First time poster – this looks like a wonderful forum!! I am a novice in the area of mineral rights but am trying to help some relatives who own long-ago inherited oil, gas and mineral rights in McKenzie County, ND. The rights are attached to 2 locations: Everglades Well (T152N R96W Section 10: NW/4) and Gladys Well (T152 R96W Section 9: NE/4). The relatives have seen a flurry of offers to buy their rights recently, including one offer from Southwest Energy Partners, LLC that just came in. Southwest seems to be in a hurry since they (politely) asked for a final reply in 5 days. We won’t be making that deadline but it has spurred the relatives to be more informed on the rights they own. I have some idea of how to estimate value of their holdings, based on current cash flow. I am wondering if anyone has any insights on how to factor the possibility of drilling increasing in the future. For example, I saw an excellent response to one person who had a similar question for acreage in a different oil field – that response included a map showing actual drilling and not-yet-drilled areas. If anyone has thoughts or insights on this, general or specific, would be greatly appreciated. I will be very glad to research any comments given! Thank you.
You are wise to slow down and not be rushed by any “deadline”. Anytime one gets offers to buy, the buyer knows something that the seller does not. If there is a flurry, then lots of buyers know something (and I usually hang onto my minerals since I would rather have the royalties). First offers are usually low in my experience. You need to find out if they are just buying the royalties from current wells or if they know about future wells and they hope you don’t know about them (that is their profit).
The current cash flow may not be that helpful for you since these are horizontal wells and they do not have a straight line decline.
There should be about 7 Everglades wells in section 10. The Everglades wells have surface locations in Sec 3. EverHorse is also in Section 3 & 10.
Section 9 has the Gladys 1-9H and also the Gladys 2-9H (offline) plus the Anderson Federal and Larsen Federal wells that have surface locations in section 16.
Are the relatives in pay status on all the wells? Have they spoken with their accountant about the pros and cons of selling versus keeping? Capital gains may be a factor for a sale. Passing minerals to the next generation can help offset the capital gains tax due to the revaluing of the acreage as of the date of death. If they do decide to sell, never hand over a signed deed without getting the full amount in hand at the same time.
Martha, thank you for your helpful note. Regarding current cash flow, I agree knowing that won’t be that helpful for me – I was trying to figure out how to estimate whether production would be (materially) increasing in the foreseeable future. As you said, the buyers know something and I am guessing that something has to do with material changes in upcoming production —it would be great for us to have an idea of the same.
Regarding my relative’s pay status on all the wells, could you point me in the direction of how I would find that out. The only copy of a recent check I saw didn’t have any information on which wells were being paid on.
Regarding capital gains, excellent point, thank you. I will be sure they work with their accountant(s) before deciding to sell or keep.
If the relatives are getting direct deposit, they need to get the “run statements” that go with the check. Usually available online for free. They need to make sure they are getting paid on every well they are supposed to be getting paid on. The North Dakota oil and gas site is a good place to start to get the maps and lists of wells.
https://www.dmr.nd.gov/oilgas/ They have a mapping tool. Some of these wells have surface locations in adjacent sections.
You also need to find out what royalty they currently have. Offers are related to the royalty that they are already getting. Higher royalty, higher offer.
The relatives need to track down copies of all their Division Orders on the wells. If they do not have them, they need to request from the Operator. Newfield had those wells. Encana bought them out, so you might have to hunt with both operators to get the right answer.
Martha, thank you again for your helpful note. I will check out the “run statements” on line, and the map website link you provided. I did indeed learn along the way that Encana purchased Newfield – then I learned they’ve since changed their name to Ovintiv, Inc. I also have made a request for copies of Division Orders to both Ovintiv (for the Section 9 rights) and ConocoPhillips (for the Section 10 rights). Thanks again for your help - we greatly appreciate it.
It is good idea to check with other reputable mineral buyers in the basin when considering an offer.
David, thank you for your note. Would you have any advice for a newbie like me on how to identify reputable operators in the area? I will also start googling this subject. Thanks again.
Hi Beverly, a good place to start would be with one of the county sponsors. They are very reputable.
Hi David, excellent advice - thank you very much.
Hi David, I have tried numerous search terms to find “county sponsors” in McKenzie County ND – or even just in the state of ND – and am not finding anything useful. Is there another term besides “county sponsors” that I should explore? Any insight on what a county sponsor is would also be tremendously helpful – is the sponsor a government official, or a member of a trade group, etc? Thanks very much.
@beverlyhills David is referring to some of the trusted parties who we (the firm who owns this forum) have taken time to vet and with whom we have experience. Some of them are mineral buyers.