Would it be beneficial to Sell our Royalties or Just Retain Them?

We currently own approximately 6.89 acres of land in Pultney Township, Belmont County, Ohio.  We are pondering selling our rights to our royalties.  As we often feel that we end up screwing up, we wanted to know if it would be to our benefit to retain the royalties or sell them out right to get a lump sum cash payment.  We could use the cash now and we have no idea if or when they may be drilling in our area.  Any suggestions would be greatly appreciated.

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Permalink Reply by Bill Barnaby on July 16, 2014 at 8:29am

You won't know till its all drilled out. You could be sitting on a gold mine, you could be sitting on a copper mine, no one knows. With that many acres I would only expect 3k a month if its a really good well, and who knows how long that would last.

However, keep this in mind.... gas companies leased 80% of your royalties for 5-7k an acre.... these companies are offering 5-7k (or more I don't know) for 20% of your royalties. They're in this to make money, and they're certainly not in this to make you money.

Permalink Reply by Drb Bummy on July 16, 2014 at 8:45am

So based upon your knowledge, if we waited it out and they finally drilled our property and they pooled all of our acreage into the unit and we have a royalty rate of 18%, what would you estimate the monthly pay out to be - I am not holding you to this exact calculation but we are trying to get some sort of knowledge first.

 

Also, who knows if they will ever drill our property.  I know there is a pad a couple of miles down the road, but the way they are drilling, they are not coming near our area.  Thanks.

Permalink Reply by Bill Barnaby on July 16, 2014 at 3:36pm

It's really impossible to say without knowing production, and its always difference, just plug in like 2-5mmcf in the calculator, those are low numbers if you can make that money with the low numbers, then a big well would only make more.

Permalink Reply by bungalow_steve on July 16, 2014 at 9:09am

It's almost never a good idea to sell minerals, there are many shale deposits that may be extracted in the future. If you don't need the money I wouldn't sell unless your 80 and have no heirs.

Even though you don't own many acres and won't be able to buy a private jet, at the end of the day, your acres probably will generate royalties every month to pay for all your monthly utilities/car payments for the rest of your life, that is not insignificant.

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