My family received an offer from Caddo Minerals (Austin, TX) to purchase mineral rights in Borden County, TX. On Jan 2023 the family signed a 3 year lease agreement with HighEnergy. Caddo Minerals if offering $23,650 per net mineral acre. The family owns only 5 mineral acres. Buy or sell?
Same buyer-Different county.
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I should correct my initial post from “Buy or sell?” to “Hold or sell?”.
Dang, Caddo minerals is gonna hunt me down and have me kilt. Will, I was just kidding. 
I mean everybody has to have some kind of shtick, it might as well be a smart one.
Hey Kyle, what is your legals and what royalty rate is your lease? I don’t mind telling you my amateur opinion on what its worth on the market if you don’t mind sharing some details that would indicate possibility/reality of wells.
That offer is $11,825 per net royalty acre (as I would guess you are 25% royalty, or Caddo offer is assuming that). That actually doesn’t seem terrible to me, but it may be that you have 8 DUCs and the number should be 2x that.
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The 5 acres owned by the family is divided equally among 4 individuals with each owning 1.2924 net mineral acres. The purchase price per net mineral acre is $23,650.00. Each individual has received an offer of $30,565. In Jan 2023, a 3 year lease was signed with HighPeak for:
Tract 1: All of Section 47, Block 25, H&TC Ry. Co. Survey
- $750 per net acre bonus consideration
- 3 year term + 2 year option
- 1/4 royalty rate
Since then, I have only received the initial bonus check for $969.30 (1.2924 X $750).
You have yet to receive the DO and first payment which would include all back monthly payments once it went into production. I would wait until I see what is going on dollar wise. It may take about 8 to 10 months from spud date until you get the first check. then the monthly checks . They will decline, but I have yet to see anything from Caddo Mills offers to me that would not made them money and me lose money. Become more familiar with what you have,understand the surrounding areas as well. Start with the RRC and the GIS viewer in Texas before making a decision unless you really need the dollars right now. Just my 0.02cents worth. MK
RRC queries website: RRC Online Research Queries GIS website:Public GIS Viewer (Map) This is what I found on the RRC GIS Viewer.
This is one plat showing the East Half of the sections. These as NMoilboy has explained are new permitted and drilled as are a few in the other half. The purple I layed out is the section you have asked about
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Hey Kyle
Thanks for info.
There are two existing wells in this acreage. Online since early 2022. You might want to contact HighPeak and ask why you aren’t in pay on the Gloria Griffin 47-38 1H and 2H. Those two wells have made a combined 350,000 bo.
And then there are 7 new wells in the Eastern 3/4 that have been drilled but not completed (i.e. “DUCs”).
Lets say each of these new wells makes about 150kbo in the first year. Thats 1050000 barrels at $75 a barrel with each nma getting 1/1280 * 1/4 of that or something around $15k per nma in the first year. Plus what you have in suspense on the old wells. Plus year 2 and year 3 etc.
I am mostly a mineral holder, but occasionally a mineral seller, and a mineral buyer. I would mostly advocate holding, though will sell if the time is right. I would say your stuff is worth more than $23.6k pnma.
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I can’t thank you enough for this information. I spoke with a landman today and finally got answers to many of my questions regarding this offer to sell and lease signed in Jan 2023. This forum has been invaluable thanks to people like you and NMoilboy. I will continue to do my homework on this. Caddo has given me until next week to make a decision.
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Thank you NMoilboy. One of my initial concerns was that such a small portion (1.29 acres, .2%) of the entire section (646 acres) would be too insignificant to keep and that royalties, over time, would not meet the sell offer of $30k. I am aware that Caddo Minerals does this for a living, has more information than I do, and in their best interests has undervalued the net mineral acre at $23k. I guess time will tell but I think I will decline to sell.
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That’s cool. I mean it’s perfectly fine to sell, I just think you could get more than that offer.
