Hello, I’m new here. It was difficult to decide how to categorize my issue or choosing the words to search for for previous discussions over this topic. I, along with some siblings, inherited mineral rights in Texas, divided now. I get fairly high offers, often over $100K, for my mineral interest in this county or that county, etc. Royalties I receive are only around $100 a year, yet these co’s are willing to pay over 100K. My siblings get similar offers. We have questions, wondering why they are willing to pay such a high price. Are the odds better that I will continue to see $100 per year for the next 10+ years rather than to see $2000+ per month some time within the next decade? My brother talked to an older man that was offered $1 mil for his mineral rights years ago, he turned it down and now wishes he sold, he never made much in royalties. I’m wondering if the odds are good that too will be my future scenario. It’s not making sense to my why they offer so much, yet I’m currently making so little. Is it simply that the future looks bright to them?
Price is mainly determined by location and activity. Minerals in the best play, in the best county, and in the best rock demand a premium. The biggest risk is time. As you can imagine a mineral buyer has to factor in all of these things when they put the offer in front of you. They have also had to discount the value of the minerals to ensure they have a hedge if it takes longer to drill a well, prices collapse, etc. Usually when high prices are being offered around an area with low royalties it is either due to impending activity or speculation. Buyers use a ton of data to look at where activity is moving to, where are Operators looking to drill wells, where are leases being taken out, etc. Sometimes the buyer is actually the Operator themselves, looking to buy ahead of their own drill bit (why not? As the Operator you know when and where you will be drilling next which means you have virtually no risk as described above).
Feel free to ask any questions and I am sure you’ll get a ton of other responses on your core question.
Our family in similar situation couple years ago had 1% ORRI in Lea Co. NM 2300 acres getting offers for a year before we decided to sell half our royalties and keep the other half 5 out of 6 of us sold and recieved just under 1 million we were getting about 25 dollars a month a piece 2 years later still about 25 every other month. I guess all depends on your age and financial condition just my 2 cents. GOOD LUCK!
PhillD gave you a lot of good information.
Some unsolicited purchase offers are just come-on’s or “bait and switch” attempts. The specific terms in a purchase offer can also make a big difference. For example, offers that appear to cover your interest in one specific location, or well, may include deeds worded so that they actually cover any mineral interest you own in the whole County. That said, if your family is receiving multiple offers, and from bonified buyers, there is justification for them that you should be able to figure out.
From what you posed I’m assuming you don’t have a lot of information on the current activity in the areas where your mineral interests are located. Before anyone here could attempt to answer your specific question on the reasons behind “high” purchase offers versus low current royalty income, they would need specifics on the locations (State, County, and abstract or legal description), the well names and operators you are receiving those small monthly royalties from, and whether that production is holding all of your interest, or if not, whether that mineral interest is currently under lease but not in production.
If you want to post those specifics I expect someone here will be able to help you.
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