Measuring an Offer to Sell Mineral Rights

I have offer on table to sell 50% of my mineral rights for ~$1Mil. I am viewing this that investor thinks  the property is going to generate well over $2 mil in royalties. It seems to me that I will get a second million by time investor breaks even.  Is my thinking wrong?

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Permalink Reply by James T Monyak on December 1, 2012 at 1:00pm

From my understanding all the information is available on the DEP web site.  Unless you are saying the information is coming from someone working for the E&P company.  That would be illegal to use that information for self use and that person would be fired, although Chesapeake has a company that buys mineral rights and will make a priority to drill those locations. That is wrong too, but Cheseapeake is known to do alot things they end up being sued for. 

Permalink Reply by jonathan M. on December 1, 2012 at 3:57pm
Wow 10k/acre!? Was that offer recent?? Thanks
Permalink Reply by rmc on December 3, 2012 at 12:03pm
Yes the offer was made a month or so ago but was made on a letter addressed as nonbinding so it could have been a bait and switch. As far as anyone doing anything illeagel surely not in the good ole USA.
Permalink Reply by rmc on December 3, 2012 at 12:05pm
Oh the agreement they sent for me to return to them was addressed to Houston Texas
Permalink Reply by jonathan M. on December 3, 2012 at 12:50pm
Nonbinding? Smells fishy to me
Permalink Reply by jonathan M. on December 1, 2012 at 3:40am
Cheliped wants 20k/acre, he's only selling half of 100 (50) for 1 million.
Permalink Reply by James T Monyak on December 1, 2012 at 5:55am

KBrooks I am Selling,

For $3500 per acre one would own all the mineral rights for all depths and all minerals except Coal .  So one would receive royalties from both a Marcellus & Utica wells when drilled.  One would receive a 1/8 royalty paid monthly.   The mineral rights have been separated from the surface rights.  I think it’s a great  price since many landowners think their mineral rights are worth $15k to $25k per acre.  Nevertheless, since I need cash today it will be a good deal for someone.   I think I am still ok since the total parcel is 50 acres and I will still own 40 acres.  So I am sure that I will be rich sometime in the future, but I still need to pay bills today in the real world.  I am willing to sell as little as three acres for $10,000 if I can’t get anyone to buy all 10 acres. 

0ym9x5ag7ury2Permalink Reply by 0ym9x5ag7ury2 on December 3, 2012 at 3:53am

K,  If you need money do a search on this website under my  name, you'll find options that other people have taken rather than selling their minerals, like partnering with a relative or friend. You have a treasure under you if you can learn how to utilize it in your favor rather than giving it away to someone who knows what you have and are willing to take it from you.  

Sign nothing without consulting a lawyer so they can tell you where the pitfalls are before you get trapped in a contract. 

Good luck and keep reading this website for facts that will help you make the right choices.

Permalink Reply by 0llbnp780fs53 on December 4, 2012 at 10:56am

Thanks Ron.  I think they may be putting a well pad very close to me and they are in the process of laying collection lines, so I'm going to wait and see how that works out over the winter.

0ym9x5ag7ury2Permalink Reply by 0ym9x5ag7ury2 on December 3, 2012 at 3:40am

JMN,  Channel 9 (antenna 166 degress) Stuebenville, Sundays at 11:00, has been showing Jeff Rokisky and his team of lawyers that can evaluate your mineral rights and establish a value based on well production in your area. They will present your mineral rights to 25 or more companies for the best price. Cost is 6% if you sell.

I don't recommend selling mineral rights but this will allow you to kick yourself in the butt a fewer number of times since you will have gotten the best current price from what you should have kept.

Jeff Rokisky 1-877-748-3234  www.rokiskylaw.com     Sales Team  1-800-388-2529

As the well diggers said: "You don't know what's under your feet, do you?"   I know.       Ron

 

 

Permalink Reply by James T Monyak on December 3, 2012 at 3:46am

Do you know the price range that Rokisky has received for his clients?

Permalink Reply by J Hankins on December 4, 2012 at 6:49am

One factor often not considered is the time value of money. Minerals and the royalty income generated by production is similar to winning the lottery. If you win, you have a choice to receive the total prize money payable in a fixed yearly annuity over a period of 30 years, or opt for a lump sum of cash that is paid to you today. The majority of people choose the lump sum of cash even though it's typcially half of the total prize money. That is because from a financial standpoint the lump sum of cash would earn more, if properly invested, over the 30 year period than the total prize money amount. This is due to the time value of money.

 

For example, whether you won the lottery for $10mm or thought your minerals were worth $10mm, if you chose the lump sum payout or sold 50% of your minerals, the $5mm dollars invested over 30 years at 5% would return you $22mm.

 

If the inevestor pays you $1mm, I'm sure he expects to make $2mm, but he may have to wait 25- 30 years to get it. If you are willing to wait 25-30 years, selling may not be for you.

 

I think hedging your position has it's advantages. If you feel the minerals are that valuable, you can always use the $1mm to buy more minerals. Investors tend to have tens of millions of dollars that they are able to spread over thousands of acres. The average landowner has 10-100ac to bank on receiving producing royalties. I own mineral interest in various states, and I have found it best for me to sell a portion and keep a portion.     

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