We all take out home loans knowing we’re gonna pay the bank 2x-3x what they give us today, this is no different. Its perfectly fine to sell 2-3x worth of 30 year cash flow for x today if you need x today. Doesn’t mean the mortgage bank or Caddo is robbing you. But in this analogy Caddo is definitely not the bank offering the lowest interest rates. That’s all.
Good luck.
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Those "this offer is good only until “some date” clauses are merely formality 99 out of 100 times. In other words, they’ll be there when the “drop dead” date comes and goes. Moreover, in your situation, there will be 50 more waiting in the wings who’ll be more than happy to make similar and/or better offers.
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Not familiar with the “DO” acronym. I have been trying to contact the lessee HighPeak. I finally got a call back today from HighPeak and explained that I was requesting any information about the lease (e.g. production, wells, future plans, deed documents, etc.). He said he had to research my request and would call back this afternoon but never did. I will continue to call and send emails. What obligation does the lessee have to provide information to lessor? I would like to know the name of the lease, well numbers, production values, etc. so I can use the RRC Online Research Queries more effectively.
The " DO " refers to the Division Order. Contact there Divisions Order department or better still send a certified letter to them. MK
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Within the last week, I have contacted investor relations at HighPeak Energy to ask about production, royalties, lease names, well numbers, etc. regarding a lease agreement signed in Jan 2023 for Borden County, Section 47, Block 25. I have since been in communication via phone and email with two representatives from HighPeak Energy. One rep says that I need to probate the deed before I can receive royalty checks and the other says that I have no mineral rights but only executive and surface rights according to their “title opinion”. The latter says that a “family member” sold the minerals rights years ago but when I asked for details he said he would have to do more research and referred to my situation as “rare” but would not elaborate.
Meanwhile, I have an offer from Caddo Minerals for $23k per mineral acre for mineral rights the current leasee says I do not own.
AMENDED to say: After receiving @TennisDaze info, “Is try to ask the operator or Caddo Mills for some help”?
I have had an attorney and a land man ($$$$) tell me with 100% confidence, that I owned something ( my gut said different ) and once I checked it all out with the operator, they (the attorney and landman) had missed the sale of those minerals by the trust in the court docs. I then went back and double checked both findings myself and concluded the operator was correct. It still cost me $$$ and time. Caddo could be wrong? The operator could be wrong? So if you can, have them prove themselves if they will to save you some dollars, then use that info to follow the real truth. At that point you can make a decision MK
Operator is not obligated to prove the mineral owner’s title. It has had drilling title opinion which it will follow unless the mineral owner proves otherwise. Operator will not share confidential internal information about future development plans. There is some confusion in the posts here. First as to the names on the deeds - has title been transferred down to your name? If it is in the name of deceased predecessor, then you need to get your title clear. You can research the deed history on-line backwards from current owner and purchase deeds in you chain of title. That is how you will find the deed which may have sold minerals and retained certain rights. If the previous owner sold the minerals and retained only the executive right to execute leases, then the landman may have had your family sign a lease which covered minerals owned by others.
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Thank you @TennisDaze for that info. I have had an operator provide me with the details of the last known Deed/Transfer of our trust in NM. That was all I needed to go backwards to find the error that was made. That is why I suggested the idea. MK
Don’t sell! In the county that we are in they tried all kinds of ways to buy us out. We said no. Now we have 9 wells pumping
DennisG, what county do you live in?
If you got an offer from Caddo Minerals, you likely have permits or near term production on your acreage.
If you want to sell this acreage, I’d recommend working with a landman to figure out exactly what you own and get two other bids and making a market between buyers. There are landmen out there that represent the sellside and charge contingency fees. Each buyer has their own price, timing, and development assumptions, which formulate the price they are willing to pay.
The risk of holding the asset is commodity price risk and to some degree, development risk. I personally would hold onto the acreage, but outside of limiting the two risks aforementioned, you can also lessen your tax burden by selling, which would convert the income from being taxed as ordinary gains to capital gains. You can also 1031 into a like kind asset and defer taxes altogether.