In a Planned Unit - What should I do now?

So our property has finally been put into a proposed unit.  The hearing for the Withey NE and NW units are scheduled with the Ohio DNR in December.  Based on other units in the area, if the schedule is similar, royalty checks should start to come in within the next 12-18 months.  What should I being doing to prepare?  Are there steps that I can take to reduce our tax burden?  Also, I have heard many people on this site state that you should never sell your mineral interest.  However, I have received what I consider a good offer of $17,000 per acre on a 17% no deduction lease.  If we were to sell we would only sell 25%-50%.  Should I get an oil/gas appraisal for the property and what should I expect to get from that as a result?  A lot of questions, and there are probably some important ones that I haven't even considered.  Any input/advice would be appreciated.  Thanks.

Views: 812

▶ Reply to This

Replies to This Discussion

Permalink Reply by tacoma7583 on November 12, 2025 at 1:06am

I received a very similar offer in Columbiana county per acre to buy my rights.  the current unit is only about 70% of my property, so if they come back and drill the NE laterals ill be really happy with my decisions.   The unit im has had higher oil production than the others in the area so this helps even with lower oil prices using the forecast for 12 months production even when I pay taxes, single no real deductions.   I'll break even on what I would have earned if I would have sold the rights.  I asked three different accountants about anything to help save taxes and they didn't have any solutions that seemed legit.  One presented a plan but it felt like a good way to get audited in the future.    The only other tax situation was like a 1031 exchange on the mineral rights if sold , but I didn't want to buy a property just to buy.    

Permalink Reply by Petroleum Attorney 1976 on November 12, 2025 at 6:36am

Call Appalachian Mineral Company at 724-320-9202 or oilgasmineralco.com  -  They are Petroleum Mineral Advisors who can help. I know a few others who used this company and were glad they did before selling any mineral interest.  

Permalink Reply by David Cain on November 12, 2025 at 8:07am

Tacoma7583,

Thanks for the response.  I'm a little confused.  Did you say that in 12 months of royalties you would basically match the best offer you had to purchase your mineral rights?  Even with the dramatic drop-off in production after the first six months or so?  I do appreciate the response and I don't want to do anything that would seem dodgy.  Just want to pay the lowest legitimate taxes that I am obligated to pay.  Thanks.

Permalink Reply by tacoma7583 on November 12, 2025 at 8:45am

In my math the numbers are fairly close,  but depends on how you figure it and your tax situation.    not accounting or tax  advice but if you sell  the mineral rights it is normally considered long term capital gains, these 0%, 15%, 20% categories and how it breaks down depending on filing statues. If you keep it the IRS gives you 15% depletion on the royalties for tax purposes.  Again the unit I'm in has produced about double the oil as similar size units in my area, So that was a gambling risk too  if it would have been equal to theirs I'd probably be mad for not taking the $17,000 per acre.   I think that's why selling the mineral rights is a personal choice.  The dollar offered might provide that person to be able to pay off there home,  retire early, buy another income or retirement property.    I know most of my neighbors that kept there rights and have receive royalty's have spent the checks already, bought new truck, new SUV.   While, I'm still here eating ramen noodles trying to figure out how to make the money work for me.   

Permalink Reply by tacoma7583 on November 13, 2025 at 7:29am

the unit I'm in which was around 750 acres, only two laterals.  I don't own a big acreage of that. The gross value of the well production added up to $39,203,499.16 for the initial 3 months even with oil (condensate) being low $,  that was for condensate, drip condensate, Residue gas, plant products.   This might have been an above average well but of course I have to multiply the big number by my royalty interest for my share.  

