Value of mineral acres - Divide and Williams County - North Dakota

I own about 160 mineral acres in 160N, 101W and 160N, 102W of Divide County, North Dakota and also acres in 159N96W and 159N97W of Williams County, North Dakota. I am NOT interested in selling them. I would however like to establish some kind of value just for my own net worth statement. I’m at a loss as to how to value them. In Divide County there are no wells on this property but drilling activity is getting closer and the closest producer is about 2 1/2 miles away. In Williams County there are two producing wells that are producing about 150 barrels per day on average. As for a ballpark value, I was recently told to use about 4 times the going lease rate in the area. Does anyone have any suggestions short of paying for a formal appraisal?

Sparky:

Establishing a value on minerals is not an easy task. You have to consider your total net mineral acres in an area, how close is a producing well to your minerals and what is the production, what is the current bonus rates for your area in regards to leasing and is your area currently leased and on what terms. I would avoid seeking a formal appraisal if possible due to the extra expense and most likely they will utilize these same methods in determining the values.

Thank you for your comments. My total net mineral acres in Divide County, 160N, 101W and 160N, 102W total about 150 acres. This was leased about 18 months ago for $400 per acre. I’m told the current lease rates nearby are about $1400 per acre. There are about 10 drilling permits now issued in an area between 2.5 and 6 miles from this land. The closest producing wells are about 2.5 to 3 miles away and it appears the initial test showed about 300 barrels per day from the Bakken. My remaining 4 mineral acres are in Williams County 159N, 96W and 159N, 97W. This acreage has more activity in the area and we have two producing wells with production from 100-200 barrels per day. This was leased about 2 years ago for $700 per acre. Any help with valuation would be appreciated.

charles s mallory said:

Sparky:

Establishing a value on minerals is not an easy task. You have to consider your total net mineral acres in an area, how close is a producing well to your minerals and what is the production, what is the current bonus rates for your area in regards to leasing and is your area currently leased and on what terms. I would avoid seeking a formal appraisal if possible due to the extra expense and most likely they will utilize these same methods in determining the values.

Sparky:

You are definately located in a "hot area" and you have a decent amount of net minerals in the area. If the current lease bonus is $1400/acre, I would go for a figure between $1800 - 2,000/acre with a 20% royalty and three year lease period. These leasing individuals have a ceiling amount they will pay and it's your job to find out what that price is. Don't forget, you can and should shop around to see who is leasing in your area and market your minerals before you sign a lease. I always negotiate on the high side as you can always go down on your bonus amounts. These are you're minerals and you are in the drivers seat in regards to the final approval.