High offers to buy minerals

I have been hearing of companys offering $12000, $13000 even $15000/ acre to buy mineral rights. So far I haven't been able to find out who is making these offers. If you've received an offer in this range could you please tell me who made it? Thanks.

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Permalink Reply by Tim on January 18, 2015 at 10:06am

Washington County has a wide range, esp since the big well was hit by Range.

Most counties have wide ranges, due to various factors, the biggest variables being producing vs non, leased vs non, royalty %, deduct vs no deduct, hbp, shallow vs deep operator lease, surrounding production.  There are many other factors.

Are you looking to sell, or are you looking to figure out your values?

Permalink Reply by Puzzled on January 18, 2015 at 10:23am

Yeah 20k per acre at 20 percent gross  over 20 years.....if you get a gross lease with no market enhancements......I have not been able to secure such an animal  to date...my land is in the supposed sweet spot for ng...in proximity to the tipped well the herrick well and near the stalder ..it is not so simple to get a lease I can live with 

Permalink Reply by Dan Warner on January 18, 2015 at 7:30pm

Thank you, Tim.

I am primarily concerned with valuation, but I hesitate to contact any buyers just yet.  With the current turmoil, I don't expect to make a move until the dust settles a bit.

These are small tracts, not likely to garner a lot of interest, in the current climate.

In the meantime, between shootouts, I am a student of the industry.

Permalink Reply by Jarrad Stephens on January 18, 2015 at 10:24am

Werner you're an appraiser I am thinking.

Permalink Reply by Werner Kostendt on January 18, 2015 at 10:28am

Jarrad, I am a land economist.  Fancy term for real estate appraiser  :)

Permalink Reply by Jarrad Stephens on January 18, 2015 at 10:47am

Probable price, discount rates, and present value gave it away. Land Economist here in CA  lol

Permalink Reply by Philip Brutz on January 18, 2015 at 11:01am

"The meek shall inherit the earth, but not its mineral rights."

J. Paul Getty

Permalink Reply by David Allen Lilly on January 19, 2015 at 5:21am

My children shall inherit my mineral rights.

Permalink Reply by David Allen Lilly on January 19, 2015 at 1:16am

Let's try this little mental exercise:

What percentage of the total revenue expected from any lease will these mineral rights buyers pay a landowner ?

Example:

If you have a 20% gross lease in an area that is being drilled heavily and the drilled wells are producing very well the royalty buyers determine that the lease will pay $100,000 an acre (that is way low, but just an example) over the life of the lease.

What percentage of that figure ($100,000) will their generous offer represent to the landowner ?

I have stated many times without being challenged that you will be offered about 10% for that lease, and far less in other less desirable areas. So, you will get $1000 an acre up front and the investor gets the rest. What a bargain, for the investor. Some leases will not even bring an offer.

Whatever the total payout from the lifetime of your lease, these guys are going to give you about 10% in the best, most desirable areas, but hey, you'll get your money fast and save on your taxes.

Permalink Reply by David Allen Lilly on January 19, 2015 at 1:19am

I forgot, Happy Martin Luther King Day to you all.

Permalink Reply by Dan Warner on January 19, 2015 at 3:54am

Regardless of your insistence to the contrary, your 'mental exercises' have been countered here repeatedly.  What is noteworthy is that they are only exercises.  Similar to a treadmill, they are exhausting, but get one nowhere outside of your mind.

You have yet to substantiate what you have "stated many times without being challenged" with anything resembling factual information.

You take time to point out that your theoretical EUR value is "is way low, but just an example".  However, you skim over the fact that that you have found it necessary to lower your hypothetical selling price to a ridiculous $1K/acre, in order to make your algorithm resolve to a figure that would seem to support your theories.

While there may be unscrupulous buyers casting about for unsuspecting landowners, in an earlier post, you spoke of  "folks who leased landowners here at the generous sum of $10 an acre.".  This would seem to indicate that there are bad apples, as well as unsuspecting landowners, in both barrels.

This is a statement on the human condition.  While pitiable, there is little to be done about it.

(Unless the nouveau rich here in the shale should feel charitable towards the less suspicious, and start a fund for the less fortunate from their "walkin' around money".)

 

Permalink Reply by David Allen Lilly on January 19, 2015 at 4:46am

Great response, except the part where you will not challenge the 10% claim that I have made, choosing instead to grab at other parts of my comment which you are more comfortable with.

The sums used in my example were intended to be easily calculated, not pertinent to my overall contention, which is that the investors are going to pay you about 10 cents on the dollar of what they consider will be the overall value of your royalties.

So, I ask you again, is 10% of what the royalty buyers expect to be the total value of your royalties close to accurate ?

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