Just learning about a family member who inherited some mineral rights in Martin county TX. Where do I go to learn about the # of wells and production? We have received a few offers and curious how to learn more about the valuation of those rights. Any advice on keeping and leasing vs selling? What are the key factors to look at? Typically what is an investor hope to make on the MOIC.
Section 4 Block Township 37 T1S Martin
TX Railroad Commission (RRC) Geographic Information Systems (GIS) Map: https://gis.rrc.texas.gov/GISViewer/
There are four producing vertical wells: Endeavor operates the W2 and Pioneer, who will probably operate any horizontal production, operates the E2. The primary factor is to look at the value on a Net Revenue Interest (NRI) basis. Say they drill 2 milers through 4 & 9 sections. 1 acre in the W2 is 1/640 = .0015625 * however much it costs to drill say 8 wells @ $5MM is $40MM = 62,500 is the cost to participate. Say the oil company expects 1.5 MOIC ie $60MM in revenue * .0015625 = 93,750. Now, 1 acre leased at 25% is .0015625 * .25 = .000390625 * $60MM in revenue = 23,437.5 + bonus. As shown 93,750 - 62500 = 31250, so any bonus over 7812.5 (31250 - 23437.5) would be worth leasing at 25%. This obviously changes as the MOIC increases and makes it worth participating. The value is going to go up as it gets closer to production as the discounting for PV changes. PE companies want to make 2-3x MOIC but at least 25-50% generally speaking. Current bonus prices are competitive, but around 20-30K/acre in this area, so add that to the 25K in revenue for the value of leasing the minerals. To value the unleased minerals, think of the best estimated ultimate recovery (EUR) of the wells * oil price market. Say everything comes together and they make 3x or $120MM in revenue * .0015625 = 187,500 - 62,500 = 125,000/acre discounted for PV. Sorry for being a little convoluted but this gives you an idea.
Hi I used a team out of Midland for the same issue here’s her contact info and it cost a little over 1000.00 dollars. Money well spent IMHO
Contact Cathy Norwood (432) 683-4391csnt recall company name.
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