Permalink Reply by Dwight Talbot on November 12, 2025 at 11:13am

Depending on how many net acres you have you could be better off keeping all and waiting for the production royalties.  My advice is to never sell O & G rights unless you're needing money right away. My grandfather bought a lot of oil and gas rights at tax sales, etc for $5.00-100.00 and paid taxes on them for years, and now they have produced hundreds of thousands of revenue.  17% Gross is a good %.  We have a property in Wetzel Co, WV that we were offered $10000/acre for and the 1st 2 checks from production were more than the total we were offered.  We did have substantial acreage in the unit, however.  You can look at the Declaration of Pooling filed in the county clerk's records office either in person or online possibly and find where you are listed in the unit and how many net acres you have in the unit.  You can then use the formula to figure your payment decimal:  Net acres in Unit divided by Total acres in the unit x Ownership fraction (percent) in the property parcel x 17% royalty = Payment decimal. 

For example 70 acres / 580 Unit acres x 1/2 ownership x 0.17 = 0.01025862 payment decimal

Then you can see how much you would be paid out of each 1 million of products sold out of the unit well/wells.  

$1,000,000 x 0.01025862 = $10,258.62

Most Marcellus Wells when first drilled will produce $1-3 million total per month for about the first 9 months and then begin to taper over the next several years.  

It is true that you face paying taxes, but that comes with having income.  You do have the 15% depletion deduction on your federal tax of the GROSS amount produced credited to you as well as any expenses, legal fees, accounting fees, and property taxes that you have paid in relation to the royalty income during the year.  

Permalink Reply by David Cain on November 14, 2025 at 6:45am

Dwight and Tacoma,

Thanks very much for your responses.  Sounds like solid reasons to keep my mineral rights and wait for the royalties rather than selling.  If I break even after the first year of royalties (as opposed to selling) then all the years afterward would just be gravy.  Have either of you been receiving royalties long enough to speak to production after say 1,3, or 5 years?  I know production drops off rapidly after the first 4-9 months.  I've heard the drop after the first few months could be anywhere from 50%-75% and would level out for about a year and then take another drop after that, continuing to fall over time.  I've also noticed you both mention production in terms of dollar amounts.  Do the leaseholders or operators have to provide this information to you?  The odnr reports only show the barrels of oil or mmcf of gas and not the dollar value.  Again, I appreciate your information.  Its nice to get info from others that have already gone through this.  

Permalink Reply by tacoma7583 on November 14, 2025 at 7:06am

@David Cain I sent a friend request so I can message you on this platform. 

Permalink Reply by Dwight Talbot on November 14, 2025 at 7:24am

Hello David,  The $ amount I am talking about would be the totals sold and the net I received.  I don't know what Ohio's law is, but West Virginia requires the companies to give you all the details of amounts of oil, gas, & NGLs sold, price per unit for each, total $ amount sold, and then break it down for your decimal under the same categories.  They have to tell you which wells the production came from, etc.  Most companies now are reporting through "EnergyLink" "Enverus" in addition to the statement that comes with your check (or by email if you have direct deposit of payments).  The Enverus report is usually more detailed than the check stub accounting.  You can sign up for a free EnergyLink/Enverus account to receive those statements online.  You can download a pdf of each month's/company's payment detail.  You can pay per file for an excel download of the same info.  Or, you can sign up and pay for a basic or higher account with Enverus which give you lots of tools for analysis. 

Permalink Reply by Kambe on November 17, 2025 at 3:55am

Is this unit named yet or the oil and gas company involved in the unit?  Are there any nearby wells already in production, just curious as to activity

Permalink Reply by David Cain on November 17, 2025 at 10:43am

Kambe,  the proposed unit names are Withey NE and Withey NW.  There are several units in the area.  The closest would be the Rock Ridge SW.  It began production on 9/04/2024.  In its first four months it produced 69,000 barrels of oil and almost 5,000,000 Mcf of natural gas if I am reading the ODNR reports correctly.  The Withey units are roughly the same size and will also have two laterals each like the Rock Ridge SW.

Permalink Reply by Kambe on November 17, 2025 at 11:56am

thanks, good luck.  It looks like Ascent is the producer and they have a good record as far as results.  

RSS

© 2026   Created by Keith Mauck (Site Publisher).   Powered by

Badges  |  Report an Issue  |  Terms of Service