Value of royalty rights


#1

A few months ago my aunt, sister, and I each received letters from a company offering to buy what they are calling a combination of “oil and gas rights and non-participating royalty rights” for property in Greene County, PA. It is a total of 44 acres among the three of us.

The letter contained portions of a chain of title (field notes from the company’s title agent) showing that in the 1970s a friend of the family left the rights to my grandparents (who died in the 1980s), and that subsequently the rights now rest with my aunt, sister, and me. (The field notes do not contain any actual language from the wills to show the language used in granting the rights.)

The letter said that if we would like to sell the interest, the company will run a full mineral title of the property to confirm the ownership, and that the offer could increase or decrease, depending on what they find. Further, it says that we would not be under an obligation to sell until we agree on a purchase price.

We were unaware that we owned any rights prior to receiving the letters.

The first letter offered $2,000 an acre. My aunt called the company, said that the offer was not enough, and asked them to send a second offer.

The second offer was for $2,500 per acre. The second letter stated that “The big issue that is preventing us from paying more money is that about 95% of this interest is a non-participating royalty interest. … If you owned more of the executive rights, we could offer you more money.” This second offer was limited to 30 days.

From what I understand, a non-participating royalty interest means that we are not able to force the lease of the oil and gas, and are not entitled to a lease signing bonus. But, if the “executive” holder of the mineral rights ever decides to enter into a lease, and the land is drilled, we will be entitled to a portion of the royalties.

I informally talked to an attorney who said his firm would charge around $10,000 for the title search.

My guess is that the 30 day limit on the offer is a pressure tactic, to force us to move quickly, without exploring other options.

We are wondering if $2,500 is a reasonable price and if not, who could we talk to about getting a better price? (I’m guessing that without knowing the percentage of the royalty rights, an accurate price is hard to judge.)

I have done some research, but all of the web pages I find are talking about holders of full mineral rights. Any information would be greatly appreciated.