$6000 is way low to sell minerals. A month ago, $13,000/NMA was common. Now it’s $16,000. Location and HBP can have some effect, but not that much.
If it's HBP then they can sit on the vertical producing wells for as long as they can produce which can be 20-30 years and never drill another well. Savoy investors frown on low producing HBP properties but love properties with short lease terms and 25% royalties.
The location is everything when investing in minerals, especially if there are drilling permits.
Some areas, like Blk C-7, get very high prices and some areas like Southern Blk 13 get very low prices.
I have bought over 12,000+ net mineral acres under 55,000 gross acres during the last 4 years so I have a pretty good idea of what is going on day to day.
I have some HBP minerals which have been producing for 50 years with little return on the investment. The minerals Wade is referring to are on the West side of Hwy 17 in Blk 13.
HBP, no permits and West side of hwy 17 equals $6K per acre if he is lucky.
Okay, guys, then based on location, location, location, what should Blk C-8, Sec 26 (SE/4) and Blk 51, Sec 8 (SE/4) bring per nma? Linton
Blk C-8, sec 26 is a bit on the edge with some activity. It's definitely in a good area
but nothing really hot (for now). It might end up with a permit in a few years. Value?
To me I would offer $6-7K per NMA (net mineral acre) depending on the lease terms and operator. By the way, the operator is VERY important to the value of the minerals during the lease term or if it's HBP. ( HBP is held by production, meaning there is a producing well or wells holding the acreage) There are very good operators and very bad operators. I love J. Cleo Thompson, Patriot, COG, Jagged Peak, Brigham and Parsley. Just my opinion.
Your Blk 51 acreage, is it T-7-S or T-8-S or?
T-7. There are three new wells (COG) in Blk 51, Hasta La Vista 801-803H.
I love Jagged Peak also. They have made me very happy in Ward County.
What is the royalty on your lease in the SE/4 of section 8, Blk 51-7-S
If it's 25%, then your minerals might be worth $17-20K per acre.
25%.
I’ve been known to say I would only consider $25,000/nma a starting point. That being said, not sure I could even talk myself into doing that.
Sounds like the argument from a mineral buyer’s perspective.
The comment was in response to Robert’s comments. Just have a hard time seeing $6000 when that area leases for around $3500, and we are seeing old HBP tracts all over the county being drilled. I know Robert is knowledgeable, but the main thing on valuation is what perspective you approach it from. Mineral buyers flood areas with offers they think are going to be drilled in the near future, and are hoping to double or triple their money on the royalty stream. They are taking a good deal of risk. But from an owners standpoint, their is a good argument to be made you should be valuing this on the potential using conservative assumptions. The present value of a 20 year royalty stream on an average shale well can easily come up with numbers of $20,000-70,000 per mineral acre. In my opinion, one should only sell minerals if they need the money or need to diversify their assets. Trying to time the market and predict this is a superheated market we will not see again, is playing in the turf of the mineral buyers. I think this is a dangerous area for mineral owners to tread in. Ancestors who purchased these minerals for dollars an acre would think we are crazy to sell something that has had a very steep, generally upward, appreciation for 90 years.
I totally agree, Wade. Of course mine is from an owner’s perspective, having had those I spoke of in my family for better than half a century or so, just sitting there doing nothing until recently. The only reason I might CONSIDER selling is from both a paucity of heirs and a need to diversify. Can’t find many who quote value on potential, conservative assumptions or otherwise, which of course makes them suspect to me. For that reason, I have become a firm believer in gut feelings, after having done as much as a layman can do to learn the values of your minerals yourself, both in terms of leasing and/or selling.
I am new to this forum and not quite sure of how to post, etc. I have 20 NMA in 54 T4s 34 and have been offered $8,500/NMA for purchase. HBP and operated by Silverback but recently purchased by Centennial. Also have 25 NMA in C19 PSL 10 and have been offered $3,000/NMA. HBP and operated by OXY. I am not sure how to check on new permits in the surrounding sections, etc. Can anyone help me out with understanding if these offers are reasonable and guidance on whether to hold or consider offers? Any help is appreciated.
http://wwwgisp.rrc.texas.gov/GISViewer2/
I pasted a link to the Texas Railroad Commission GIS viewer where you can see if there are permits.
Thanks Robert! Most helpful.
High bid came in at almost $11,000/acre.
Thanks David. However, I need to correct my numbers - I had my interest reversed between the two sections and I meant Net Royalty Acres and NOT Net Mineral Acres. How does the $11,000 equate to NRA? Sorry for my ignorance.
thanks
Curious how many others are receiving a continuous and amazingly varied series of offers to buy. I have 70 Mineral acres in Reeves, Sections 1 & 12 Block C-3. Two Hor. wells producing since early 2016. The first produces about half as much as the second which started up Sept of the year. Just found out Apache has sold the wells to Parsley Energy.
So far I have offers on the first well from outfits like Forth Worth Mineral Co. NorthPoint Mineral Group and Anthem oil & Gas inc ranging from 28k to 41K. Bit of a laugh as I have taken in that much or more in royalty payments to date. All come in a regular business envelope. I assume these are the quick buck guys looking for uninformed owners.
On the other hand Copper Creek Royalty keeps sending offers which started in the 5##K range up to the current 7##k. And an outfit named Pleasant Grove Holdings recently joined in to offered 6##k. These offers come in a big brown full size envelope and there is similarity to the layout of the offers. And of course they all have a 4 week time limit from date of mailing.
Call me a cynic but I have a hard time believing the funds would actually get paid while the title would get transferred.
We closed on a transaction last week on interest in Reeves county. Received $13,100/nma. The transaction price came in right in line with the 3-4x royalty rate rule of thumb. What we received via auction was 80% premium to the highest letter we had received cold.
We used a broker, Lee Caple. His website: https://capleroyalty.com.