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 JR on June 9, 2012 at 12:19pm
Patricia, did they want your leased or unleased acreage?  We are leased but appear to be in theliquids rich/oil window--prime location. We also would sell. I'd sell the whole thing for $25-$30k per acre. Unleased you would think could be a bit more...$35k? I figure years of royalties, additional formations below. It is valuable.
Permalink Reply by Chartist on June 9, 2012 at 11:58pm

From the depletion curves I've seen, 80% of revenue comes in years 1&2 with the other 20% coming over the next 28 years...This is actually a good thing given the time value of money.  The most important thing you need to know is the discount rate being used to get the net present value of the revenue stream:  10% is fair, anything higher is robbery.  You're going to need some production numbers from the area, could be tough to come by.

Then throw in a dollar amount for the surface.  My guess is your older and need cash now.  The buyers are hoping they can dazzle you with a number per acre without you asking how they determined it.  Some assumptions will need to be made as in all finance.  But in the end, you have to look at your own personal situation of age and cash flow needs.

Permalink Reply by Gerald Hohler on June 11, 2012 at 8:10am

A friend of mine just sold his 60 acres and home near Dellroy, Ohio in Carroll County. He sold the mineral rights also at the same Kiko Auction. He kept 25% of the mineral rights per acre for himself, 25% with the property, and 50% per acre at the auction. He got $2500.00 per acre for the 50% of the mineral rights, and I do not know what he got for the actual land itself. So that makes it $5000.00 per acre ACTUALLY paid just for the mineral rights. It does not matter what someone thinks it is worth, it is what the market will pay. Good Luck $$$$$$

Permalink Reply by Gerald Hohler on June 12, 2012 at 2:20am

No............no lease as of yet.

Permalink Reply by Kathleen on June 11, 2012 at 8:23am
I like how he broke it up. The new landowner IMO needs to have a piece of the rights. I also believe this way of thinking will end and we will sell like the western states do but as new land buyers in Ohio we are not 100% used to this idea yet. Good for him.
Permalink Reply by Linda A on June 27, 2012 at 4:49am

@Kathleen,

how do the western states sell their land and/or mineral rights?

thanks

Permalink Reply by Kathleen on June 27, 2012 at 11:43am
A lot of the states, as an example that had gold rushes have the minerals seperate from the land.
You can actually see people seeing just the minerals on eBay but there are other land sites that show it.
I'm not 100% on this but I'm pretty sure some of the BLM (bureau of land management) land out west has the minerals separated to private owners too.
Permalink Reply by Linda A on June 27, 2012 at 11:59am

thanks Kathleen...

Permalink Reply by Denver Gallentine on June 27, 2012 at 2:04pm
Kathleen-
We have an example of what you are describing here in Ohio. In th thirtys when the Muskingum Conservasy built the dams (like Atwood) they bought up thousands of acres. After buiding the dams they sold the land, but kept much of the mineral rights. Some people who own 150 acres near Magnolia, Ohio were excited when CHK started leasing land until they found out that Musk. Con. still owned the mineral rights. I believe there was a similar situation written about on this site by Dr. J. (somehing do w/ storage cavities or something like that). Good discussion by you and Linda. - Denver
Permalink Reply by Tim Tarr on June 11, 2012 at 10:02am

Here is the way I look at it. All numbers are just an example.

Size of unit 1000 acres

number of wells in unit 10

cost per well $5,000,000 that includes all costs (Bonus,access road,well pad etc...) you can get an idea of the first 3 from company  report that is operating in your area.

Your royalties 12.5%

10 x 5000000 x .125/1000 = $6250/Acre That's the gross you should get before company makes a nickel

That doesn't include post production costs but the company has to pay those too.

Add in their ROI (return on investment) 30% after additional company expenses and that is a good place to start.

Don't forget to add in your signing bonus.

Remember that's for the one formation. Good bet their are others.

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on June 11, 2012 at 4:50pm

The problem with this math is that it assumes quite a lot.  10 wells per 1,000 acre unit isn't a reality right now, so using that as an input isn't accurate.  Also, most wells in the condensate window cost almost double your number.  Assuming a 30% ROI is also not a fixed estimate.  In Range's wet Marcellus presentation they show that they DO NOT MAKE ANY MONEY until gas is above $5/mcf.  At strip price they lose 29% of their investment.  Trying to evaluate what someone's land is worth based on a handful of actual producing wells in the Point Pleasant is difficult and can lead to huge swings between estimates.  The truth is that your land is worth exactly what someone will pay you for it.  

Permalink Reply by Linda A on June 27, 2012 at 4:56am

exactly Mr. Grayson, and if we get too greedy (holding on to a dream offer) we could end up with nothing - if you consider what is waiting for us down the road as far as regulations and govt schemes of wealth redistribution.  They will take OUR money in a heartbeat and there is nothing we can do to stop it.

They are stealing farmer's rights just to farm as they have done for many generations.  Now they want to know EVERYTHING you have and do on your farm, including raising vegetables, if you have ONE chicken or ONE goat or ONE horse and what are you doing with that manure!  Also, animals/gardens take water and the UN Agenda 21 wants control of ALL our fresh water - including rain water! 

Do what is best for your circumstances TODAY, because we nave NO control over tomorrow.  If there are things you want to do and believe you want the money to survive the next 20 years (retirement age folks) then just remember.  None of us can control our tomorrows but all of us can control today!

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