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 br on January 23, 2015 at 3:53pm

okay sorry to jump in here from PA close to hancock co. wv and wash co pa. n e way. I am stumped or dumbfounded about people saying they can or have got 10 to 15K per ACRE for their royalty or mineral?  some saying worth a lot more for mineral rights 100K+?  ok just call me an ignorant sob or what ever need be it.  that being said PLEASE CLARIFY THE FACTS NOT WHAT COULD HAVE OR SHOULD HAVE.. NOT LOOKING FOR SPECULATION UNLESS THATS ALL THERE IS? sO MY QUESTION IS IF own  say 30 - 75 acres in THE Marcellus area's and have 1.5 yrs reaming on a 5 yr lease with Range  at 15.5% and no activity as of yet. i'm being offered to sell my mineral rights at 4k or less per acre i understand i loose all royalty and any re-leasing monies from here to indefinitely. only retaining my surface property.   WHAT IS A FAIR PRICE TO SELL MY MINERAL RIGHTS OFF NOW? OR DON'T SELL AND GAMBLE TO RENEW LEASE IN A YEAR AND A HALF AND OR IF ANY DRILLING WILL EVER COMMENCE? THANK YOU

Permalink Reply by br on January 23, 2015 at 3:34pm

okay sorry to jump in here from PA close to hancock co. wv and wash co pa. n e way. I am stumped or dumbfounded about people saying they can or have got 10 to 15K per ACRE for their royalty or mineral?  some saying worth a lot more for mineral rights 100K+?  ok just call me an ignorant sob or what ever need be it.  that being said PLEASE CLARIFY THE FACTS NOT WHAT COULD HAVE OR SHOULD HAVE.. NOT LOOKING FOR SPECULATION UNLESS THATS ALL THERE IS? sO MY QUESTION IS IF own  say 30 - 75 acres in THE Marcellus area's and have 1.5 yrs reaming on a 5 yr lease with Range  at 15.5% and no activity as of yet. i'm being offered to sell my mineral rights at 4k or less per acre i understand i loose all royalty and any re-leasing monies from here to indefinitely. only retaining my surface property.   WHAT IS A FAIR PRICE TO SELL MY MINERAL RIGHTS OFF NOW? OR DON'T SELL AND GAMBLE TO RENEW LEASE IN A YEAR AND A HALF AND OR IF ANY DRILLING WILL EVER COMMENCE? THANK YOU

Permalink Reply by David Allen Lilly on January 24, 2015 at 1:53am

Most of the discussion involves numbers that are speculative to some degree, but they are reasonable and as far as my numbers  I stand by them.

First, your lease is very important but just as important is the area you are in. I drive through that area all the time on business, through Washington PA out to Johnstown or up to Erie and Pittsburgh.

I don't see nearly the activity there that I do here. Some will disagree but even my CPA knows of the Utica/Marcellus sweet spot that exists here, he had a map that he showed me that I have seen before many times. If you drive west from your area on I-70 when you get into Belmont county Ohio you will start to see the rigs, continuing east and mostly south you will run through what is the hottest part of the play, Belmont county, Guernsey (the southern and eastern most townships) into Noble and Monroe counties.

This area is where I have seen the highest offers and the most activity.

Prior to this I was told over and over that the monthly per acre payment from our 20% gross lease would be 2-3 thousand per acre, just for the royalties.

Also, I suspect there is another formation under the Utica that the oil companies are looking into, it may double the value of your royalties.

I have said that here in Millwood township Guernsey county and surrounding areas the lifetime value of your lease is $200,000 an acre, because of the off the charts production numbers that have been reported around here, as have been quantified by Antero resources and have been posted on this thread a couple of weeks ago.

Whatever the value, it will be substantial.

Now, if you sell your royalties you can expect to get about 10% of what the investor determines will be a realistic lifetime value of your lease. You will give them surface to core and will be out of the game forever when it comes to future development of other formations.

The 10% figure is close, in your area you may not get that high, but the figure I have quoted is an industry standard and it will be close to what you will get.

Personally, I would never sell my royalties. I am sure that in my personal situation it would be a horrendous mistake that will cost us a ton of money.

