I’ve got purchase agreements for 14 acres in Williams county North Dakota. How much do I sell each acre for? Nonproducing at this time but eventually every square inch in Williams county will be sold.
Welcome to the forum.
Location is critical in that county, so be more specific with section, township and range. And be aware, that many offers to buy come before the bit, so find out about activity before being too quick to sell. If you have a purchase agreement, then don’t you already have an offer? It would be wise to get an attorney to review it as some offers have very unfriendly fine print.
Thank you for your information. Yes, I have purchase prices but want to know if they’re fair.
In general, most offers that I have received were for some discounted cash flow for a certain period of time of the perceived royalties of current wells-based upon a geological and engineering analysis and a certain price deck. Many buyers will not offer payment for the expected value of any new wells that they think are likely to be drilled. They want that profit for themselves. (Our family prefers to keep the profit for ourselves.)
if you have no real need to sell, then just sit back and wait. If you have a need, then always ask for more than what they offered.
My engineer says that “Fair Market Value of producing properties is determined by taking 75% of the discounted cash flow using a 10% discount rate.” Many engineers consider the fair market value to be the amount a willing buyer will pay a willing seller, with the properties of interest being for sale for a reasonable period of time, neither the buyer nor the seller being under a compulsion to buy or to sell, both being competent and having reasonable knowledge of the facts."
Unfortunately, mineral owners are rarely as knowledgeable about the facts of the area since they do not have their own personal geologists, engineers and landmen.
Similarly, my attorney says that “a fair price is a what a willing and informed buyer under no compulsion to buy and a willing and informed seller under no compulsion to sell agree to”. Unfortunately, the seller is rarely as informed as the buyer.
My analogy is that if someone popped up out of the blue and wanted to buy my car, I would be very hesitant to do so without learning a whole lot more about why and if the offer was legitimate. I would have attorney look at any contract.
I would never turn over a lease or a contract for sale without getting paid with a cashier’s check the same day. And for royalties, I would check that there are no funds in suspense or funds at the state treasurer’s office. Buyers are often after those as well.
M_Barnes, how would a person go about finding out if there are payments “in suspense” or at the State Treasurer’s office? Just curious if you can help with that. I appreciate the great advice you give!
I use Missingmoney. https://missingmoney.com/ It has the links for all of the states. Check Delaware as well as the state where the person was living. Occasionally, you have to check the state where the company is domiciled (hence Delaware).
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Value of undeveloped mineral rights is whatever someone will pay you for them at the time of sale. You can compare to surrounding sections, but you have to factor in things like when they were sold, what oil and gas prices were at the time, well production etc. Its impossible to tell you if the offer you are getting is fair as nobody on here knows if your section will ever get drilled or what the price of oil and gas will be at the time the well is completed.
Thanks for your help!!! I actually found $$ due my husband!
How do I found out about activity in the area that I’m potentially selling. 158 N, Range 96 W, Williams County PM
And, what does “Estimated Royalty” mean ?
158N-96W There has been active leasing in the sections that do not already have horizontal wells. A rig is onsite and drilling about five wells in 28/33. Phoenix Capital Group is the operator.
I would have to see the context to comment on Estimated Royalty and what it referred to.
“Estimated Royalty” means whoever is making the offer does not know what royalty your interest is leased at with certainty aka they do not have title nor have they looked very hard into your interest itself. More often than not they are going to assume a higher royalty to make the offer look more attractive, then proportionately reduce once you are already under contract and title has been verified.
This is fairly common and not necessarily nefarious but I would just be aware of it.
100% truth.
A free market at work… it’s all about efficiency. The less homework done prior to getting a call from “low hanging fruit” owners, the better for the buyer/offerer/letter writer.
The devil in all these “correspondences” is in the details. Remember, in the end, the only thing that will matter is the language in a deed, and the volume of money in the Seller’s account.
FYI, there is indication of activity in Sections 5,6,7 & 8, doing a quick search through the ND DMR hearing dockets just posted. In your township/range, a 4 section well being proposed. Not sure of your section, but be aware that they are always attempting to purchase in areas where they have knowledge of wells going in.