Would You Sell Your Land & Minerals? And If So How Much Would You Take?

My husband and I were approached by an invester to sell our land with the OGM rights. We are thinking about selling our land that is located in the WET UTICA region and has great geology. We would like to get the opionion of other land owners out there. If you were approached would you sell? And if you would sell what would the price per acre be?  Half of our acerage is leased and the other hald on a seperate parcel is not leased. It seems like if we do the math of the royalties over 30 years there is allot of money coming in. So do we sell? And If so what do we ask per acre? Thank You & God Bless =)

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Permalink Reply by Dexter Green on June 20, 2015 at 5:07pm

If someone is selling their rights so they can go buy a Porsche then yeah, it's probably not a very wise deal.  But taking a lump sum for a portion and then investing it wisely could, over the life of that well, grow at a steady rate.  Over a 20 year period you could easily turn a $50,000 sale into $110,000 simply by not spending it and investing it.  Your 10% figure is not accurate in most cases.  Buyers are usually getting a 50-60% discount, not 90%.  

Permalink Reply by David Allen Lilly on June 21, 2015 at 1:50am

My figure of 10% is accurate, and comes from solid sources. I promise you no one is getting 50-60%. You know as well as I do that folks who sell their mineral rights are not the investor class, they are buying fast-depreciating goods with their money, an even worse bet when you give away a large portion of your money up front to do so.

As far as investing goes, the best return on investment is to hold onto your mineral rights and enjoy ALL of your royalties.

It will be all the more depressing if and when another formation is found and developed, the producers are currently extracting from multiple formations on the same pad in other places.

This is an issue I am passionate about because you and I both know what is happening here. Folks who have never had any money before are being massaged by folks who do not have the mineral owners best interests at heart to do that which is, surprise, not in their best interest.

  

 

Permalink Reply by Robert Allingham on June 21, 2015 at 8:48am

David Allen Lilly, Not trying to cause any trouble, just a discussion. I have to sell a portion of my oil/gas rights(not mineral rights) in order to get an important back surgery to increase my quality of life. I am the investor type also. I am college educated and retired from the Federal Gov't. Obama care ruined my health benefits and my co-pays are now a percentage of total cost which puts some of my health care almost out of reach. I am selling roughly 33% of my rights and keeping the other 66%. I will be investing half of what I'll be getting in the stock and bond markets. I am an individual investor using Value line investment survey and standard and poor's valuations. The 33% I have to sell will also keep me at a zero capital gains rate for the Fed and my only tax liability will be state and local. Not everyone that sells is unknowledgeable. Therefore I respectfully disagree with your above statements. Again this is for discussion purposes and not to pick a fight.

Permalink Reply by David Allen Lilly on June 23, 2015 at 12:08am

We can respectfully disagree.

Your situation is an outlier, a combination of circumstances that are rare.

Not everyone who sells is "unknowledgeable" but I bet you the vast majority are and that 99.99% will come to wish they hadn't sold their royalties.

Good luck with yer back surgery, I find myself in much the same circumstance.

Permalink Reply by Robert Allingham on June 24, 2015 at 4:47am

Thanks David Allen Lilly, Discussions are always good and welcome. Thanks for not attacking. Good luck to you and yours buddy.

Permalink Reply by Dexter Green on June 23, 2015 at 6:33am

David, I've modeled out dozens of wells and found that, in most cases, mineral buyers (the legitimate ones, not the fly-by-night jobs) are paying much higher than 10% of the NPV.  In Columbiana county a few years ago Westhawk was paying $7,000/ac.  Based on the production figures and the pricing in that county right now that number represents perhaps 33% of the NPV.  It's not always a high number, but there are some buyers who are certainly putting up a fair amount of risk.  

Permalink Reply by william Allen. Ladd on June 21, 2015 at 1:46pm

For me to buy a Porsche is a ridiculous thought. I'd be better off to fry my breakfast eggs with the dollar bills  a Porsche would cost.

I doubt that anyone actually knows just what the value of any minerals under their property is worth. It would be a gamble to buy anyone's mineral rights anyway. They might have an educated guess but the cost of harvesting any minerals could well be far to expensive. On the other hand if the landowner does sell the mineral rights, then any possible income from those minerals would go into some one else's pocket!

Bill L.

Permalink Reply by Tony Yurina on June 22, 2015 at 3:50pm

I wil

Permalink Reply by Tony Yurina on June 22, 2015 at 3:54pm

I am having trouble posting my update and edits.

I do not recommend selling any minerals.  If you have to only sell one strata and a small percentage of the total.  There is too much future upside.

Permalink Reply by Chris Stevenson on June 22, 2015 at 6:12am

I'm just curious to know if five family members who jointly own the mineral rights to 105 acres can sell their rights individually. My sister and I would like to pursue this, only because we're deeply in debt and a little too old to wait. That would leave my cousin and her two children. How does something like that work? We don't own the land above, only the mineral rights.

Thank you in advance for any answer,

Chris

Permalink Reply by bo boboski on June 22, 2015 at 10:18am

From all the reading I've done on the matter, my answer would be YES. If you filed bankruptcy,the trustee could take your share!. You could even use your share as collateral for a loan. You'd still need a lawyer,sorrytosay.

Permalink Reply by Dexter Green on June 23, 2015 at 6:37am

Yes, you could sell your interest without having the other owners involved.  If you own 1/5, or 20%, you'd be paid for 100% ownership of 20% of the rights.  So you'd be paid for 21 net acres.  

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