Value of OGM's in Crawford County

I have 60 acres in Eastern Crawford County and own all OGM's.  This Property is held by production (1980 lease) by Range Resources and has one straight gas well on the property.  The well is not very productive now but Range will keep it perking as long as they can because the lease expires when it no longer produces.  I have been approached by a landman representing Mountaineer Minerals, LLC. asking if I would sell my OGM's to them.  He is aware that the property is held by production.

I am just starting to research this proposition and welcome any thoughts on the value of these rights or any other thoughts on the subject.

'Thank you.

Mike.

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1xc6tw2xj1fwlPermalink Reply by 1xc6tw2xj1fwl on March 31, 2014 at 3:40pm

Jim, that is not a legit offer.  First of all, it's dry gas which is down in price and probably going even deeper downward to the tune of 50% over the next 2 decades.  We have way too much of it in this country.  The person who contacted you likely has no idea what they're talking about and quoted you a price based on offers in a different area.  It's also possible that this is one of those "Option" scams where the "buyer" tells you they will get you X amount of dollars in hopes that you will accumulate a bunch of debt during the "waiting process" only to come back and say, "gee i'm sorry mr. landowner, we were only able to get you a fraction of what I originally told you."  If the company doesn't have any recorded deeds (which I highly doubt Montaineer does), don't fall for it.

Tell them you'll sign a letter of intent for 30 days.  In the meantime, expect not to receive it.  If he comes back with a mineral deed and a cashier's check for the full amount, take the money and run because there is no way they're going to break even in this lifetime at that price.  You realize there is shale deposits all over the world and north america is number 5 in estimated reserves.  We already have too much natural gas and the problem is only going to get exponentially worse.

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on April 1, 2014 at 2:23am

"First of all, it's dry gas which is down in price and probably going even deeper downward to the tune of 50% over the next 2 decades.  We have way too much of it in this country"

You ought to be careful of the sources you use when forming those types of opinions, for no other reason than it's factually incorrect.  Look in to how much recoverable gas we actually have and how much we import every year. 

Permalink Reply by pg guy on April 1, 2014 at 2:35am

Further, a little research will show that much of eastern Crawford County is thought to be in the wet gas window.

Permalink Reply by sldouglass on April 2, 2014 at 9:36am

Know that the old lease still in effect may not have all the provisions that the horizontal drillers want and need.

Check into the company making the offer.  Will it operate or is it a flipper [buy low; sell high].  The party contact with you may have a deal to pass the lease on to Range.

If you need money, take it and do not look back.  Lease provisions may be bad but who cares.

$6500/acre sounds pretty good to me for a bonus - but, what are the other terms and provisions.  Leases are complex and they are not written by landowners.

0ym9x5ag7ury2Permalink Reply by 0ym9x5ag7ury2 on April 4, 2014 at 8:52am

Lets see now, 2nd largest oil find on earth, maybe you all don't have a grasp on what's happening in the Appalachian Basin. "Take The Money and Run". Now that's the way you stay poor for sure.

The health insurance companies are going to take all the one time payment money you might deal for.

My money is on the Royalties. Royalties will pay for all the health insurance and taxes our society might come up with plus leave money in your bank account in spite of your actions.You will become rich and there's nothing you can do about it, trust me.

Where else can you get that kind of financial security, the Stock Market?  Please!!! 

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on April 4, 2014 at 9:04am

What are you calling the 2nd largest oil find on Earth?

Permalink Reply by J. Kinney LandRights on April 4, 2014 at 9:53am

unless he's buying your minerals because he found gold or diamonds beneath it --- $6500 is a laughable offer based on the current facts and market for that part of the play.  

Permalink Reply by Mike Dubiel on April 4, 2014 at 9:57am

Please expound J. Kinney.  Are you saying $6500 to buy the rights is low?

