Offer to buy oil,gas and hydrocarbons for 6,500.00/acre in Center twp,Butler County,Pa

I'm considering selling roughly 30% of my oil/gas rights and have been offered 6,500.00/acre. To accomplish this I would sell the oil/gas rights on 21.412 acres in full(100%) and keep the remaining 50 acre rights for myself. My particular circumstances require me to acquire some funds upfront and even though I know selling some of my rights is a bad idea, I must consider this option. Forgetting all the reasons NOT to sell I would like some input from you knowledgeable Gomarcellus guys and gals that are getting royalties in Butler county if this seems like a fair amount for Center township Butler county Pa.. All thoughts and ideas are welcome but please refrain from any bashing or negative character comments. Any information on contract wording to insure only gas, oil and hydrocarbons are being sold vs all mineral rights would be appreciated also.      Thanks in advance, Bob A. 

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Permalink Reply by LewPa on June 15, 2015 at 7:56pm

Bob A,

That is a fair offer for Butler Co. What is the name of the company offering it? Definitely go thru a lawyer to make sure of the language. Amy Molloy, SR Law in Slippery Rock is very good and sharp with OG matters.   Good luck and let us know how it turns out.  LewPa 

Mike MurphyPermalink Reply by Mike Murphy on June 15, 2015 at 10:23pm

ATTORNEY

Permalink Reply by Max on June 15, 2015 at 10:10pm
Bob,

Speaking from experience, if you are in one of the new REX units, unless you are starving, don't sell anything. A few years ago I received a bunch of offers right before our unit went into production. In the first year of royalties, I got paid 90% of what the highest offer was. 5,500 per acre. Be patient, you are sitting on a gold mine.
Permalink Reply by Trapper on June 15, 2015 at 11:07pm
Max,that's $450/acre/month. About 20X what I'm hearing from others here in Butler County....
Permalink Reply by Max on June 16, 2015 at 5:43am
Trapper,

Actually, what I got for my first year came to $350/acre/month with 2 wells. Or $175/acre/month/well. That's net with deduction. Everyone is free to make their own decisions, but for me, It would have been a huge mistake to sell.
Permalink Reply by Trapper on June 16, 2015 at 5:58am
Wow max! Definitely would have been a mistake for you. Thank you for sharing.
Permalink Reply by Philip Thackray on June 16, 2015 at 6:09am

Max,

Can you tell us what County and Township you are in?

Phil

Permalink Reply by Philip Thackray on June 16, 2015 at 7:13am

Bob,

The recent results from the Rex Renick pad confirms that that area of Center Township is on a par with the best Rex "legacy Butler County" area.  That was important news.

From my experience in an XTO unit in Forward township for:

1) a fully drilled unit (90 acres per well)

2) 30% deductions

3) 15% royalty

4) in the first year

DEPENDING ON COMMODITY PRICES

$6500/acre from royalties IN THE FIRST year is very achievable.  HOWEVER at current prices that is not possible.

In my unit the well output declined 40% in the first year.  This is considered to be a good rate of decline and is consistent with recent Rex publications.  I would note that current production methods used by Rex have resulted in improved well performance compared to the XTO wells of two years ago.

Unlike an outright sale, the royalty income is somewhat offset by the depletion allowance.

What are the factors in favor of selling the mineral rights:

1) financial need

2) continued low commodity prices

3) Rex is just drilling one well/unit at this time.  I believe that each Renick well is a separate unit.  So it would be awhile before you would see "big bucks".

4) Possible severance tax

5) Possible Rex bankruptcy.  From the landowner viewpoint royalties are all gravy but Rex has 5-6 million dollars per well invested, a debt that the landowner does not share (thank goodness!).  With commodity prices as they are, I don't see how these wells are profitable to Rex.  Whatever light these is at the end of the tunnel pricewise is out to 2017 or beyond.

Phil

Permalink Reply by Trapper on June 16, 2015 at 7:31am
I think the probability of Shell building the cracker should be considered. IMO this is the reason for Rex divesting outlying leaseholds to concentrate on Lawrence and Butler counties. Just my thoughts and I think worthy of consideration before selling.
Mike MurphyPermalink Reply by Mike Murphy on June 16, 2015 at 8:10am

ALSO remember there is  more then just the Marcellus formation under you ,,,,,,Upper Devonian,Utica, and possible Rogersville ...if you would sell you may  lose out on some hefty royalties for many years.........you say you have a financial need to sell your mineral rights .....think about what you would do to solve your financial problems if you didn't  have the good mineral rights to sell..........My grandfather told me many years ago "never sell your MIneral rights ",,,,,,you never know what money you can make from them ..........most all these companies trying to buy mineral rights are just carpetbaggers looking to flip your mineral rights for a huge profit .....here today gone tomorrow 

Permalink Reply by Philip Thackray on June 16, 2015 at 8:26am

Bob, Mike, Trapper,

Rex has been very successful in he Upper Devonian in their legacy acreage and now in Center Township.  XTO on the other hand has not drilled a good Burkett well.

In the long, long run there is no question - keep the mineral rights.  But financial need, continued low prices and a possible Rex bankruptcy are real factors.

Phil 

Permalink Reply by Robert Allingham on June 16, 2015 at 12:39pm

WOW!!! You guys are the best. Thank you for all the input and thoughts. The offer to buy only gas/oil and hydrocarbons came from E.D.R.( Energy Deep Resources). This is a tough decision to try to make. I need some back surgery and thanks to Obamacare I have a large co-payment responsibility as compared to my health benefits prior to this new socialized medicine. All of your points are well made and need to be considered especially the point made about how I would solve my financial dilemma if I didn't have mineral rights to sell(a very important idea to think hard about). I'm going to print these responses and re-read them over and over until I decide what to do. Does anyone out there know how to calculate the time value of money? Appreciate all the input more than I can express in words and I will share my results along the way.  Bob A.

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