To each his own, but I would advise you strongly against selling yours, and to be patient and enjoy your life while you wait for things to play out.

What did you get up front to lease your land three and a half years ago ?

Permalink Reply by br on January 24, 2015 at 9:17am

2500 per acre and like i said highest offer from 3 different investors is at 4100 per acre at min of 30 acres.. I know what your saying about the ohio counties but looking for any news on my area as well as having to get myself out of a pickle, so to speak and possibly selling off some of the only liquid assets i have, may be only option at hand? again not wanting to get into personal to much. Again i'm not getting the formula or something not clicking for me? understood 10% of royalties life time but dont know what that number is? also we are talking selling off the gas n oil rights and of course that obviously will include any and all future royalties (cant collect royalty if don't own the gas n oil) so how do you sell only the royalties and maintain ownership of the rights? again no production and dont know if ever? my property is on the south side of racoon state park if that helps? thanks and sorry for not understanding all completely thanks again and just to clarify; IT DOES SEEM ALL SPECULATIVE AS FAR AS MY PROPERTIES AND SITUATION GOES? 

Permalink Reply by David Allen Lilly on January 24, 2015 at 2:03pm

I will try to explain it for you.

You call XYZ royalty buyers/investors. They want to see your lease, they then look at what is drilled around you, your proximity to a pipeline and what production has been in the wells around you.

The buyer then calculates a dollar amount that they think your lease will be worth over its' lifetime, say just for fun $50,000 an acre, again, just for fun.

So, if their conservative estimate is $50,000 an acre over the life of the lease they will offer you at best 10% of that, or $5000 an acre.

At best.

They would likely try to get it for less, and then walk the price up until you take the deal or until they are not comfortable any longer.

You sign, you get your money, which might be the equivilant of the first 6 months of royalties, and they get the rest, forever.

Whatever "pickle" you are in, try to imagine what you would do if it wasn't for the selling of your royalties.

I would gladly sell my land before I sold my royalties, although neither is happening.

Good luck my friend, if I can help you in any way I will be glad to.

Permalink Reply by br on January 24, 2015 at 7:34pm

thank you Mr Lilly, I understand not to sell, but I either gamble now or hope for later. I realize my timing is off at the present time and especially for the conditions surrounding the business as well, unfortunately I need to do something. Regardless, I don't know what is going to play out and not sure anyone else does? I received 2500 per acre for a five year lease @ 15.5% royalty.  There is aprox 18 months left on my lease and no sign of any activities. 

I dont know where or how to get a number to take or calculate the 10% of or from?

Permalink Reply by David Perotto on January 24, 2015 at 1:59am

If you really need the money sell, but try for at least 12,000 per acre. If you wait you will be rewarded. Look at the Range Resources company presentation, it tells you the gas in place estimation, that reveals what to expect.

Permalink Reply by br on January 24, 2015 at 9:29am

I orig asked for 5k per acre to sell my gas n oil rights i was offered 3500 3800 4k and now 4100 per acre or a percentage of all properties owned aprox 74 acres differ parcels any way you say 12k per when i cant get 5k? so if someone is willing to pay me 10k per for 30 acres i'll signed the sales agreement today. Thank you Mr. Perotto where do i find to see this range report? i am in hanover township beavr co side

Permalink Reply by David Perotto on January 25, 2015 at 2:24pm
Permalink Reply by Philip Thackray on January 24, 2015 at 2:47am

BR,

What is your township in Washington County?  How close is the nearest producing Range well pad and what is the unit name?

Production numbers vary enormously across the Eastern Ohio, WV panhandle and South Eastern PA regions.

As a starting point, you need to create an approximate Present Value (PV) of a typical income stream (per acre) in your area.

Phil

Permalink Reply by Puzzled on January 24, 2015 at 4:09am

The price of gas is not 4 dollars at this time...........how many people here have a true gross lease?. I think the price will go back up at some point but when?...I would not sell for the price 5bey offered you

Permalink Reply by Puzzled on January 24, 2015 at 6:28am

There is nothing to get over ....you state facts......I stated a fact

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