Offers to purchase mineral rights more aggressive lately?

Has anyone noticed the offers to purchase mineral rights becoming more aggressive lately?  It used to be letters would come in the mail a couple times a month giving a name and number to call if you wanted to consider selling your minerals.  Then weekly postcards.  Now actual offer letters to purchase wanting you to sign, date and have the form notarized. I was kind of shocked when I saw this because it gives how many acres total, where they are, deed pages (how they came to you etc.), and a number they are willing to pay for your portion of the acreage.  I thought it was pretty tricky and clever on the part of the purchaser because I bet they get a lot more "hits" this way and what people may not realize is this isn't an offer to negotiate or to learn about what they are talking about but an actual sale.  Once you sign, notarize and send this thing back in that's it you get a1x check - pursuant to you owning the minerals - they get the minerals.  You, as the seller, can't go back and say no.

I would never consider selling but how much do you think mineral purchasers offer in comparison to what an owner could get out of their minerals if drilled etc.?  Do you think they offer 10%, 20% etc of what they feel the minerals will be worth?

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Permalink Reply by Rickey L McLaughlin on June 27, 2016 at 6:55pm

(like)

Permalink Reply by EnergyPro on June 3, 2016 at 3:08am

It really depends on your current situation and how comfortable you are with risk.  In all honesty, when the majority of us purchased our land (pre-2007) we never expected this unrecognized value to come to fruition.   The reality is a mineral conveyance is a smart move for a lot of people.   It gives them a large amount of Cash guaranteed and takes all the risk out of the market.  There's nothing worse than finding out your land is stuck between 2 units, undevelopable, or your 200 acre tract only has 4 acres unitized.   That dream you were sold on doesn't always come to life.   I'm in favor of mineral sales, i'm just not very pleased with the marketing methods and the individuals doing it.  

Sam- Washington, Pa.

Permalink Reply by Jonathan H on June 3, 2016 at 7:42am

I have gotten only a few offers in the last few months, with price ranges MUCH lower than summer of 2015, but I've heard enough about drilling in the area that I wouldn't be surprised if it changes soon - I'm being pursued by a pipeline company, but the line they want to run is from a proposed well site on a small property in the bottom of a hollow at the end of a tiny road with small bridges; I wouldn't be surprised if it doesn't happen.

I'm in Belmont County, Ohio.

003ho3nbn6dh7Permalink Reply by 003ho3nbn6dh7 on June 3, 2016 at 7:56am

Hi, all,

I work for a licensed company who sells minerals on behalf of the landowner, not the buyers.  We hold free seminars periodically to discuss the current value of minerals, and when we sell, we shop them around to over 1600 buyers to get the highest price.  Our goal is to make the OGM market more open, transparent, and competitive, like the residential real estate market is now.  We're happy to discuss your individual situation with you, just message me.  I don't like to be too blatantly promotional on this board, but it's clear from these posts that in spite of GMS's best efforts, many landowners don't have access to the tools to learn what their minerals are worth, how to assess an offer, or how a sale would affect them short or long-term, and we can help with that.

Permalink Reply by Educate Me on June 3, 2016 at 8:08am

So what tools would you suggest that are accessible to "regular" people?  Perhaps you could break it down for us?

003ho3nbn6dh7Permalink Reply by 003ho3nbn6dh7 on June 3, 2016 at 8:33am

Most of this is public record.  You can go to the courthouse and compile data gathered from deeds and leases (provided the full lease terms are recorded) and come up with a database of what sold for how much and to whom in your area.  You can compare it to production data from the DEP's website to get a value per operator, well, etc.  You can consult the IRS's regulations regarding how the sale will be taxed and your options for paying tax vs. rolling the funds over into another type of investment.  Obviously this is a time-consuming project.  It is much like selling your home:  you certainly can sell on your own, but 90% of all sellers use an agent for their knowledge.  OGM's are real estate; right now many OGM buyers operate on the "we buy houses for cash!" model, but that method really just benefits them.  There's no reason it has to be that way.

Permalink Reply by Paul Butler on June 9, 2016 at 12:49am

Licensed by who and licensed to do what?

003ho3nbn6dh7Permalink Reply by 003ho3nbn6dh7 on July 3, 2016 at 3:34pm

Hi, Paul, we are a real estate brokerage, licensed by the state in PA, OH, and WV.  We do not have to be licensed to sell OGM's, but because we are, we are familiar with how the sale of OGM's will affect homes, land, etc, and we can also sell those for our clients. 

Permalink Reply by Dion Warr on June 3, 2016 at 9:26am

Educate:

Part of what you are seeing by way of changes in offers and presentation is reflecting the changes in legal practice in making a solicitation or an unsolicited offer for minerals and/or royalty.  The laws of each state or different, but in general, the pushback on solicitations revolve around certain key issues:

1) Initial contact - Did the prospective purchaser seek the prospective seller out by phone, mail, bulk mail or in person?  Also, was there a follow up to the initial contact in person or by mail?

