A few months ago my aunt, sister, and I each received letters from a company offering to buy what they are calling a combination of “oil and gas rights and non-participating royalty rights” for property in Greene County, PA. It is a total of 44 acres among the three of us.
The letter contained portions of a chain of title (field notes from the company’s title agent) showing that in the 1970s a friend of the family left the rights to my grandparents (who died in the 1980s), and that subsequently the rights now rest with my aunt, sister, and me. (The field notes do not contain any actual language from the wills to show the language used in granting the rights.)
The letter said that if we would like to sell the interest, the company will run a full mineral title of the property to confirm the ownership, and that the offer could increase or decrease, depending on what they find. Further, it says that we would not be under an obligation to sell until we agree on a purchase price.
We were unaware that we owned any rights prior to receiving the letters.
The first letter offered $2,000 an acre. My aunt called the company, said that the offer was not enough, and asked them to send a second offer.
The second offer was for $2,500 per acre. The second letter stated that “The big issue that is preventing us from paying more money is that about 95% of this interest is a non-participating royalty interest. … If you owned more of the executive rights, we could offer you more money.” This second offer was limited to 30 days.
From what I understand, a non-participating royalty interest means that we are not able to force the lease of the oil and gas, and are not entitled to a lease signing bonus. But, if the “executive” holder of the mineral rights ever decides to enter into a lease, and the land is drilled, we will be entitled to a portion of the royalties.
I informally talked to an attorney who said his firm would charge around $10,000 for the title search.
My guess is that the 30 day limit on the offer is a pressure tactic, to force us to move quickly, without exploring other options.
We are wondering if $2,500 is a reasonable price and if not, who could we talk to about getting a better price? (I’m guessing that without knowing the percentage of the royalty rights, an accurate price is hard to judge.)
I have done some research, but all of the web pages I find are talking about holders of full mineral rights. Any information would be greatly appreciated.
I don't think I would spend a lot of money on title work for the property. While I can't remember PA law regarding NPRI, many states allow operators to drill wells without the consent of the NPRI owners if the executive owners are leased.
Also, it will be very difficult to value the NPRI. While these exist, they aren't extremely common. Since you only have rights to royalty on production, you are at the mercy of the executive rights owner to sign a lease. If they chose not to, then your NPRI could be worthless. Make sense? Hope this helps.
LandmanDad. Yes. We figure that it might be the gas companies themselves that might want to buy the NPRI cheaply and thus have to pay out less in royalties.
Overall though, being at the mercy of the executive owner seems to limit the value.
I would be pretty surprised if it was an E&P company that wanted to purchase your NPRI. My guess would be a mineral buyer. The E&P company would be after the executive rights owner.
E&Ps purchase royalty rights all the time. Many have mineral buyer subsidiaries or related companies.
I have been running title for more years than I care to count.
I have worked for large corporations and for individuals. In general I believe
that a title search with attorney title opinion would not cost more than $6,000.
However, the company will perform the work for free.
As for the offer, it's about half what it should be.
Although I do not currently work for a mineral buyer, I did some work for one
several years ago. I know the company is still active in Greene Co. If you are
interested I can get you contact info. Very reliable people.
do you still run title? and if so what areas do/can you cover? I'm always looking for some help