Hello fellow Mineral Rights owners,
My family has a few scattered minerals in Grady county. They used to be just a novelty and for years nothing was really paid on the leases, maybe $100 a year per well at most. Since 2011 the proceeds have skyrocketed into the thousands, which is a good thing.
Lately we are getting bombarded with offers to sell our minerals. In the past few years the offers have gone from a few hundred per acre to as much as $15000 per acre. In my most recent offer, someone tried to pressure buy and offered me $12500 per acre for around 5.5 acres. That would net around $70,000. Those 5.5 acres are netting me about 400 a month now which would net me only about $48,000 in 10 years; but factoring in depletion it will be significantly less.
So, what am I missing? Why are these guys willing to pay me twice what it appears to be worth at this point in time? Is this some kind of scam? I was told by the buyer that they try to calculate payment based on what they can double in 20 years, so If they give me $70K now they're gambling that in 20 years this depleting well will produce $140k.
Sounds like a good way to make some money fast while my feet are still above ground, but if their predictions are right, It would be better for my family to wait it out and take the declining monthly payments, I doubt I will be around in 20 years.
I'm not in a hurry to sell, but i also hate to pass up a good opportunity, though I never buy into anything when I'm given a "now or never" pitch.
Is anyone else dealing with this? Any wisdom on the value of my minerals is appreciated
__Pennyman__
Pennyman,
I have discussed this issue with several professional royalty buyers. One in particular mentioned that he used to pay $1,500 per acre in a particular section in Grady County and now the same section is going for around $15,000 per acre. This is very similar to the housing market bubble of 2007/2008. Many players got in the game and drove the prices up very quickly. As with most bubbles, it is not likely that it will last long. The money that funds these purchases is mostly private equity from out of state. At some point they will see that it is uneconomical to continue at these prices, and the market will likely correct itself.
It is always hard to decide whether to sell a mineral interest. Money is not the only factor to be involved: future family legacy, maintaining something that has been in the family for some period of time, and what could be a steady source of income in the future. You should consider your desire for quick cash and mineral ownership perpetuation. You can also consider the possibility of selling some and maintaining a smaller portion. The prices you received was more likely than not a legit deal. I would ensure that you are dealing with a reputable company. Any reputable mineral buyer will be registered with the BBB, so check there first. If you cannot find anything on the BBB, you can always search the internet for information on the company. Additionally, have someone knowledgeable in the business review any contract for purchase.
I hope this is helpful. Please ask any follow up questions that you have.
Chase
Pennyman,
Also, you have to consider the "time value" of money as well. The biggest unknown being whether there will be additional wells in your unit over time. That would be gravy for the buyers rather than you.
A tough call, but I think I'd still lean toward accepting the offer at that price. Seems like less risk.
Rick
If I get the urge to sell I keep reminding myself of the very large untapped amount of oil under each section that present technology is unable to tap into and that is something my heirs may benefit for generations to come.
One of our operators told me that there was a potential 10 wells to be drilled in each section so all of this holds me back from selling.
Once you sell it is gone forever....
Your quite right Linda, but who knows what regulations, or what the price/barrel, will be in 10-20 years. The down side to minerals is that there's very little in the way of utility, or a hedge for the average mineral owner. Cash almost always gives you some choices. My family is sort of in the same boat as Pennyman, with one decent well, but many more acres.
Rick
Keep in mind that you could always choose to sell 1/2 or 1/4 of what you own.
I appreciate all of the good replies- At this point I think we will just hang on to the minerals-If someone wants it bad enough to pay $15,000 per mineral acre, It must be worth keeping around. I couldn't see any reason to just sell it off little by little. not really hurting for the extra income-just want to maximize the yield if possible by selling at the right time. Don't anticipate Oil prices going down long term.
I applaud your decision. They aren't the good guys making those offers,all they are doing now are looking for mineral owners desperate for cash.Oil prices will eventually recover as long as the demand is there.
I wonder who has made the decision to sell portions/percentages of their mineral interests. I need some cash right now, so am tempted. My father was an attorney in west Texas for half a century and I can’t get around those words he spoke to me a good 40+ years ago, “don’t ever sell your mineral interests”. Of course he had several female descendants where I don’t. It’s definitely a tough call and I am battling with it. Being a, what I consider relatively young, recent widow, there are things I could do with the cash that I will probably not be able to do otherwise…, but then I’m not at the point, yet, where I have to have the money. I’m finding this decision darn near impossible to make with all the variables involved. Sure would appreciate any and all input.
Linton,
I see this happen on a regular basis. It's exactly as you describe: We want to hold on to the minerals, but do not necessarily need to hold on to all of the mineral interest. It is a difficult decision either way. Certainly minerals in hand can be more valuable than minerals sold, but the value is mostly potential value. The price has not been driven up just because the minerals are valuable, but more because of supply and demand. Many royalty buyers have entered the market and are competing for a limited supply of mineral rights. You should consider looking into whether there is production around the section where you own minerals, and also check your options on what is being offered to sell. Most royalty companies are in the mineral grab mode and will buy whatever you are willing to sell.
Thanks for the reply, Chase, very good advice. Many years ago we in the family all got a good laugh because there was a well drilled on some of my Dad’s mineral interest property in Ward County and it was a “gusher”. Daddy got so excited and, seeing the writing on the wall from a lawyer’s point of view, etc., he ran down to his office and quickly deeded all of us kids a small share of his small share! That “gusher” lasted about 15 minutes. Somehow out of all the moves I’ve made in the last fifty years, which are many, I’ve always managed to hang onto that old lease in it’s tattered blue back. He said, “Hang onto this, it may be worth something one day.” And he was right. I’m sorry it was never worth much during his lifetime, but I know it would put a smile on his face to have seen the west Texas oil boom in the last few years. Thanks again, Chase, I’m trying to figure all this out. Linton