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 Ken Barton on January 19, 2015 at 4:31am

If you've "heard about" it, but have not seen it in personally in black and white, it is not real.  If the offer was real, or they were interested in your property, someone would have contacted you already.  I guarantee that anyone who buys minerals will try to get you at a lowball price.  They may hint at a higher one, but when the time comes to make the deal, there will be some factor that will make your tract not as attractive.  They will then offer you a lower price, especially after the discover that you need or want the money. Remember, you will not get paid until they insure that you actually own the minerals, so in any case the check is not immediate, unless you are already leased, so they have some idea that you are actually a mineral owner, and even that may cause delays since a lease does not state what percentage you own.  If you are leased, why would you even consider selling?  As I have stated before, if someone is interested in buying your minerals, you need to immediately understand that they know more than you do and have access to more information.  I have stated before, and I repeat it now-I would never recommend that anyone sell their mineral interest.  In the past, I've used the example of Esau selling his birthright of a plate of stew. I think that it is still appropriate.  Whatever money you get today would only be a fraction of the amount that you and your family could receive in the future.

Permalink Reply by David Allen Lilly on January 19, 2015 at 4:47am

Your final sentence is the most important in a well written and well thought out comment.

Permalink Reply by Ken Barton on January 19, 2015 at 4:53am

Thank you, David.  Your post is excellent and very informative, also.

Permalink Reply by Dan Warner on January 19, 2015 at 8:33am

From the basement:

Some of the interests that I am considering selling are already drilled and producing. I held back my DO's (15) untill the new year, so I can't quote the royalty numbers yet, but some of the other shareholders seem satisfied.

The unleased (and leased, undrilled) minerals of my mother's are in an appr. 10 mile radius donut hole that is as yet undrilled.  I don't know the reason, whether it be infrastructure, or else.  A Statoil well at the NE edge of the donut hole was the top producer in TC at the end of 2013.  The Magnum Hunter/Stewart-Winland Utica gusher is appr. 6-7 miles to the west.  There is a great deal of plugging activity in the area, so that may be some of the reason for the delay, IDK.

Perhaps they just don't like me.  

Whats your stake in the shale?

Permalink Reply by Dan Warner on January 19, 2015 at 9:07am

From the basement:

Now Mr. Ed.

That's not a very community-minded attitude.

Nor does it reflect the give-and-take spirit of a public discussion forum.

Might it be that you are the undercover operant?

Permalink Reply by Dan Warner on January 19, 2015 at 7:11am

Actually, the first sentence is the only factual statement.  The rest is conjecture, and lacking substantiation.  Mr. Barton also fails to qualify himself in order for us to give the proper weight to his statements.

He also leverages hyperbole (e.g. "I guarantee") to create an illusion of insider knowledge, finishing with an authoritative statement regarding what your family "could" receive down the road.

Could, not will.

Permalink Reply by Dan Warner on January 19, 2015 at 7:11am

The parable of the stew has more than one interpretation, some bordering on contradictory.  

In any case, it does not have context here.  Esau's birthright was simply the right as the elder son to hold authority over the family, a concept that is not applicable in present-day US.

If one particular version is consulted, Esau was near death from starvation (ironic, as he was purported to be an excellent hunter).  I wonder how many of us, in a similar setting, would allow ourselves to die out of pride.  Probably too many, but not me.

In another version, E & J were feuding twins with a lifetime of conflict, of which this was only one.

 

Permalink Reply by David Allen Lilly on January 19, 2015 at 9:00am

Maybe you missed my earlier question, as a percentage of total expected value of the royalties, what can one realistically expect the investors to pay to a leaseholder ?

Permalink Reply by Dan Warner on January 19, 2015 at 9:27am

Sorry, I've been quite busy.

x = selling price

y = EUR value

The equation is

y/x * 100 = z%

As the E in EUR denotes 'estimated', the above formula, with values inserted, will result in at best, an estimate, albeit an educated one.

The selling price is the true variable here, and is the one thing that I am trying to establish.

Permalink Reply by David Allen Lilly on January 19, 2015 at 12:53pm

I figured as much from you.

The answer you are avoiding is somewhere around 10% of what the investor expects to realize from the total payments throughout the life of the lease.

Permalink Reply by Dan Warner on January 19, 2015 at 1:52pm

Likewise, I'm sure.

To the contrary, I am seeking a figure that was not pulled out of...

..nah ...

...thin air.

Permalink Reply by Susquehanna Sally on January 19, 2015 at 5:10am

Mr. Lilly-

How did you arrive at the 100k/acre mark in the highly productive areas?  Thank you.

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