2) Presentation - Was the offer made in person or by mail, either at the time or after the initial contact?  Was this offer presented upon an agreement between the purchaser and seller to review an offer and material terms, or was this offer transmitted to the mineral or royalty owner unsolicited?

3) Acceptance - Was acceptance based upon acceptance of consideration (ie., depositing a check) or by execution of an agreement, sale or deed?

4) Description - In what manner was the property or rights to be purchased described?  A unique description or reference unambiguous as to location and extent, or a more vague or omnibus description, e.g., "all that Seller owns in XYZ Township (or ABC County)"?

Again, laws in each state vary, but in general, pushback from owner advocacy groups, legal counsel and legislators have resulted in the tendering of offers (1) becoming less generic and more targeted to specific owners, (2) more specific in written presentation as to owner and terms, whether solicited or unsolicited, (3) acceptance being held valid provided that the seller has executed an actual agreement, rather than merely accepting consideration [whether "token" consideration or substantial as to a fair market value] and (4) covering right, title and interest in specific property, properly described in accordance with local and state law, rather than "all I may own"-type descriptions.

The general line of thought is to dissuade and discourage so-called "fly-paper" type offers made by speculative interests using generic, vague and/or deceptive offers or otherwise mislead owners into accepting a non-substantive offer, particularly by accepting or depositing a check or draft.  So, I wouldn't necessarily equate the change in delivery of such solicitations or offers as being more aggressive - the owners and powers-that-be are pressuring the purchasers to "come correct" with owners as to stating their purpose and providing a bona-fide offer with material terms and a contract that can be reviewed by the seller and/or his counsel.

In my home state (LA) for instance, the governor recently signed a bill into law regulating unsolicited offers of sales of minerals with gave guidelines as to content, specific disclosures, and specific periods of right of rescission available to the seller.  This bill had been brought to the legislature in prior years but had not gained passage.

With respect to offers made and valuations - bona fide purchasers are usually well researched and have knowledge specific and proprietary as to geology, permitting, engineering, well control, etc.  As they have paid earnestly to obtain such information, one cannot reasonably expect that they would share this information gratuitously with another party.  Also, offers are usually discounted for relative risk and duration of time to recollect on their investment (longer production tails on shale wells are worth less than shorter relative conventional production with respect to estimated cumulative reserve).

Keith (our publisher) has assembled a team on Shalecast that may assist you on productive assets for evaluation purposes, and has some calculators, etc. for owner tools too.  They also offer to market minerals on your behalf rather than waiting on offers from others.

As a final note, most bona fide purchasers will accept a deal on a portion of your minerals and/or royalty rather than "all or none".   This would allow the owner a hedge against present value and potential future proceeds.  Take a bird in hand on some and leave the rest in the bush, as it were.

Good luck to you.

Permalink Reply by Randy Kansas on June 3, 2016 at 9:41am

I sold half my minerals several years ago and glad I did;

gas prices dropped, it helped with my kids college and and nothing has happen since, even my lease expired;

wish they would by the other half at the same price, but I doubt it now;

RK

Permalink Reply by LERRET on June 3, 2016 at 11:41am

As a mineral appraiser many offers are "market value". And some wish they had sold because wells have not panned out. For most mineral owners "The Beverly Hillbillies " is not going to be the model of income.  Having said that, minerals should be viewed as a multi-generational investment. Selling minerals at "market" represents the time value of money. Money earned 10 years from now is a deferred investment.  Selling them also has a huge tax disadvantage since most are going to be 100% capital gains if you don't manage that tax problem early.

Only the pros buy and sell short term, and they do so wisely.

The average Joe fails to understand the underlying value of minerals. Many in the 1990s sold their minerals in N central OK and elsewhere thinking they were "played out" and worthless.  If you don't understand the fundamentals of pooling (unitization) then you run the risk of selling without understanding additional wells may be drilled in the unit or deeper zones lay in the future. I never recommend selling minerals. I own minerals my grandfather owned in the depression. They are producing steadily. But there were years they made nothing. OTOH, they are generally very low cost investments to hold.

But beware these unsolicited bids. I would not even respond to them. I would solicit buyers rather than take some pig in the poke offer.  And very much beware anything touted as a ROYALTY deed or lease...Often they disguise a deed to look like a lease and you lose the entire property forever.

Permalink Reply by James T Monyak on June 7, 2016 at 8:52am

Who stealing from whom?

I bought some mineral rights " 3 acres" in Bradford county a few years ago and to date have received around $200 in royalties.  I have not seen a check in 8 months!  The landowner made out on this deal.   Maybe our elected officials will put a stop to this practice of landowners selling worthless royalties.

The landowner said my daughter would be able to go to college on the royalties.  He needed cash now.  Maybe Trump University will accept $200

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