anything here, the more information you give, the better the advice you get.
240 NW 1/4 N1/2 SW 1/4 of Section 34 Township 2 North Range 6W 50 NW of the SW 1/2 NE 1/4 of the NW 1/4 of Section 8 Township 1 North Range 6 West 60 NE 1/4 and the NW 1/2 of SE 1/4 of Section 12 Township 2 North Range 7 West
I see that 34 is leased to Bear Cat. Is the other leased?
I am not sure what the situation is over there, but there has been a lot of lease transfers in the last few years. Also seem like there are quite a few plugged vertical wells.
Maybe some think they can get some horizontal wells into production. I think I would just sit tight for a while.
You might want to ask all these gentlemen offering advice what they would pay for them.
I don’t think any of us are acting as an agent for an unnamed oil company.
He asked what they are worth. They are worth whatever someone is willing to pay. There are more individuals buying minerals than oil companies. Most companies do not want to tie up their capital in something that may not generate a return in a number of years.
Mr. Quick,
I think R W Kennedy stated it pretty well.
There are too many unknowns. I don’t think Mr. Kent has given enough info to place a value on them or make a fair offer.
As you know, the amount of acreage, state of the lease, state of title will be a big factor before anyone could make a fair offer.
Mr. Kent,
My family has acreage in 2 of the 3 areas you listed and I don’t think that is a fair offer. However, see my above post. Questionable title (RISK) and a bad lease could easily bring the value down to that or less.
Unknowns is the key word & risk. I have bought minerals for the last 40 years. Very few ever produce. Generally we value them at 2 or 3 times the lease bonus for those minerals with leasing potential and a low possibility of being drilled. I have minerals that have never been leased and do not expect my grandchildren to be able to lease them. In areas where the minerals should get drilled then, then it depends on whether they are leased or not. Price then becomes dependent on perceived production and how long it will take to get your money back. Assuming the well does not crater. Minerals can have a lot of upside, but there is always risk. The downside is what to pay for them. Minerals are commodities just like gold or silver.
I was in a similar boat not that long ago. I suspect if someone approached you to buy them, they are worth something. I would also venture to say they are most likely worth more than what was offered. It seems to me that there are a lot of people out there that have inherited mineral rights and really have no idea what to do with them or what they are worth. In which case, there are also people out there who search out people that don’t know what they have in an attempt to score a good deal on mineral rights they can sell to a larger company for profit. That being said, I was originally offered around $1k per acre for my rights and I’m working on a deal that’s over 3 times more than that and I know I am leaving some on the table for the middle man, which is fine with me since he has the relationships to sell them.
My advice would be to read around here, there’s lots of great advice and do some searching to figure out exactly what you have. Then you can shop it around and see how much people are willing to pay and make your decision from there.
Thank you
Frankie Newman said:
I was in a similar boat not that long ago. I suspect if someone approached you to buy them, they are worth something. I would also venture to say they are most likely worth more than what was offered. It seems to me that there are a lot of people out there that have inherited mineral rights and really have no idea what to do with them or what they are worth. In which case, there are also people out there who search out people that don’t know what they have in an attempt to score a good deal on mineral rights they can sell to a larger company for profit. That being said, I was originally offered around $1k per acre for my rights and I’m working on a deal that’s over 3 times more than that and I know I am leaving some on the table for the middle man, which is fine with me since he has the relationships to sell them.
My advice would be to read around here, there’s lots of great advice and do some searching to figure out exactly what you have. Then you can shop it around and see how much people are willing to pay and make your decision from there.
Just my opinion, to lease and then sell is the least desirable position to be in. When you leased you conveyed 72% to 87% of what you have to sell for the lease bonus price and the lease itself devalues what you have left unless it was negotiated for you by an oil and gas professional who did his level best to get the best possible terms for your side, but even in that event you are still selling your 12.5 to 27.5% along with a lottery ticket that the acres will not be drilled. If you have a lease with a couple years to run, there is no way to quantify the odds of whether those acres will be drilled or not and I for one, if I were buying, would assume that the acres would be drilled and the price would reflect that. As the law says, when you leased them you conveyed the minerals, with the mere chance of reversion, the minerals are gone and now you have a royalty interest in their production until the lease expires. This is what you are selling, the royalty interest, whatever it is. Between operators it’s not unheard of for sales of acres between $5k and $25k, you aren’t going to get what the operator would get, but I believe that you could get $3k to $6k or possibly more per unencumbered acre in a good area with proven production, which may be less than you could get in royalty, but the difference would be you get it now and not over a period of years. I wish you luck whatever you do.
Good answer and discussion.
I have been in oil and gas exploration since 1972:
Never sell minerals.
Ever.
Thank you. Due to some health issues I need the money now. Thanks again for the info and feedback.
Just my opinion, to lease and then sell is the least desirable position to be in. When you leased you conveyed 72% to 87% of what you have to sell for the lease bonus price and the lease itself devalues what you have left unless it was negotiated for you by an oil and gas professional who did his level best to get the best possible terms for your side, but even in that event you are still selling your 12.5 to 27.5% along with a lottery ticket that the acres will not be drilled. If you have a lease with a couple years to run, there is no way to quantify the odds of whether those acres will be drilled or not and I for one, if I were buying, would assume that the acres would be drilled and the price would reflect that. As the law says, when you leased them you conveyed the minerals, with the mere chance of reversion, the minerals are gone and now you have a royalty interest in their production until the lease expires. This is what you are selling, the royalty interest, whatever it is. Between operators it’s not unheard of for sales of acres between $5k and $25k, you aren’t going to get what the operator would get, but I believe that you could get $3k to $6k or possibly more per unencumbered acre in a good area with proven production, which may be less than you could get in royalty, but the difference would be you get it now and not over a period of years. I wish you luck whatever you do.