I’ve been offered $4000/net mineral acre at 1/8 royalty for my 5.93407 interest in 14-15N -9W Kingfisher County, OK. Is this a good price for that area at the present time? Thank you.
Is this an offer to buy? You need to know if there are additional wells being planned. Your section is surrounded by sections with multiple infill wells. Many buyers like to make lowball offers right before increased density drilling begins. They want the future royalties and hope mineral owners are not savvy about the future potential.
Personally, I don’t like 1/8th royalties and avoid them like the plague. Many savvy owners focus more on the royalty and lease terms.
This post is not legal, tax or investment advice. Reading or responding to this post does not create an attorney/client relationship.
Thank you for responding. Nothing new is planned there currently as far as I know but live out of state so am not able to check for myself, hence the inquiry here. Thanks again,
Make sure that your name and address are on file in the county with the clerk or deeds or records. If activity is pending, you will be sent the OCC documents. Get familiar with the Oklahoma Corporation Website as they have quite a bit of data.
Given that the sections 12/13 immediately to your east have five multi-unit horizontal wells, you may get some activity in the future. Time will tell.
0_Royalty-Owners-Booklet-112020.pdf (6.8 MB)
Thank you for the info you’ve provided. Do you know someone I can talk to about the possible tax implications I will incur if selling? I want to make sure that I won’t get gobbled up by capital gains taxes before I seriously think about selling. Any info you can provide will be greatly appreciated!
You should contact your accountant for more precise information. In general, when you sell, the IRS wants to know the cost basis for the minerals. So you need to know the value when you inherited or bought. The purchase part is usually more simple than the inheriting. If you inherited, you would need to know the value on the date of death of the ancestor. If you are lucky, the executor did an appraisal. Most folks do not have that information so you may have to have a forensic appraisal done. Some people use a royalties approach, but you had better be able to back it up. If you do not have a cost basis, the IRS can use zero value and tax you on the entire sales amount. The amount of capital gains percentage varies according to your tax range.
You might also consider waiting to see what activity might happen. Your section is surrounded by sections with four to five horizontal wells so you may have more drilling on the horizon. Many buyers offer rather lowball amounts in the hopes that mineral owners will accept and give up those future royalties for a pittance.
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