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Permalink Reply by Tom S on March 22, 2016 at 4:39pm

In my experience with pipelines and mineral rights, their first offer is at least half (more likely one fourth) of their final offer. 

I never let them use the excuse about oil prices being low.  After all, it is up 30% in the past 2-3 weeks. It is a long term lease, so today's price doesn't matter. 

This is a very personal decision that you have to make and live with, but since you are asking for opinions, if it were my mineral rights, I would counter at 6K or even higher, let them laugh at me and then negotiate down from there.  I have heard of some Utica leases, in my area, in Ohio that are being renewed at $4500/acre this month. I know my situation is different than yours, so I circle back my first comment: their first offer is a bad offer.

Good Luck!

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Permalink Reply by David Allen Lilly on March 23, 2016 at 8:09am

Mr. Baseman,

I want to tell you two absolute truths, well, really three:

1) The prospective buyer knows more than you do about the drilling activity around you, guaranteed. If they are willing to buy your royalties you may rest assured that they know for certain that there is a value attached to them. Do not doubt this because of what someone else told you, sometimes there is bad information passed around whether innocently or on purpose and other times things change enough that what was once good information has become bad.

2) You will be offered MAYBE 10% of what the buyer has determined to be the lifetime value of your minerals and your lease. Period. Subsequent passes will see increased amounts but the cap will be at about 25% of what the buyer expects to be the ultimate lifetime value of your lease.

3) As alluded to in my first item, things change, sometimes rapidly and sometimes slowly, but they do change. I was distraught by the circumstances of the leases my neighbors had signed, and I was further upset by a certain producer whose name rhymes with "parrizzo" who jerked an entire landowner unit around (which was very poorly led by the man in charge) for over a year before finally cancelling the entire deal without paying more than a very few of us.

These situations turned on a dime, same as the oil and gas markets which are recovering their prices somewhat and more and more expected to continue an upward trend.

I would strongly advise you to hold onto your mineral rights, the risk of selling is all on you, I would rather ride it out holding onto my minerals than hating myself forever because I made a tremendous mistake.

In my personal situation the first guy here with a lease offered me $10 an acre and a 1/8th net royalty. Had I signed that very poor lease I would have NEVER forgiven myself for the misfortunes I would have caused myself and my family.

Good luck to you, the decision is all yours, no hard feelings either way.

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