Permalink Reply by J. Kinney LandRights on April 4, 2014 at 10:19am

Unfortunately the complete opposite.  $650/acre is probably even a reach at this point. I also don't see a real buyer even purchasing any rights in Crawford at this point.  Most investors have models to recoup their investments within 36 months of production and require at least a 20% estimated return on investment on a very conservative "guess". Results show the geology isn't as good there meaning NO company is going to be in a hurry to get there so production could be a long time away, if any other than what Range has already done. If the geology was even decent there would be some leasing going on.  A real investor knows all the variables and realizes that he could make more money playing a low risk stock or bond over the next 10 years rather than buying any minerals in Crawford; even at $650/acre. A real buyer is going to put that money in a proven, less risker area where a return can be realized much much much much sooner. 

I wish $6500/acre was real as I know a lot of nice people looking to sell portions of their OGMs there in Crawford Co and could use the financial help. Heck they'd sell for a third of that.  

I'm keeping an eye on this thread as I'm interested to see the outcome.  I've been involved in many transactions here in western PA and unfortunately these types of situations don't end well for the landowners; I wish they did. 

Permalink Reply by J. Kinney LandRights on April 5, 2014 at 5:59am

Jim,  I've helped landowners in many different aspects of mineral development and divesting opportunities. Sold a lot of minerals in western PA for landowners and have rec'd great offers from private investors and not the mailbox stuffer buyers. The relationships I've developed with those buyers has allowed me to get a better understanding how a real buyer with cash determines value and ultimately their offers.  I hope Crawford turns on and better data is proven but the geology is only one piece of the puzzle.  The drilling company and their strategy also holds weight with investors when determining value for minerals today; such as many other pieces of the puzzle. Who is drilling and their drilling history/model will show how long it may be before production starts.  Some investors won't touch minerals leased to the GIANT companies because they move so slow and their objective is to boost investor presentations with "holdings" or "futures" or "reserves" and not actual production. And they have the money to wait and go at their own pace.  You take a company that isn't a giant but has the capital to do this drilling with an established position (meaning not all over the place) and they've proven to drill not to hold but to drill to produce; investors will be more willing to take a chance and pay better prices (and again the operator is only 1 variable considered and theres many more).  

It's all about time and returns such as any investment and right now Crawford doesn't have any ingredient showing those things can be achieved. 

I hope this offer is in fact legit and maybe there's some interesting new info out there, unfortunately it's my belief that this offer in question is just like the many other "XYZ Minerals" that don't have cash but rather trying to sucker out a spread from anxious landowners.  These "xyz" companies can't make a dime unless they have something to sell so they don't care what the price is the landowner agrees to even if it is $6500/acre in crawford co. 

Just my humble opinion -- 

Permalink Reply by Trapper on April 5, 2014 at 6:12am

Have you ever helped arrange sales to a straw company owned through the vines by any of the GIANTS.......?

Permalink Reply by J. Kinney LandRights on April 5, 2014 at 7:15am

These companies definitely have buying arms.  Why wouldn't they? They usually want to buy minerals that they already have leased.  Obviously they not only know when they're going to get developed but they also control when the minerals will be developed.  They know all the secrets, they also know all the concerns.  

I have never sold any rights to these "buying" divisions of these large drillers but I have rec'd fair offers.  First off I don't make any decisions when it comes to accepting offers thats my clients choice.  

I absolutely will reach out to these companies, like all real buyers, and negotiate their offer.  I want the landowner to see all options available so they can make educated decisions and they will know whats a good deal and what is not.  That also helps decide whether or not they even want to sell or not.  I have plenty of clients asking me to go find out where the market is for their particular asset and they have very little intention of selling anything but it's always good to know what their asset is worth. Determining worth is done by seeing what people are willing to pay for it; not what someone can pencil in as potential. Worth and potential are two very different things. 

In my opinion I feel it's silly not to market to these known buying arms of drilling companies.  Does it matter where the best offer comes from?  Isn't that the ultimate objective if you're selling an asset?  To find the best real offer regardless of where it comes from?  These companies are usually very professional, well versed, and facilitate the transaction in an appropriate manner. And they definitely have the cash!

 

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