I'm looking at an offer for $3,917/net royalty acre on some sections I own in Blocks 28 and 29. Is this as good as I can expect?
Henry
Henry,
Is that an offer to buy your minerals or to lease your minerals?
Clint Liles
It's for royalty and mineral rights.
Henry
Henry, I noticed in the Loving County Appraisal District records that there are a number of producing properties that you're receiving royalties from. Are these the same tracts that you've received this $3,917/net royalty acre offer on? I ask because the offer you have received is quoting net "royalty" acres as opposed to net "mineral" acres, so it sounds like they are wanting to buy your royalties, or they are attempting to do a "royalty lease". If you have existing production on the property, or production expected soon, a royalty lease is basically (generally) the same as selling the majority of your royalties.
I would not recommend signing a "royalty lease", or selling your interests for $3,917 per net royalty acre. If you post more information about the name of the company that made the offer, and what the property descriptions are, we can give you an idea fairly quickly as to whether that sounds like a standard oil and gas lease, or if it is a company attempting to buy your interests.
You may also want to consider reaching out to one of the forum sponsors to see if they can offer any insight.
http://marketplace.mineralrightsforum.com/ad-category/minerals-management-consultants/
Thanks Wolfcamp. Here's what was written on the Pony Oil order of payment: " This payment is for Mineral and Royalty Rights for 150 Net royalty acres or 37.5% [I'm selling 3/8] mineral interest in the following property described as follows, "Lands" at a rate of $3,917.00 per mineral acre". And yes, the 5 sections involved are currently producing (Anadarko and Shell).
Henry, that offer is low for a purchase. I'd suggest reaching out to the forum sponsors to find out what they're seeing in your area.
Do you own minerals or an NPRI? The term "royalty acre" can have varying interpretations. The phrase you have posted mixes royalty acres and mineral acres and these may not necessarily be the same thing. Are you selling 100% of your minerals? If not, I urge you to have a oil and gas attorney with title experience look at this deed to make sure that you are not selling more than you intend. Have you checked on recent permits and activity on and around your acreage? Anadarko has some new permits in Block 29. Over the years, there will be many wells per section in Wolfcamp formation so your pricing should not just be based on current income. If you do not know for sure that this is a terrific price, then you should be doing a lot more homework.
Thanks TennisDaze. Being a novice at this with limited time to do research how do you suggest I go about doing homework? I've pursued multiple offers and they do seem to get higher the longer I'm out there. That's an interesting tip about Anadarko on block 29. Of the 5 wells i'm interested in selling the one (and only) on 29 is by far fetching the highest price.
I think you can do better. I've seen $8,000 to $12,000 per acre in Loving in those blocks,
jd
Thanks James. Where/how do I find these outfits offering the higher amount you suggest?
The average price in this area is $7500-$8500 for leased land, and if it's in production the offer can be higher.
The 5 sections I'm shopping around are all producing. Today I spoke to a knowledgeable person who explained that the $/net royalty acres equals roughly 1/2 of $/net MINERAL acres. Therefore making my offer roughly $7,734/net mineral acre. He thinks I might do better.
Susan, that is a low offer. There is a great deal of development potential in your area, making it more a question of not if, but when...
I would say you should get at least $9500/nma in the current enviroment. I recently acquired a 2.25 net acres in a few sections of block 29 and paid $11,000/nma. (anadarko operated).
hope this helps