Understanding mineral rights

#1

Hi trying to understand my mineral rights. My Great grandmother passed them down through thr family.

I have always been told never sell your mineral rights but recently I have been contacted with an offer that surprised me initially. So I felt it was time to get a better understanding of what I have.

In reading through the posts here i have noticed the terms gross mineral acres and net mineral acres what is the difference?

What would be a reasonanle per acre price for the mineral rights? I understand that some of that depends on the exact location but I dont have my paperwork handy.

Thanks for your help in advance.

#2

Gross mineral acres is the tract you own part or all of, such as 40 acres or 160 acres. If you do not own 100% of those minerals (suppose you GGrandmother owned 160 acres and she passed them to 2 children equally then each would own 50% of the 160 acres or 80 net acres each). Net acres is the portion of the gross acres you own. A lot of offers are being sent out to buy minerals rights but in my opinion the offers are not near what the value of the minerals could be. You can check the drilling activity near your minerals of the WOGCC website. This can help in arriving at values, but I agree with never sell your mineral rights.

#3

Thanks for the help. Trying to figure out what is a fair offer. I have been offered$4100 per acre. I know a lot has to do with location. I believe I am in the Naples Ridge area. Is this a fair offer or a rip off?

#4

section township and range would be more helpful can’t place Naples Ridge right now. I would think there are much better offers out there if you are near any activity. I do not recommend selling unless it is absolutely necessary. I think it is possible that we could see Permian prices in this area with the stacked pay

#5

Fred I am in t37 sec 6 and t38 sec31. I appreciate your assistance in figuring this out.

You mentioned Permian and stacked not sure what you meant

#6

What township? Is there any activity near your acreage? Stacked pay refers to multiple zones that can be produced such as Teapot, Teckla, Parkman, Sussex, Niobrara, Turner etc. The Permian is the hot area in Texas that has multiple pay zones and is drawing offers well over $20000 per acre, not saying the Powder is there yet but it has potential to do better than the current offers we are seeing.

#7

Fred thanks so much. Townships 37 and 38

#8

Sorry I meant what range

#9

Section 31 38N 75W NW/4: E/2 NW/4 SECTION 31 38N 75W lots 2,3,4 NE/4 SW/4 Section 6 37 N 75W lot 4

This is the description I have appreciate any help in determining the value if I were to sell. Also curious if there is drilling activity that may make it more profitable to keep

Thanks for the Help. Fred Clausen you have been generous with your time

#10

Frontier.pdf (84.2 KB)

This map shows your minerals in yellow. The green circles represent producing oil wells, with the size of the circle proportionate to the production volumes. The producing formation here is the Frontier sandstone at approximately 13,000 deep. Drilling here is difficult and very expensive. Well costs are in the teens of millions.

The big green circles just north of you are vertical wells drilled 20 years ago in a geologic sweet spot.

Horizontal wells in this area have thus far had marginal results. Note the well just to the south of you which was a dismal failure. The two wells to your east would not be considered successful even though they made decent oil, simply because the well costs are so high relative to the production.

The horizontal well to the northwest is a decent well and there are 5 wells currently drilling around it as shown in purple…

The current activity has created some interest in your minerals.

One way to look at value would be to estimate the reserves per acre. I estimate the well in Section 12 will produce close to 400,000 bbls of oil. These wells are spaced on 1280 acre units and there could be as many as four wells drilled in each unit. That gives 4 x 400,000 /1280 = 1250 bbls/acre.

Assuming a 3/16th royalty would give you 234 bbls per acre. Recognize that figure is pretty speculative.

Compare that to how much you are being offered per acre, recognizing that the royalty payments will be spread out over 20+ years vs the sale wold be a lump sum. Also take into account that there is no guarantee that the drilling activity will continue moving in your direction.

Good luck.

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