Good afternoon. I am new to this but have long heard the stories of the oil property. My grandparents (step-mothers side) have had mineral rights on their side of the family as long as I can remember. Over the years, they have passed down to my step-mother and she is now looking to sell a portion. Before selling to another group, I asked for information on the property as I see it as an opportunity to continue the legacy of my grandparents and also as an investment.
I spent alot of time on this VERY valuable site last night and ended up on a couple others gathering information last night. FIrst, thank you all for all of the great information you share here and the great things you are doing helping others.
I'm looking for a little guidance because while I was able to find the list of all wells on the property I wasn't able to find when the leases end. I'm trying to determine if the property is still a good investment and something I should take on. I know there is alot that comes with it as far as taxes, etc. There is a current offer of $3500 per acre and there are approximately 6.5 acres. She receives checks each month totaling anywhere from $500 to $900.
What advice do you have for me as I look at this investment? The land has been producing for some time, some of the wells are from the 90s and others as recent as 2013. I have the coordinate of the acreage and just want to know if these normally continue to produce for many years, would have any potential to have more wells in the future, or what other questions I should take into consideration as I evaluate this investment.
Any advice would be greatly appreciated.
Are these drilled wells or fraced? Makes a difference in longevity.
Thanks for the reply, How would I be able to tell this?
I checked with my stepmother and she is not sure which these are - I have pulled up the information on the wells but honestly am unsure how to read what I am looking at :)
Becky, without having personal specific knowledge of the mineral acres it sounds like a reasonable purchase at $3,500 per net mineral acre. @$500 per acre I suspect the buyer expects the property to pay off within 4 years and start showing a profit. Really as long as the sale value of the acres doesn't decrease, the profit begins at the first royalty check.
There are deductions from the owners taxes for depletion also.
If you have the money to invest you might buy the acres and if things don't look like they are going the way you would like after two years you could possibly sell the acres and combined with the royalty you received have a good chance of breaking even or profiting. The odds of breaking even off royalty alone seem high. The possibility of a new well being drilled or of the acres rising in sale value in the future is also attractive. I don't know your acres, they may be worth more than the $3,500 per acre offer that is on the table right now. Not knowing all these things, it sounds like a reasonable investment. Someone else thinks so or they wouldn't be offering to buy the acres.
If the last well was drilled in 2013, I would say the royalty is coming from mature production and not the first "flush" production and most likely production will not fall off rapidly, greatly reducing your royalty check.
There are no guarantees though, if the wells are gas wells they could be shut in even though they are capable of producing. That wouldn't mean you lost the value of your investment but your royalty would cease until production resumed. I hope I have at least expanded your knowledge of what you need to consider.
Thank you so much Mr. Kennedy. This makes alot of sense. It is all very interesting and I miss having my grandparents here to talk with about it all but you all have been very helpful. The land is in Grady County (of course) Section 20-5N-5W, 6.5 acres - Ive been going through the documents to try to understand active wells, etc but haven't been very successful in reading them, though I am learning - I just started this research Friday so it's a learning curve for sure.
With it only being 6.5 acres, I was curious what the chances of future wells would be given the long history of wells on that land, based on what I was able to find.
Thank you again for your kindness in helping to give me some additional knowledge. I really appreciate your willingness to share. Have a great day.