Valuation in a Dead Area

Arkansas Mineral Rights
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15-20 years ago the Barnett play set off a series of unconventional horizontal plays including the Fayetteville. I appraise minerals as a Cert. General Appraiser and Reg Prof. Geologist. The Fayetteville booms for 10 years peaking at some 48 rigs with a collapse starting in 2011 or so to zero rigs running after 2017.

I annually value a 3500 acre estate parcel on the south side of the play. This was leased at $750 per net mineral acre during the late 2000s. A well drilled was dry, the Fayetteville drops off into deeper ground any further south. A few nearby wells managed to get small amounts of gas from Atokan formations above the Fayetteville. Another well to the west of the subject was converted to a disposal well which still is operating. Unlike the failed deeper disposal wells near Guy, AR, this zone is shallower and has had no earthquake issues. With zero leasing having gone on a full 10 years how the heck do you value such property? I mean first, is it really a viable prospect for Fayetteville gas? Or, only marginal prospect for Atokan gas? Or, is its value for disposal wells and what are the available sales that would support a market value estimate? Someone somewhere would probably be willing to buy the mineral but would they pay more than a few dollars? I think not, but trying to decide how much a “few dollars” is, well, that’s my problem. Anyone know where (in the US not just AR) a cheap sale has occurred? Inquiring minds want to know.- Terrel Shields

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Great points about the challenge of valuing non-producing minerals. I routinely see small mineral parcels in a non-producing area of Southern Colorado for $15-$25/acre on an online auction. In my opinion, they have little to no future potential. No producing wells for miles. Some remote helium activity is occurring in the region, but not on small parcels. Considering these each have a minimum annual property tax bill of $5 per parcel, I don’t think those small rights are even worth paying for. I say this because I do own some. But similar rights continue to be sold weekly there. In Kansas I feel like in most of the state if it isn’t already producing it probably won’t be in the future either. Very few prospects left overall. Better prospects in places like OK TX in comparison.

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