Replies to This Discussion

Permalink Reply by Gas Boy on July 25, 2014 at 1:43pm

Interesting............what is your professional experience Dave?

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Permalink Reply by Jeff Smith on July 24, 2014 at 5:24am

A simple (yet not scientific) way is to use comparable analysis.  Looking at the wells nearby and the production they have is a decent indicator of the kind of volume you can expect.  You can look at how long the well has produced and come up with a rough EUR for your area.  http://www.drillingedge.com is a good site for finding production and nearby wells easily and quickly.

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Permalink Reply by George Donovan on July 25, 2014 at 11:01am

I like the Palmerton Groups,GZA GeoEnvironmental Inc.. They have an office in Wexford. Ph 724 935 0018  Web address is www.gza.com

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Permalink Reply by Zack Smith, Geologist/Appraiser on July 25, 2014 at 11:47am

Your first step is to CONSULT YOUR ATTORNEY OR FINANCIAL ADVISER to determine what is appropriate to your intended use and what is LEGALLY ACCEPTABLE. Anything for IRS-related application CANNOT be performed exclusively by a geologist as your subsurface rights are legally defined as real estate.

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Permalink Reply by Dott on July 26, 2014 at 12:00pm

I had a CPA who specializes in appraisals(including minerals) do ours. It was 2 years ago and cost 5,500.00 without geology report.  It was specifically for Probate/Inheritance tax purposes in Ohio at the time (Ohio no longer has Inheritance tax). The CPA is in PA. There was someone who was going to do it for 4,500.00 with a geology report, but I had already signed agreement with CPA. I was very happy with her work. If anyone needs either parties information let me know.

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Permalink Reply by Zack Smith, Geologist/Appraiser on July 27, 2014 at 5:15am

Wow, sounds like I need to increase my fees!

You don't need a geological report, you need a geologist to at a minimum develop the decline/type-curve upon which the income valuation in based, which no CPA is capable of. Last fall, I gave a presentation at an American Association of Petroleum Geologists conference illustrating the financial impact upon landowners of using the wrong models.

If your report used a risk factor analysis, chances are the CPA was not valuing the correct interest; typically, this will give you the value from the perspective of the operator ignoring unsystematic risks. If the CPA was border-line competent s/he would have used a decline/type curve with market-derived discount rates, but since they can't develop curves  themselves most likely your report would have used a Pro Forma from the operator. In my presentation I showed that in core production areas of Pennsylvania the Pro Forma can overestimate value to the landowner by approximately $3,000 per acre. And if you're in 100% production and s/he used a "normalized production curve" with curve fitting, that's completely useless.

Luckily, the IRS auditors are usually accountants too and probably won't know the difference...

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Permalink Reply by Jeffrey Beunier on July 28, 2014 at 4:48am

I know of a few, and could be of service as well.  Can you reach me offline and email me to discuss?

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Permalink Reply by Al Cramblett on July 28, 2014 at 6:17am

Quincy,

Been there and done that and I believe I used the best in the business. His name is John B Gustavson of Mineral Appraiser, LLC, 2265 Hillsdale Cir., Boulder, CO 80305.

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Permalink Reply by John B Gustavson on August 1, 2014 at 11:16am

Thanks for the accolades, Al. When it comes to estimating decline forecasts and appraise properties in Tioga County, I always link up with Tim Knobloch, president of James Knobloch Petroleum Consultants, Inc., 2163B State Route 821, Marietta, Ohio 45750. Phone: 740-373-8970.

Thx again, Al

John B. Gustavson

Certified Minerals Appraiser

Certified Professional Geologist

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