I need to provide the value of my mineral rights in 157N-94W-sec. 32 for my daughter's college financial aid forms. Two wells are producing and my last check from Hess was for 119 dollars. I do not receive monthly checks--usually quarterly. My interest is 1.6 acres. I have been offered $500 for my interest. I don't want to sell but I need a ballpark figure on what my interest is worth. I've been told that any offer to buy will be very low. Is there another way to calculate value on mineral rights without the expense of an appraiser? Any help on this will be appreciated. J. Reinke
Joan,
For your purposes of college financial aid information, you could use the Hess 1099 for 2014 and divide it by the number of months of production in 2014 to get a monthly average net. Then estimate that 2015 monthly average will be 1/3 of 2014 and 2016 will be 1/3 of 2015. Given today's uncertainties in the oil market, even that projection may be optimistic. It will certainly show that your mineral income will not carry much weight when it comes to supporting a college student's needs.
Gary L Hutchinson
Minerals Mangement
Father of 3 highly educated sons
Mineral Appraiser
Gary,
Thank you for your reply. We are looking for a valuation of our mineral rights, not mineral income, for the FAFSA. Although we expect our daughter's college expenses will be covered in large part by scholarships, we'd like to get a sound figure for the rights, even if that is the current market value.
Congratulations on raising three highly educated sons! I know how expensive it is to send one child to college--three is quite an accomplishment.
Joan
JOAN,
In the legal, financial and economic worlds, mineral rights value is a direct function of proven mineral reserves in the ground. Proven reserves are those that have been identified to the extent that there is no doubt that they can be produced at a profit using current prices and technology. Proven mineral reserves are expeditiously measured by the amount of income the minerals are capable of producing. Hess is a profitable company, therefore your risk free income is an indication that you have proven reserves the easy way. College financial officers know about identifying reserves through anticipated future income based on current income trends.
If prices change, as they have, the complex engineering calculations of proven reserves will change and your value will go up or down. Those studies are very expensive and would severely diminish your proven reserve value. Hess may shut in your wells if they are not longer profitable. (see proven reserve definition) For a time, your income and proven reserves may be zero. Hope that helps you understand that mineral income is the best and cheapest method of estimating mineral value.
Gary L Hutchinson
Now if I can get them to support me.
Gary,
Thank you! I wanted the best and cheapest method and I'm glad that I understand it now. Good luck with the support.
Joan