Value in eddy?


#1

Lease expired 3 years ago, recent offer to buy mineral rights. Anybody know value in township 19 range 26?


#2

In the East, mineral bonus payments for leasing minerals recently went for $95K/acre at auction while the West is more modest ranging up to $3,500 for lease bonuses. Depending where your MI is, the valuation to sell outright could be quite significant given all the current and planned activity in the area. If you cannot hold onto the MI for whatever reason, recommend speaking to a landman and/or lawyer to better understand the future valuation of the minerals to ensure you are not being undervalued.


#3

The $95,000/acre was a BLM auction for a 10 year term and 12.5% royalty, so big grain of salt there.


#4

Thank you, I will keep both of these responses in mind as we move forward


#5

Location is a “bit” bigger driver than lease terms. His acreage is 19S 26E. Nowhere near the Loving border where BLM acreage went for 95k. Not even in the Delaware Basin, on the NW shelf in Yeso land.

Here is a cartoony map. Wells shown on zoomed in version are all Yeso wells. Shallow, not real great. 50-100kbo. Most drilled before oil crashed in late 2014. Yes, BLM leases have better terms but some offset BLM leases shown. Pricing around $1k an acre. To lease. So that is probably the high side of what you could lease for.

You mention buy your minerals though. Minerals are forever. I don’t know what section you are in, but at some point on a “forever” time frame somebody is probably going to drill your section for the Yeso. If for instance you owned an acre in Sec 8 of 19S 26E…and you leased it to COG at 3/16th. They drilled 8 Yeso wells. Those wells have made 613kBO and still make around 250 bopd total. The royalty payments made and expected for a single acre there are:

613kbo x $50/bo x 1acre/640 x 3/16th = $8980 per leased acre (past production) 250bopd x $40/bo x 1acre/640 x 3/16th x 30.4 days/mo x 48 months cash flow = $4330 per leased acre (current production)

That’s an EXTREMELY best case scenario, but even with iffy Yeso wells your royalty may be worth a good bit more than the lease bonus if they drill a ton of them. Its probably fair to pay you something like 1/3 of that, bird in the hand and all. Thus I’d come up with an imaginary number of say $5k/acre to buy your minerals.

Not a landman or a lawyer. :sunglasses:


#6

Thanks for your input, it was very informative. We are a new generation just taking control and have a lot to learn, so every bit of information we can get is great. I guess my next question would be, would it be standard practice for someone with mi to contact say, Yeso to investigate leasing negotiations?


#7

Shawn,

Sorry for confusion, the wells near your acreage produce from the Yeso formation (rather than say the much more productive BoneSpring or Wolfcamp in the Delaware Basin). The operators of Yeso wells near you are predominantly COG (Concho Oil & Gas) and Mewbourne. Ideally some operator is leasing or has been leasing in your section and would contact you to lease. IMO it never hurts to contact an operator, always good to shop anything before selling. I’m sure if you tell folks here what Section you are in, somebody with access to Eddy County courthouse records can tell you what leases have been filed recently and by whom.

I would guess this area is kind of sleepy right now on leasing, it seems like a place people will drill at $70-$100 oil but not at $50…but could be wrong.

Good luck.


#8

Thanks again. This clears up even more. We are T19 south, R 26 east Sec. 13 and 14 feel kinda stupid in all this, but am slowly learning


#9

Looks pretty quiet in those two sections- some plugged wells and one operating gas well (Oxy Petroleum-small red circled). If you look to the North there is activity and several horizontal permits (blue Ps). All the permits are with COG Resources issued btwn 2013-2015.

Below are links to the OCD site for info on the Gas well in section 14 as well as info on one of the closer permits. This may give you more info and can link you to the operators:

Oxy Gas Well: OCD Permitting - Well Details

COG Permit: OCD Permitting - Well Details


#10

Thank you BP11. This also helps. Greatly appreciate the help.