My wife and her brother each have a decision that they need to make regarding selling their mineral rights in Grady County versus holding out for royalties. I was hoping some of you knowledgeable members with no stake in the decision could weigh in on the pros and cons of each possibility. I have my own personal thoughts on the situation, but I want to avoid steering the responses so that they can feel better about what decision they choose to make.
My wife and her brother each own a 25% stake in 50 net mineral acres in 02-09N-06W, with their aunt owning the remaining 50%. Each of them had previously leased their rights to Citizen Energy II for a lease bonus + 3/16 royalty. This past week, their aunt made the decision to sell her already-leased 25 acre equivalent for the price of $14,000 per acre. If my wife and brother-in-law were to also sell their rights for the same price, they would each gross $175,000 for the sale. That is a significant amount of money for the average person to receive at once, so the temptation is definitely understandable.
Some other factors to consider:
Leon 1H-2-35 was spud on May 5th by Citizen. Once completed, this would be the first well that could or would generate royalties for them.
Production for recently completed wells in a nearby section (taken from NewsOK on 10/12/16):
Citizen Energy II LLC; Rosemary No. 1H-1-36 Well; NW1/4 NE1/4 NW1/4 SE1/4 (SL) of 01-09N-06W; 1,355 barrels oil per day, 3,562,000 cu-ft gas per day; TD 17,929.
Citizen Energy II LLC; Rosemary No. 2H-1-36 Well; NW1/4 NE1/4 NW1/4 SE1/4 (SL) of 01-09N-06W; 1,123 barrels oil per day, 2,086,000 cu-ft gas per day; TD 17,927.
So considering this info and the known production capability in this region of the state, what are the risks and likelihood of leaving significant amounts of money on the table in EITHER decision? Does $14,000 per acre seem like a fair offer considering the rights are already leased, or is this still significantly undervalued?