Value of orri 959 ac. in Township 21 South, Range 32 East?


#1

have numerous cash offers for my orri in Township 21 South Range 32 East Sections 3, 10 &15, what is a fair offer ??

thank you


#2

who is making the offers that might give an insight to fairness?


#3

Fair is eye of beholder I suppose.

We all know that they won’t offer you something unless they think it will be worth more than that. It’s entirely possible that everybody that made you an offer just did it based on hoping that a bigger fish will pay them a bit more than that price, very quickly. They don’t care what it’s worth, just what somebody else will pay them for it. That way they don’t have to worry about the risk of development either. They make an offer, get you under PSA, then try to market it. If they can’t, they may bail prior to closing. Maybe. Let’s assume those offers are on the low end of “fair”. And even then, minerals are at an all-time high, most mineral owners have a lot of mineral eggs in a single basket, it’s not insane to just sell for 100s of times your current cash flow and cash in. Fair is what you make of it.

The person making you a higher end “fair” offer is, IMO, paying you today for some possible/risked future cash flows. Paying you $.50 on the dollar for birds in the bush. What sort of cash flows might those be…should have at a minimum 2nd BS and 3rd BS targets. Probably less economic BSPG1 or Delaware. Wolfcamp up there is pretty dicey. There are no permits on those sections. If you have no idea when your acreage is going to get developed your cash flows could be pretty darn far out in the future, thus fair price is a lot less, as those future cash flows are going to get discounted back at a pretty high rate to account for the risk (that they may not happen).

What is a fair number for somebody that would hold your ORRI and see it get developed…at $60WTI? I’d bet $10k-$13k per nra. So 959 x ORRI %/12.5 x let’s say $11.5k/nra = $920k per 1% ORRI. That’s my guess. Maybe I’m totally wrong.

Good luck.