I continue to see many newcomers to this site want to know what their minerals are worth. They typically have received an unsolicited offer saying the buyer will pay the current year property taxes and all costs to transfer ownership. Often times these potential sellers have just realized they own something, and they are ecstatic about the “found” money .
Last night I was reading a booked called “The Frackers” by Gregory Zuckerman. Tucked near the back was a sentence on EOG and their holdings in the Eagle Ford. It said “…EOG estimates that it can recover 2.2 billion barrels of crude from its 639,000 Eagle Ford acres.”
If that is accurate on EOG’s position, that equates to 3,442 barrels per acre. If the royalty is 20%, that is 688 barrels, Now at $50 to $80 per barrel, that is $172,000 to $275,000 per acre over time. Recognizing that the buyer has to make a fair profit in a reasonable amount of time, the value might be 1/4 to 1/2 of that amount which might be $43,000 to $135,000 per acre.
Now one must ask certain questions:
- is 2.2 billion barrels on 639,000 acres reasonable?
- how does your interest compare to EOG’s Eagle Ford position?
The buyer wants it for the least amount possible, the seller wants the most possible and somewhere in between might be a transaction both can live with.