Value of Marcellus mineral rights? Bradford Cty, PA

Hello, I was seeking some information on the value of my mineral rights so I may further market them. Total acreage is plotted (10) and the well is in production with preliminary numbers from the operator at just under 8,000 mcf/day. Royalty is 161/2 %. There is a lease addendum for production costs are the responsibility of the operator. I'm not real sure what else I could add here but I may have a consideration for the property, a nice gentlemans farm that has been on the market since Sept, and now need to help a perspective buyer with an option so that I would still have funds to work with to relocate myself.

I've had the low ball offers that didn't consider the above avg percentage, let alone now as it stands according to MDN, it will be only second to the highest producing well in Bradford county, PA. There should be a way to put a decent value for a smart speculator. I once read on a landman's forum that a multiplier of 48-72 times a monthly royalty payment was a rule of thumb.....just don't know if that is correct and if there are buyers of rights at this price point.....any feedback would be greatly appreciated.

The well has been under production since late Sept, but I haven't received first check yet.

I also hope I am not breaking any of the forum rules here as I am new on here and the last thing I would want to do is break rules or offend anyone. Blessings! Joe

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Permalink Reply by Nancy LeNau on January 13, 2014 at 9:53pm

Joe,  I also enjoy your comments !   God Bless....

046aqwyftq0soPermalink Reply by 046aqwyftq0so on January 15, 2014 at 3:52pm

This guy is correct, market price is market price.

Permalink Reply by daniel cohen on January 14, 2014 at 12:08pm

Joe,

Have you considered a different route to get some funds while still retaining ownership? I'm thinking that possibly partnering up with someone, on a % basis, would still allow you to retain some future equity in the well. Another thought is to explore a loan possibility on the basis of the well expectation, and to retain the option to repay the loan at a future date to regain the control of the well assets.

I'd suspect that any accountant could help you with details of these different approaches and likely suggest a bunch more. Of course you'd have to get a decent attorney on your team to make sure you're well protected.

On a different but related note-there are class action suits being considered against CHK currently in the initial stages which could impact your long term thinking. All that being said, you're doing exactly the right kind of exploration to determine your options. (I'm also in Bradford county as are you.)

Best,

Dan

Permalink Reply by Joe Shervinski on January 14, 2014 at 12:28pm

Hi Dan,

Not sure what a partnership would do or if that would be any different than some kind of private loan. Going further in debt with a loan isn't what I'd really want as from my talks with bankers, based on the income of a well, I would have to receive the royalties for 2 years before they'd consider it a steady stream of income.

Yes, heard of the different suits and either they may settle some matters or there is always the possibility they sell to another operator at some point.

Yes Dan, that's exactly what I set out to do, is explore and maybe educate a few more in the process of this discussion so a "real" value is assessed on these mineral rights.

Kind Regards,

Joe

046aqwyftq0soPermalink Reply by 046aqwyftq0so on January 15, 2014 at 3:53pm

Dan this is a good strategy. Take a company on as a partner, that way they work for the property as a whole. Cash in a little and roll the dice on the rest. 

046aqwyftq0soPermalink Reply by 046aqwyftq0so on January 15, 2014 at 3:58pm

Hey guy, north bradford is around 4,000 per acre for 12.5 percent use a proportion to figure out the correct number 12.5/4000 = your royalty/ X    and solve. 

South Bradford at most in the best spots (chk zone) is 5800-6000 for 12.5%, use the same proportion. a good way to do this is also run reserves on your on property for the size of the unit and proportional to your net interest in the unit. Use 2.50 per MCF this is a good average number for the area. 

REMEMBER!**** whoever is buying your minerals is now assuming the risk, you have to let them to try to make money too over time. If you sell partial interest they are now are partner and you are in the same boat and they are now working for the rest of the interest owners if its a company. 

Note: if your property is valuated at a conservative estimate of 10,000.00 per acre, a fair asking price is 8,000-9,000 per acre. no sense in buying minerals you cant break even on. Unless if the buyer is running some kind of ponzi scheme. 

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