Selling MIneral Rights vs. Royalities

I have been getting offers to sell my mineral rights. Last night, I had an offer of $12,000 an acre.  I said I wasn't interested.  But how do I determine which will get me more money--mineral rights or royalties. First of all, I have no way of knowing how much royalties would be if I were to get in a unit. Is there a range of amounts for royalties? How much per acre?  I also heard that these fracked wells have a life of about 7 years, with a dramatic drop off in productions after the first year. Comments?

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Permalink Reply by james coffelt on January 17, 2014 at 5:06am

Jimmy

I do not know about coal. I have sold thousands of acres of minerals, and no transactions todate have preserved surface rights. I suspect it is not as important, as they could drill your property from 2 miles away.

Evan

Assume the terms synonomous,, and both are capital gains 

Permalink Reply by Marvin travasco on January 17, 2014 at 6:29am
My disclaimer:I'm not an attorney or accountant, just making obvious assumptions based on Mr coffelts recent and past treads. He mentions
Mostly all Pro-sell your mineral rights .....could he have a vested
Interest in persuading land owners to sell? Take all info on this site
With a grain of salt. He posts: 25% of land not drilled... I think 25%
Of members of this site are here to market what's in his/her best interest,
With fake threads under many fake member names... Also mentions "I did 20yr
Model analysis, but can't post due to being computer "ILL-literate" hum..
1031 exchange is TAX DEFERRED -not tax free!!! Also he mentions 50% +\-
In taxes. Research other sites to qualify all posts on this site.
I stress, some members only are posting to benefit themselves by misleading
The public. Good luck with all your decisions, consult professionals and
Have their opinions in writing, & for peace of mind- 2nd opinions to check
The work of others could only help police landowners avoid bad decisions.
Permalink Reply by james coffelt on January 17, 2014 at 9:33am

Marvin

Your skepticism is appreciated, in this gas and oil business.

I am a cattle rancher, nothing more, I am not working to buy or lease minerals.

I have a lot of experience on this subject , which I hope is helpful to others. Take it or leave it, it matters not.

If you will send your email, I will send you my 20 year analysis, and you can post it.

It is aliittle dated, and hand written, but most will get the gist

The 1031 exchange, will be tax free, as assets are rolled into LLC's, trusts, etc. You are right, by design, it is tax deferred. However, it can be made tax free.

As for Professionals, it depends. Some are sharp, and fluent in this business, and I would suggest 70% do not know more than participants on this sight

 

Permalink Reply by Deron on January 17, 2014 at 6:19am

susan i dont think it would be a good idea to sell mineral rights unless you are struggling financially.  it sounds like you have been trying to compare royalties from your recent lease with 12000 per acre to sell your mineral rights.  if you sell your mineral rights you will not be able to get royalties or sign leases ever again on your property.  who knows in 30 years they may find another shale that is worth more than the utica or marcellus.  they have invested way too much money for these leases,,, the royalties are there.  I would at least wait until you can talk to some people receiving royalty checks.  another idea is to break your property into 2 tracts and only sell mineral rights on one tract then if the royalties are crazy amounts you wont be missing out entirely. 

Permalink Reply by Susan A Tippel on January 17, 2014 at 7:06am

That is exactly what I am trying to do. I am not really close to selling my mineral rights though. On the other hand, I sure don't have 30 years left and I have to keep that in mind. If nobody drills by the time my lease expires in 2 1/2 years (I will be really pissed.) I will consider selling mineral rights if the price is very good.

Permalink Reply by evan on January 17, 2014 at 9:55am

Smart thinking Susan. I for one said I would never sell mineral rights. But then I learned Alot, about Alot of things with this whole business. There are many reasons to sell and many to not. For instance the way your property lays according to where the closest well pad will be matters Alot. Half of my property could never be touched with the way the nearest wells have already been drilled ,so in my head  it would take along time to make up that difference that I will probably never get royalties for .  The company your dealing with is also huge. Many more reasons to do it but wont bother with listing them. You could sell just your royalties on the Utica also therefore you still have complete control of your property

Permalink Reply by Rick on January 17, 2014 at 2:11pm

I sold my minerals to Scout Resources LLC. P.B 993, New Philadelphia, OH 44663 5.0 gross acres at 51,500 and only sold what was in eclipse resources lease! I kept surface down to 4,000 ft. and picked back up at 200 ft. below the Trenton-Black River Plus get to keep and resign bonus! for the pre-existing lease. 

Permalink Reply by evan on January 17, 2014 at 2:20pm
So rick you did it huh. 51,500 is the best I heard of yet congrats
Permalink Reply by Rick on January 17, 2014 at 3:05pm

Yep! as long as the title comes back and the buyer doesn't change there mind I guess! Yes I'm happy! But I hate being out of the O&G play, When they start the unit up soon I'm sure I'll be very sad...lol Told I want steak dinner every year when they do..lol

Did you see the addendums I got also! Thanks evan 

Permalink Reply by evan on January 17, 2014 at 4:25pm

Yes I saw your addendum. Great job you mustahad a good attorney. I'm gonna keep those in mind

Permalink Reply by Rick on January 18, 2014 at 5:56pm

I had one but never got to talk to him, Everyone wanted the deal done asap! That was all my doing!......I'm so happy it keeps my hopes up to get back in the play someday!...lol

That's what held me up from selling long time ago! plus I get the resign bonus if they don't drill by oct. 2017

Permalink Reply by Gusher on January 17, 2014 at 3:11pm

also keep in mind that royalty income is taxed at roughly 42% and selling mineral rights is taxed at roughly 15%

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