Current rates for Selling mineral rights?

We have acreage in union township and have been approached to sell all or part of our rights for about 7000 dollars an acre. This is quite a bit more than other offers we had received. Can anyone tell me if this is a good offer? Any suggestions for how to proceed would be appreciated.

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Permalink Reply by Russell Garrison on December 3, 2013 at 10:25am

When you start to get to $4000 to $5000 per royalty acre in areas that have demonstrated wells with good output, you are getting into competitive pricing.  To determine what that means to you for a mineral acre, multiply price per royalty acre by the royalty percentage in your lease and divide by 12.5%.  For the above at $5000 per royalty acre and a 15% lease works out to $6000 per mineral acre.

If the acreage is already in a drilling unit (i.e certainty of revenue coming in shortly) then the price will be higher.  Same if there is a strong indication that the drilling is moving in the direction of the property in a short period of time.

The best way to understand whether the price is competitive is to get solid offers from more than one company.  It is important to understand whether you are getting an offer from a company that is purchasing the mineral interest, or is acting as a broker and is going to try to sell the mineral interest to someone else before paying you.  If a company is funded and ready to buy they should be able to do the necessary title work and pay you within 30 days.

The bottom line is that the competitive price is the best price you can get from the companies that are ready to pay and close on the deal for the area your property is located in.

That being said, I never tell anyone that the best option is for them to sell their mineral interest.  If you are in an area that is going to get drilled at some point in time you will make more money by waiting. 

We all know however that life is not that clean.  First we cannot predict what areas are going to be drilled.  If you are surrounded by wells that have come in well it increases the probability that if/when a well is drilled on your land that it will be good, but there are areas that come up poor but are surrounded by good producing wells.  If you are not surrounded by good producing well at some point as the drilling moves out from the areas that have demonstrated good performance it will drop off and not be productive or effective to drill.  Thus the story in the reply's about the person that was being offered $11,000 an acre to lease and it went away before they could sign.  It was because the edge of the productive area had been discovered and they were just outside the good area.  Thus the risk is that you can be offered a good price today and after getting more well results not be offered anything in the future.  Thus some people consider selling some of their mineral interests as a way to hedge this risk.

The other factor in life is the need for the money.  There are lots of personal reasons on why money now can be an important factor in the decision to sell vs waiting for money that may show up later and be spread out over the life of a well.  The only person that can determine whether it is right to sell is the owner.  Important part is to not let the pressure from the mineral interest buyers or the lure of having money in the hand color the decision for you.

Permalink Reply by Deer Hunter Bob on December 3, 2013 at 2:24pm

I agree with Russell Garrison and the best way to determine worth is to see what multiple companies are willing to pay!

The only issue I've seen is that most companies aren't reputable nor do they have the money! I know a lot of people that have signed to sell and it never happened.  Those same people are now working with America's choice royalties to weed out all the fakes or LLCs that are only trying to sell paperwork and not actually pay the landowner.. regardless who you work with beware of the companies that take a long time to pay, aren't willing to pay deposits, etc.

Permalink Reply by Mark Allen on December 3, 2013 at 4:31pm

great post.

Permalink Reply by scott peterson on December 9, 2013 at 11:55am

Last offer was almost 15k per net mineral acre. Getting tempting..................

Permalink Reply by Philip Brutz on December 9, 2013 at 12:02pm

Scott, I was guessing that the offers would go up after Rex released the numbers for the J. Anderson well.

Permalink Reply by scott peterson on December 9, 2013 at 12:05pm

My wife is ready to kill me for turning that much down.............

1xc6tw2xj1fwlPermalink Reply by 1xc6tw2xj1fwl on December 9, 2013 at 2:42pm

Bulls win...

Bears win...

Pigs get slaughtered!!!

Permalink Reply by scott peterson on December 9, 2013 at 2:49pm

and the smart pig gets fat.....

Permalink Reply by Summer Johnston on December 9, 2013 at 2:54pm

The correct expression is that pigs get fed and hogs get slaughtered.

Permalink Reply by Jarrad Stephens on December 9, 2013 at 12:22pm

I am assuming that offer was for land that is not currently leased? Just curious what county you are in? 15k an acre would not be a bad offer for mineral rights. My family has a large tract of land with an offer like that everyone would be set for life.

Permalink Reply by w. k. chirpas on December 9, 2013 at 1:22pm

I was just offered $14200 and $14310 per acre in Harrison county on a little over 200 acres that is leased at 18.5%.  I did not sell. 

Permalink Reply by maag man on December 9, 2013 at 1:33pm

by who...  ?

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