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 David Allen Lilly on January 21, 2015 at 1:30am

Guys, we need to come back from the obfuscations, lies and half-truths here.

It does not matter where your property is.

It does not matter what the drilling activity is around your property.

It doesn't matter the terms of your lease.

It does not matter what you think will be the per acre payout over the lifetime of your lease.

What does matter is that after obtaining your information the investors will attach a dollar figure to the value of your lease, and then offer you 10% of that figure, if you are lucky.

If you were or are offered $15,000 an acre you can rest assured that the investors expect that the lease will pay out $150,000 an acre over the life of the well, or more.

So, you get the $15,000 an acre up front, and they get $148,500 over the life of the lease, again, per acre.

If you have 30 acres you get $450,000 total, up front at $15,000 an acre and the investor will realize about $4,440,000 over the life of the lease.

You will have generously given away a vast sum of money.

Be smart.

Permalink Reply by Mark Duncan on January 21, 2015 at 3:25am
Mr Lilly your posts about this topic speak volumes. But I have to ask. Your last post claims a landowner could expect 150000$ per well per acre over the life of one well. Am I reading that correctly?
Permalink Reply by David Allen Lilly on January 21, 2015 at 6:48am

Depends on where you are.

In the sweet spot of the Utica I think that figure is quite realistic.

Permalink Reply by deutchen on January 21, 2015 at 4:10am

I've decided it's time to come out of the closet and face the wrath & ridicule that will be heaped upon me by Ed & David Allen Lilly. I sold 1/2 my oil & gas rights and I'm happy as a clam at high tide now. I have all the money I need now & am still positioned to make much much more than I can use in several lifetimes.
I shopped around quite a while before I finially made the deal with Vision Minerals out of Ardmore Oklahoma. I also had good offers from Flatiron & Bounty Minerals but Vision Minerals was slightly higher. All the people I dealt with were very nice not the satanic beings that others have apparently dealt with.
I don't care if Vision Minerals might have given me 10 cents on the dollar (where David got that figure I have no idea). I don't care if I'm stupid. I don't care if they drill on me tomorrow. I really hope they do so I can rake in more money than I ever imagined. I did it & I'm totally unrepentant. May god have mercy on me.

Permalink Reply by G.H. on January 22, 2015 at 4:00am

"If they are only offering "10 cents on the dollar"  then there is obviously substantial risk for the mineral buyer.   If it was a guaranteed pay day for the mineral buyer why not offer  20 cents on the dollar or even 75 cents."

^This.  All of the people on here claiming $200k per acre aren't out there buying it up for $75k-$100k per acre (at least I don't think they are).  But if they were so certain of the payout you'd think they'd find a way to do it.  They could own plenty of this $200k per acre land with offers like that.

I really hope it's worth $200k per acre, but there is no way of knowing for sure til it's pulled out of the ground.  Many variables.

Permalink Reply by David Allen Lilly on January 22, 2015 at 4:25am

Don't fixate on the $200,000 part, that is dependent on your lease terms and your area, as much as the price of the oil and gas produced from your lease.

The 10% part is the key.

I don't know how to explain it better than this:

You will be offered 10% of what the investors expect to realize from the lifetime of your lease, they know far better than you or I what to expect for return on investment.

And I have been told that they are buying your royalties to everything surface to core. If there is another formation that the technology can catch up to in order to make extraction possible you will be out of luck because you gave the rights to those minerals away when you sold for the 10%.

I will help you understand if you can understand.

Permalink Reply by G.H. on January 22, 2015 at 4:53am

I understand your 10% argument.  It's not that complex.  In some cases it may be correct, in some cases I'm sure it is not.  You throw the 200k number around a lot, so that's why I was using it.

Anyway, I think Matthew's point is still valid whether the value is $2k $20k or $200k, there is risk for whoever owns the land as far as the value and development of their minerals, and the land owner is divesting that risk by selling, and getting the money immediately.  And, in my opinion, we don't know the value of what's there until it's pulled out.  Just my two cents.  I feel like it is a pretty objective two cents compared to some other posts on here.  I just don't think it's all black and white.  Everyone is obviously free to make whatever decision they want, and hopefully everyone makes a decision they can live with based on personal circumstances.  I'm just trying to approach it without any assumptions, but also considering all the info out there.  

There's not much point in debating this anymore.  I shouldn't have even made that last post haha.  I'm not even saying I think you're wrong, I'm just saying that I think your argument probably isn't right 100% of the time.  I came here and saw some very one-sided arguments and that's why I felt the need to respond.  Like I said, I understand your argument but I just don't think it applies universally.

Anyway, what I'd really like to see is some more info on offers, if anyone has any.  Thanks to all those who posted info on their offers recently.

Permalink Reply by Dexter Green on January 22, 2015 at 6:15am

"Don't fixate on the $200,000 part, that is dependent on your lease terms and your area, as much as the price of the oil and gas produced from your lease.

The 10% part is the key."

So your argument is now to ignore the numbers you used--inflammatory numbers, BTW--and just focus on another entirely different part of the argument?  You're grasping at straws, man.

Permalink Reply by David Allen Lilly on January 22, 2015 at 6:31am

You are obfuscating my comments, and you know it.

I believe $200,000 an acre is a viable amount for my area with my lease terms.

I know the 10% part is very accurate.

You cant stand that I am right, you have your reasons.

I will be here telling folks the truth while you try to call heads tails.

Permalink Reply by Dexter Green on January 22, 2015 at 7:16am

Your 10% number is not at all accurate.  The reason I know that is because there are exactly zero wells that have been producing long enough to even hazard a guess.  You made up a number using incomplete data and are now trying to sell it as fact.  

Permalink Reply by David Allen Lilly on January 22, 2015 at 9:21am

You don't know what you are talking about. There are mountainous reams of data from thousands of wells and geological studies done all over the country.

You are out of your mind if you are trying to tell me that the oil and gas companies don't have a pretty firm grasp on what is down there and what is extractable.

In fact, that contention is the most ludicrous of any you have made.

The oil and gas companies know very well what is down there and so do the investors.

I stand firmly by my numbers.

Permalink Reply by Dexter Green on January 22, 2015 at 9:53am

"The oil and gas companies know very well what is down there and so do the investors."

Yeah, they're all brilliant, which is why companies are nearing bankruptcy and desperately cutting capex in order to stay solvent.  The appeal to authority fallacy is just so pedestrian.

"You don't know what you are talking about."

I do this for a living.  Making calculations is how I keep a roof over my head.  So maybe try again.

"There are mountainous reams of data from thousands of wells and geological studies done all over the country."

Which has literally nothing to do with how assets are priced in the Utica.  Shale plays are not homogeneous.  

Face it, you made up a number and when called out on said number you're changing your tune.  

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