Parents received an unsolicited offer for 3/16 mineral rights 32 12N 8W. Is there any new activity? They also have mineral rights in 29 12N 8W, but have not received any offers related to that.
Mach Resources has two new permits for infill drilling in 29&32. The wells have already spud. If it were me, I would not sell when there is active drilling.
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Thank you. When will we know the production of the new drilling, and how should we value their interests if they do want to sell?
They will receive a Division order that states their decimal percentage for the royalties. It will be based upon the equation net acres/actual spacing acres x royalty x % perforations in their section(s). Based upon nearby wells and their decline curves and after about six months of production, as estimated future production by volume of products can be determined. Various future pricing scenarios can be applied to get an estimated royalty value. Offers will usually be lower than this value due to the time value of money.
If one were to sell, now would be the time to do it if you listen to legends like Hamm and Sheffield calling for a rough 2-3 year strecth upcoming. Take what, 6-9 months, to drill and complete the well and it come online, who knows where oil and gas prices will be by then according to people that have made billions drilling wells
Everyone needs to make their own decision. I tend to look at the long term as in decades, not short term. Takes about a year from permit to pay if they are drilling multi-unit wells and multiple wells take even longer. Many sections in Canadian are excellent for gas, so I like hanging onto gas acreage. Most offers I have received in Canadian are based upon a discounted cash value for current production and do not include the pending new royalties. Our family wants those royalties, so that is our strategy.
Keep in mind that you will also be facing capital gains taxes. This is calculated as the difference between the sales price less the seller’s basis. Basis is the value in the hands of the owner which is either the purchase price (if purchased) or the value as of the date it was inherited less any depreciation taken. Make sure that you are aware of the tax implications before selling. In short, ask your CPA.
About this time of year this forum is flooded with individuals trying to figure out their basis because they sold minerals and are scrambling to get that info.
This post is not legal, tax or investment advice. Reading or responding to this post does not create an attorney/client relationship.