Received a phone call last week with interest in buying my mineral right. (I get them all the time)
I have 40 net acres. I jokingly said we wouldn’t entertain offers under $1million. We really have no interest in selling. The next day I get another call they they were very interested and wanted to make an offer.
I received it today $1,297,000.
I’m considering it. We inherited it about 25 years ago and it was dormant almost all of the 80’s and 90’s
Since 2017, we have received about $450,000 in royalties and bonuses. The wells are getting very thin, only about $25k last year and will continue to decline. for a few more years till capped. Who knows what the future holds, it could all get banned or go gangbusters depending on drilling tech and politics.
my wife and I are almost 50 and 1.3mill (750k after taxes) would set us up to retire at 50. (both teachers so would likely continue to work) Considering countering at 1.6.
IS THIS OFFER CRAZY??? Too good to be true? the company and contact are legit and verified.
We have not received any indication from the operators that there was any plans for new wells.
The OCD well permitting site shows only the three know wells on that section and no new permits.
I did just find these 3 newly approved wells on an adjacent section where the bottom location is in our section. Not sure if we get royalties from than or not.
Chris- I would suggest you make a visit to a CPA or estate planner. You have long term capital gains on your side. That tax rate is 15%. The sale isn’t counted as regular income. Good luck.
You should open all the attachments and links and save data into a well file on your computer. The linked well file has 36 pages of information including plat, drilling plans, etc. just for 1st well on list. There is a NMOCD pooling order which will set out acreage and rules for the wells. You can see if your minerals acreage are included and if so, then you will be paid royalties. The wells may all be encompassed in one pooling order. Good opportunity to find everything you need on the NMOCD website. Later you can confirm get completion and production data. Operators are busy and may not have time for quick response. No surprise that someone is offering to purchase.
All the info on how far those wells reach into your acreage is in the permits that you just referenced. I mean you can call Mewbourne all you want, and maybe they will talk to you, but pretty much everything you need is in the well files in the permitting part of the NMOCD. Just look for the acreage dedication plats in the wellfiles. They will look like this:
That one goes through your acreage (the NE of the SE of Sec 32). Here are all the Sunrise wells in the Sec 31 and 32. You have two DUCs (drilled not yet online) and two permits in your acreage, plus the old Boxer well.
We are going to assume your 40 acres is leased at …25% royalty? So 80 net royalty acres. If its less than 25% royalty, then things are not quite as rosy. And you have been in pay on the Boxer 32-22-27 Fee 401H well since 2019? If it’s 80 net royalty acres you probably can get, or did get, a legit $1.3m offer no issue. Its possible somebody is offering you assuming its 25% royalty and if its less royalty, they would scale it down proportionally.
Where do you live that $1.3m gross becomes $750k after taxes? Norway? As Todd said, it’s LTCG. Your cost basis is going to be pretty much zero, but you don’t really need an accountant to figure out that you put this in the LTCG line of your 1040 and away you go. I mean if you want to 1031 it into a beach house and pay zero taxes, then probably should talk to an expert on that.
IMO, the expert you MAY want to speak to would be a “how much is this thing worth or can you get me in contact with more buyers” expert, as that person might just get you a $X00K swing. If selling for >> $1m either way seems like a good plan, you probably don’t need a “whats it worth” expert as much as just a way to put it in front of 10 folks who buy things like that, and then you know the highest price is what it’s worth (to sell). Then go from there.
If you getting offers of $20K+ per NRA in that area it’s definitely indicative of new development activity. That offer is baking in new wells coming online.
What did you do? We were receiving calls last year. But, they have gone quiet. I would have to look up our coordinates. One broker calculated we had 1500 net royalty acres.
The offer is so high because of the planned activity in the area. Mewbourne is putting up to 10 new wells into Sec 31 next door to your acreage. These wells are going in on a 10 acre pad along the western edge of Sec 31 just below their existing tank farm and two existing wells Sundown 31 32 - 001 and -002. All new permitted wells are showing directional lines heading east into Sec 32. They are also putting in new pipelines to assist with transport and storage. The buyers are likely aware and are betting on a significant return on their investment.
If I had a 1.3 million dollar offer I definitely would not be getting my and advice from here. Find an attorney in midland and go from there. We all watched people on here give awful Delaware advice during the last boom & cost people alot of money sadly.
Permian: Thanks. $20.3k/nra. Yikes. For 22s27e. Oh my. Again that may or may not be the offer, but it might be. Things are a lot more clear if people state things in PNRA basis in their offers. But that’s pretty consistent with high end numbers I have been hearing for just SE of Carlsbad, which frankly seems a bit insane on a risked basis but Lord knows. There are a ton of mineral buyers and not that many minerals to buy, so things are real real nuts.
BP11: Yeah, offer is based on possible drilling here. How much drilling do you have to have to pay off $20k/NRA? Answer: A lot. You have to make 3million barrels of oil out of a 1280 acre unit to break even. So really you need 8 wells online for 5 years or so to break even. Even. 4 wells if we are just talking about the S2 of Sec 31 and 32. 2 of them already drilled, and 2 permitted. So it seems like that will probably happen. But it seems really really hard to see a strip oil pricing scenario where you double your money in 10 years paying $20k/NRA in 22s27e. Which is barely beating no-risk T-bills.
Since 2017 how many wells were drilled to get that $450k, at what formation and unit size? Sounds like they are targeting a new formation, do you know what the offsetting production has been on new wells drilled? All questions you need to evaluate but that offer will be hard to top with new drilling and if you take the money and invest it.
That is from one verticle well.
Currently, there are 2 newly drilled (not in production) wells and 4 more permitted.
The well data estimates 1500bbl per day per well.
Our current well has produced just onder 300kbbls in the last 7 years.
As Todd said, it’s LTCG. Your cost basis is going to be pretty much zero, but you don’t really need an accountant to figure out that you put this in the LTCG line of your 1040 and away you go. I mean if you want to 1031 it into a beach house and pay zero taxes, then probably should talk to an expert on that.