Time to sell mineral rights?

I have been reading alot in various trade publications, and media sites, predicting the impending decline of fracking and shale production throughout the US. It has started me wondering if it might be time to start considering selling mineral rights while offers are high, or hang on. My quandary is our mineral rights are in fields that have had a few shallow wells but nothing at medium depths. Fracking has opened the fields up in shale layers at much deeper depths and the producing companies are starting to develop the areas now. I have learned that fracking is a much more expensive technique and the smaller companies are beginning to go out of the fracking business. Add increasing public and regulatory pressure and it doesn’t look like there is an opportunity for sustained revenue from these fields. So, the question is cash in now or hang on for a better return in the long run? I know there are lots of variables, and lots of opinions, but I know there are a lot of folks in this forum who know a lot more than I do about all this. I value your opinions and would like to hear what you have to say. Thanks.

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The answer to your question is complicated. The most important factor is where your minerals are located and what possible deeper reservoirs are under your shallow wells. Other factors are prices of oil and gas, pipeline infrastructure, whether you have heirs and want to pass on the minerals and give them a step up (or down) value, what other investments you have, etc. If you give a state and county, then folks can direct their opinions to that area.

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Thank you for your response to an impossible question. The property is located in Reeves county, Texas. Block 58, Township 2, Section 24.

I moved your question over to the Reeves forum so local folks there can comment. Geology can change across a county.

You can always sell part and keep part of your interests. This is a way to “hedge your bets” to try to capitalize on high current sales prices while keeping a part of the upside should there be additional development in the future. I would also suggest you think about what you plan to do with the revenue from a sale; it is usually best to be intentional with the funds from a sale (debt reduction, transition to another type of asset, vacation, etc.) so you can look back (hopefully with fondness) on what the sale accomplished.

I checked out your section and Rio Oil has two new wells that originate in your section and end in Sec. 25, directly to the south. Both wells include both sections so I think your area should be included. Congratulations!

The first well was spud 1/08/2019. The second was spud 1/23/2019. They may be completed but companies often don’t report completion right away.

If you are suddenly getting offers for your property, this would be the reason why. In your place, I would not sell now, and certainly not for whatever you are being offered, which will almost certainly be lowball. But everyone’s circumstances are different and you may need money right away. Just don’t sell it too cheap!

Here are links to your drilling permits with spud dates:

Drilling Permit 1

Drilling Permit 2

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I think about your question often. If it was a straight math question the computer could tell you what you need to know. Expenses for transactions including taxes will reduce the amount you receive net. I don’t live in Texas so I have to pay income tax both federal and state. Our property has been in the family for 100 years. So I have some sentimental value for our family history. If this were a straight business decision for me the sales proceeds would need to go into a new investment equal to or greater than the return I’m getting on the property in Reaves. For us that’s extremely hard to do without taking substantial risk. Therefore my conclusion is I like being popular with the land man at these extremely high prices. I am going to hold.

Thank you so much for looking up this info. It is one of the things we have been looking for.

If you click on my Drilling Permit links, and then look to the left on the reports that result, you will see a little box with a red and blue icon of Texas. Click on that and it will take you to the GIS Map Viewer, right to the wells. Zoom out and you will see the entirety of the well paths and surrounding area.

JPHale,

  First things first . . . . have you received any proposals of bonus or royalty options from any company?  If so, that is good, or it could be bad.  If you have, you truly need to check out the location of your holding and the activity surrounding your holding.
 If, whether or not you have received any proposals, in your investigation you discover that there is any kind of significant signs of exploratory or actual producing activity in your propertie's immediate or semiimmediate area . . that is good.  You need to initiate "Tracking" of those properties regarding Drilling, Completions, and producing activity!  If you should find such activity you need to access the TRRC records to find wells, depths, and . . primarily Production!  If these don't exist yet, start researching adjoining Blocks and their proximity to your property.

 I have been there and have done that.  It has benefited my family very well!

My best regards and “Fare Well”,

Stephen Watkins

I would look at the surrounding production and try and calculate what your NRI (interest in the well) would be then see what you could potentially make off of the first years production and compare that to what your offer would be.

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Bullshi*! Think long term and not just about yourself. If you have heirs, this process goes on for YEARS beyond your wildest dreams. You can’t spend it all in your lifetime unless you make the wrong decision. NEVER SELL OUT YOUR MINERALS unless your are the last one in line. Then assign it to the IRS or somebody you like better.

Wow. Not everyone who wants/needs to sell may be thinking only of themselves. The biggest cause of bankruptcy in the US is large medical bills - often because of children. So selling mineral rights may indeed be thinking about the future. Of course, selling is not optimum but we all don’t have the option to sit on disposable assets.

So what’s your advice for the last one in line?

There is always somebody else in line.

I would venture to say that is not necessarily accurate, not ALWAYS. The discussion was, “unless you’re the last in line”. I was just curious what his suggestion would be. It is not really as easy as you make it sound when you are, indeed, the last in line.

Well,You can always leave it to someone or something of your choice in your will.If you don’t… Well I guess the state will take care of things in its own way.

Over my dead body…

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Thanks to everyone who took time to answer this question and provide invaluable guidance. I thought this would be a good place to start, and you folks haven’t let me down. Now my family and I have a lot to discuss and think about. Thank you again.