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 Dan Warner on January 18, 2015 at 7:22am

"I have many friends and neighbors who would quickly be millionaires had they been more patient and not fallen for the lies of the land men who came around here and lied to them straight faced."


Your statement is unclear, and would seem to cloud the issue.  Were the landmen that you refer to buying, and your friends/neighbors sold, or were they leasing agents to whom they (your friends/neighbors) leased?  

"...guys wailing and flailing the most on here do stand to profit from what is yours."

Your struggle to cultivate the illusion that I am an undercover landman, while amusing, is baseless. 

While my endeavor is to sort out the best way for an individual to proceed, yours seems to be an effort to collect a blindered, cult-like following through strong wording and vague references.

In fact, I believe that your own opening statement in this particular post sums it up nicely.

Permalink Reply by David Allen Lilly on January 18, 2015 at 10:55am

The initial oil and gas contacts here just prior to the Utica explosion were Oxford Oil folks who leased landowners here at the generous sum of $10 an acre.

Others were here prior but I had no contact with them.

They told landowners everything under the sun, even me, but I refused to sign, a lot did, guys with hundreds of acres who would have been millionaires just off of the up front money.

You, nor no one in the world can deny that sums of money this great from the Utica will corrupt folks who otherwise may be decent people.

Permalink Reply by Jarrad Stephens on January 18, 2015 at 8:44am

With anything I think one should consider why something might make sense. I looked at a thread about a gentleman who was 80 years old with no family and he is someone who might have not much time left. In his circumstance why not get rid of the property? If he has no heirs the government will take it. The bottom line is everyone has a different financial situation. What might make sense to some might not make sense to others. Unfortunately, it sounds like there is much bitterness about this. Of course holding on until something happens is the best idea. For some it might make sense to get rid of a small piece of the pie and have some financial security. For others they may only have that smaller piece of the pie. Nobody should attack anyone for making a decision about their own property. This life is full of would of, should of could of.

Example: Man makes a million dollars releasing minerals. He has to pay capital gains at I believe 23%. Can't really do an exchange unless you are buying more minerals. Now he is sitting on $770,000. That $770,000 buys a 30 unit apartment complex. Each unit rents for $800 monthly. $24,000 x12 = $288,000 X 20= $5,760,000, drop a million for expenses.....$4,760,000 in his pocket. $238,000 a year does not consider likely rental inflation and the amount of money the property will sale for at the end of the 20 years, likely double. Instant income and some financial security. It all depends on what you do with it once you get it in your pocket. I would hold out if you can as everyone knows it will be better. However, if you have to sale just make a good decision. I plan on holding on for my future generations. If you're 80 years old, start marking off the bucket list and party like a rockstar! You deserve it.

Permalink Reply by Dexter Green on January 18, 2015 at 7:34pm

"Example: Man makes a million dollars releasing minerals. He has to pay capital gains at I believe 23%. Can't really do an exchange unless you are buying more minerals. Now he is sitting on $770,000. That $770,000 buys a 30 unit apartment complex"

He can do a 1031 exchange on real estate from the sale of minerals as they are considered to be "real property", thus meet the like-kind exchange rules.

Permalink Reply by Dan Warner on January 18, 2015 at 8:48am

Nope.  No confederacy here.

Once again, you have presented one side of the picture, with no factual evidence of any landowner anywhere having been cheated in a sale of their minerals.  Instead you choose to use calculations using an inflated gas price and conjecture regarding what “would’ve “ happened “if”. 

Similarly, (with the possible exception of your insulting reply to Mr. Martinelli’s scenario)  you have not addressed the myriad reasons that one might wish, or need, to divest themselves for a concrete amount in the present, rather than to speculate on the future of an industry fraught with the same sort of ethics that you ascribe to the mineral brokers. 

Ironically, I find myself in a similar position as you; trying to convince family members, who would sign the first offer put in front of them, of the same sort of underhanded tactics being used by leasing agents to secure the leases that you believe hold such promise.  That is why I am here on GMS, and elsewhere, gathering information that will allow me to present both sides of the picture in an objective manner, free from prejudicial rhetoric.

As to your defense of Mr. Lilly’s rights, I support them as well, and would ask only the same for myself.  My responses are for the benefit of the open-minded members, who, like me, are here to weigh the potential benefits versus the consequences of their choices.

Ad hominem attacks represent either an inability to present a factual case against an individual, or a selfish desire to place oneself above another in one’s own mind.  Your position seems to be that there can be no scrupulous buyers.  That is ridiculous.

That the future is uncertain has never been more obvious to many of those who leased a few years ago.  Stories of abuses abound, but I will spare the readers a listing.  If they are here, then they already know many of the risks.  This may represent a paradise for the speculator, or a mud hole for a hog.  Some folks are neither, preferring to live their lives based on day-to day contentment, rather than having a reserved seat at their attorney’s office, working to provide him (the atty) with his share of the slop.

There is a list of reasons to consider the opposite argument, but it is much shorter, and I think that most readers are, as am I,  already aware of it, hence their presence here.  One can only say “You’re gonna be rich!” in so many ways.

