I have been reading this site and find it curious why some people get offers of $100 per acre and some people are getting $1000 +. Can anyone help me understand why there is such a large range?
Mr. Cotten,
Opinions like yours are what is causing some landowners to hold out so long and hope for such high bonuses, that they never get anything. Landowners need the oil company just as the oil company needs the landowners. I don’t see any landowners out there drilling their own wells. And yes, there actually is a going rate. There is a going rate with everything in life. Just because I may think my house is worth $1,000,000, doesn’t mean that it is. If you build a $5MM house in a neighborhood of $300,000 houses, is your house still worth $5MM?? Absolutely not. It’s the same concept when you have people thinking their minerals are worth a $30,000/acre lease. It doesn’t matter what you might “think” they are worth. Don’t you “think” you should get paid more at your job? It’s the same concept, it matters what the going rate is. So I would be careful when advising people to set their own price. They should do their due diligence first, then set their own realistic price based on what is going on in that area at that time.
Respectfully.
Buddy Cotten said:
Dear Mr. Pollack,
There is no higher expression of capitalism than an oil and gas transaction.
I do have my own opinion. My opinion is that the mineral owner sets the price. It seems like the rest of the world thinks that the oil company sets the price. I feel that the mineral owner gets to do whatever he wants with his minerals, except in force pooling states.
Some people want to make sure that they are being paid the "going rate" in their area. What that actually means is that they prefer to value their minerals at the same rate as the worst negotiators in the county - the ones who leased first.
Best,
Buddy Cotten
Mr Cotten,
I understand you fully, but what i am worried about is many landowners taking your advise to the extreme. It's already happening. I hear landowners telling other landowners everyday that their minerals are worth $30k/acre. Like i said previously, just because you think they are worth that, doesnt mean they are. NOW, if you can convince EVERY SINGLE landowner in a particular area to hold out, well then you just MIGHT have a shot at getting that ridiculous amount. But we all know that's not realistic. All im saying is that, telling landowners that they can do whatever they want just because it's their minerals, isnt the way to go. Now, of course the companies are paying the lowest amount possible. Again, that happens in America every day in every business. You guys act like it's just the oil companies trying to bet bottom dollar. Anyone that sells something, buys it for bottom dollar and sells it higher to make a profit. This is a basic point, but it's the exact same concept. Now, you are correct about there being a middle ground somewhere. There is a difference between getting the "going rate" and getting screwed.
Buddy Cotten said:
Dear J.
I think you misunderstand my point. If a landowner wants to hold out for $30,000.00, he does.
Because he has define the price for HIS minerals. Now, this whole concept does not work in forced pooling states. Clearly, competition will encourage the oil companies to compete at a higher level to the benefit of the landowner. If you throw enough money at me, I can be out of my house by 5 today, for example.
How do you think prices for mineral leases are set? I will tell you. By the cheapest the oil company can pay. Is that not correct? Or am I being naive again? But, on my minerals, I set what I feel is a fair price to me. If they do not want to pay it, well, that is fine. The risk of loss is on both of us at that point, no? Then again, pigs get fat and hogs get slaughtered. I want to lease my minerals. To do otherwise, would be counterproductive. But no transaction ever occurs until the scales of value are in balance.
Best,
Buddy Cotten
J said:Mr. Cotten,
Opinions like yours are what is causing some landowners to hold out so long and hope for such high bonuses, that they never get anything. Your opinion about landowners being able to do whatever they want just because it’s their minerals, is naive. Landowners need the oil company just as the oil company needs the landowners. I don’t see any landowners out there drilling their own wells. And yes, there actually is a going rate. There is a going rate with everything in life. Just because I may think my house is worth $1,000,000, doesn’t mean that it is. If you build a $5MM house in a neighborhood of $300,000 houses, is your house still worth $5MM?? Absolutely not. It’s the same concept when you have people thinking their minerals are worth a $30,000/acre lease. It doesn’t matter what you might “think” they are worth. Don’t you “think” you should get paid more at your job? It’s the same concept, it matters what the going rate is. So I would be careful when advising people to set their own price. They should do their due diligence first, then set their own realistic price based on what is going on in that area at that time.
Respectfully.
Buddy Cotten said:
Dear Mr. Pollack,
There is no higher expression of capitalism than an oil and gas transaction.
I do have my own opinion. My opinion is that the mineral owner sets the price. It seems like the rest of the world thinks that the oil company sets the price. I feel that the mineral owner gets to do whatever he wants with his minerals, except in force pooling states.
Some people want to make sure that they are being paid the "going rate" in their area. What that actually means is that they prefer to value their minerals at the same rate as the worst negotiators in the county - the ones who leased first.
Best,
Buddy Cotten
Mr Houston, the operators agent will often make a really lowball offer because so many mineral owners are uninformed as to the value of the minerals they are asked to lease, and will accept the offer without negotiating.
Timothy W Houston said:
I have been trying find the answer to the same question for over a year. Mr. Cotten, THANK YOU! That is the best answer/comment I have read on this subject. I was reaching the conclusion that there is no "rhyme or reason" to amount of bonus, etc. That will help me deal with my decision making......
I understand everyone's point here. In my particular situation, I have a small number of net acres - only 20 out of 640. Additionally, everyone else has already signed their lease agreements (for what amounts I do not know). Given I have a small piece and everyone else has signed, I want to negotiate a fair deal. The problem is trying to figure out the fair price. Is there anywhere (other than this website) I can research this info.
With real property for example, recent sales are used to gauge the market and this information is readily accessible. With mineral right lease bonus offers, I have no idea how to learn of the most recent transactions.
If you are the last holdout, I think you could benefit at the very least from buying an hour of a landmans time and asking their advice. I think it likely you could find a landman in the landman thread. Pick one that isn’t anonymous. Good luck