I have been approached a couple of times in the last few months to purchase my inherited ORRI. It was originially my grandmother’s and when she passed away, it was split between her three children. My father passed away over ten years ago, so my brother and I both split his portion. I have just shy of 2 acres each and have both been offered $45,500 if I want to sell. My brother received the same offer. Recently (the last 3-4 years) we have been getting between $100-$200 a month for the royalties, so this offer seems way out of proportion. Our first thought is sell, sell, sell, but I wonder what it is about this particular land or time that would make it worth this much and now I’m wondering if we should hold on to it. I know very little about how to navigate through this and I don’t really know anyone who knows much either. Any help or insight sure would be appreciated!
Hey. Your ORRI is in a pretty good area. Should have 4-6 productive benches for horizontal development. Witness XTO units north of you with around 20 wells permitted in each. You just have the one horizontal producer, no permits. (On map below you are yellow, XTO area is pink, wells shown are hz producers or recent permits).
That all said, if you are getting offered in excess of $22,750 per NRA (45,500 for sub 2 NRA) you are getting paid for quite a bit that hasn’t happened yet. Somebody is willing to take the risk that your acreage gets developed with a lot of wells. That seems like a pretty good offer to me. WPX is not the best operator in terms of developing acreage in a timely manner. Yeah, sure, if it turns out there are 20 wells here in the next couple of years it’s worth more than you are being offered. But if nothing happens then it’s worth about 1/10th of that. Birds in hand vs in bush. That’s all I got. Good luck.
Thank you so much for your time and advice! The offer to purchase is actually from WPX. They offered to purchase after finding out that we had received other outside offers. I just wondered if that was because they were trying to keep all of their assets or if it was possibly because they know something we don’t. Who the offer originates from might not matter at all, but I thought I’d ask. Thank you again for your time with this!
Lots of operators will not bother to actively buy minerals, particularly for smaller interests. Of all the people you can sell to, the operator is the one for whom the minerals/ORRI should have the most value. They aren’t gonna sell them to anyone else so there is no promote, middleman, etc. They know/control the development pace, so they have less risk, so in theory they can calculate an NPV using a lower discount rate (i.e. get a higher value). Yes, they almost assuredly know things that you don’t. Perhaps they know they are going to park rigs there in the near future, or perhaps they are just cleaning up their ownership decks. But if you are going to sell, they are the best case IMO.
Sure. You can always ask or wait for more. Home values and minerals always go up, there is never a correction.
WPX stock is down 38% this year. They are probably sitting on a giant pile of money and credit waiting to spend it on ORRIs on wells they can’t afford to drill.
$22.5k/nra is paying for more than 10 wells…today. On a WPX unit with no permits on it. I’m totally in favor of minerals as a long term hold, but this isn’t a year ago.
Talking about your first post being out of proportion one and a half years ago we were “offered” 150,000 for our 1% ORRI our royalties were 180 a month after one year of working our minerals 5 of us sold half of our interest and received 190,000 a piece, just saying if your not in dire straits needing cash you could easily reap the benefits, food for thought also NMoilboy gave me valuable information.