As to your response to Mr. Green, your rushisms give clue to the source of your superiority complex, along with a propensity for saying what fits your narrative, regardless of the veracity:   

“Concerns about the impact of the collapsing housing and credit markets on the larger U.S. economy caused President George W. Bush and the Chairman of the Federal Reserve Ben Bernanke to announce a limited bailout of the U.S. housing market for homeowners who were unable to pay their mortgage debts.” 

In 2008 alone, the United States government allocated over $900 billion to special loans and rescues related to the U.S. housing bubble, with over half going to Fannie Mae and Freddie Mac (both of which are government-sponsored enterprises) as well as the Federal Housing Administration.”   - Wikipedia

Mr. Obama was inaugurated on January 20, 2009.

Enjoy your tea, Mr. ed.

Permalink Reply by Jarrad Stephens on January 18, 2015 at 9:16am

He might be drinking more than tea after that rebuttal. I'm thinking there will be some silence for quite sometime. I would probably just close my account..lol

Permalink Reply by Dan Warner on January 18, 2015 at 9:31am

Thank you Mr. Stevens.

Unfortunately for you, given my past experience with such folks , I fear that you have only placed yourself in the Sarah Palin -esque crosshairs.

Permalink Reply by Dan Warner on January 18, 2015 at 2:22pm

I am likewise not interested in reading the bs.  I am seeking facts.  If you or your tag-team partner know the names of the guilty, the dates, or the amounts associated with unethical behavior regarding mineral rights purchases, it is befitting of this forum that you post them.

Otherwise, you are blowing more smoke than I am with my "wacky tobacky".

After being low/snowballed by a landman who appeared at her door, notary in tow, and pressuring her, an at the time 78 year old invalid, into signing a boiler-plate lease, she is in total agreement that we should weigh the option of selling her unleased interests.

I only wish I had lived in the basement at the time.

As to the Wikipedia-denial, the sources for the articles are cited for anyone to research.

I, and I'm sure most of us, well remember the year that the mortgage crisis and the ensuing bailout occurred, as well as why.

Permalink Reply by bo boboski on January 18, 2015 at 9:10am

Ok , dude/s. This is getting old.  I know this discussion didn't start out as a pissing match to see who is the smartest or dumbest. It started as an informative thread about how much buyers were paying and who they were, and where. Let every landowner make their own decisions from there. Good or bad!

Permalink Reply by Werner Kostendt on January 18, 2015 at 9:45am

Tax consequences are also a major issue to consider.  If I am not mistaken royalty interests or mineral rights outright are taxed at a low capital gains rate whereas the actual income from production or royalty payments is going to be taxed at the much higher maximum personal income tax rates.   Proceeds from a royalty interest or mineral rights can also be transferred into real property in a 1031 exchange, deferring gains taxes indefinitely.  Leveraging commercial real estate with 5% mortgage money can produce a decent annual return on equity well in excess of 10% annually under relatively conservative assumptions. 

The present value of future benefits factor is what drives the seemingly low prices paid by investors.  Risk adjusted discount rates applied to potential cash flow an oil and gas investment high, still in the 14% to 18% annual rate range even in today's low interest rate environment.  This means that acreage that is not not producing for another 5 years is going to be discounted at dsu 18% per year for 5 years  The present value of $1 discounted at 18% is only $.44.  The high rate accounts for the high risk.  While not likely, there is always the possibility they could drill a dry hole.  There is the possibility of drilling mistakes, infrastructure issues, earthquakes, spills, lawsuits, on top of the usual expenses, severance taxes, advalorem taxes, drilling expenses, etc.  There is the possibility that the acreage might not be drilled for another 10 years.  There is the possibility that crude could drop from $100 to $50.  Investors apply a probability factor to account for all of these other factors, say maybe 50% to the present value. 

All of these rates and factors will vary depending on numerous factors in general in the area and those specific to a specific site.  How close to producing wells?  How are those wells doing?  Is there takeaway infrastructure in place? If already being drilled, how good is the driller?  At any rate, prospective acreage that might be drilled, and if drilled  might produce $200,000 per acre in royalties over the course of a 40 year life (front loaded revenue, yes, but it is only an average of $5,000 pear year) is going to be worth only a small fraction of that number presently.  

Permalink Reply by David Allen Lilly on January 19, 2015 at 4:51am

Are you really offering the opinion that selling royalties MAY make sense in light of tax considerations ?

C'mon.

Whatever the value of your mineral royalties over the lifetime of the well production you will realistically be paid about 10% of the worth as estimated by the buyer, period.

Permalink Reply by Werner Kostendt on January 18, 2015 at 9:56am

Regardless of all the math and factors, what really determines Market Value (defined by everyone as most probably selling price) is the Market, assuming reasonably knowledgeable buyers and sellers who have a clue as to what is happening in the market and who are not under duress.  Some might argue if duress and ignorance are prevalent in the market than even these factors do not impune the market evidence.    The best evidence of Market Value are comparable sales which gets back to the original questions.  Does anyone have any concrete evidence of prices for out right sales of minerals or possibly royalty rights for producing or non producing wells especially in Washington County, PA or Carroll County, OH?

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