I have purchased and inherited 80 acres mineral interest 50% so 40 net acres and have had several offers in the last few months. E/2 NW /4 Sec 25, Twn 21S, Rng 27E,
Is there any new activity here, it seems like it would take a long time to receive the amount they are offering but I know nothing and feel like we have not received enough from the royalty payments for many years? any help would be really appreciated, is it only matador in this area? how do i find the current lease information?
There is nothing currently happening there.
I mean Matador has approval to force pool the N2 of Sec 25 and 26, but that is it. If you are not leased I would get leased to Matador, first and foremost. I assume you are leased and held by the EOG deep vertical well, but maybe not. If you are, your royalty rate probably is less than 25% as it’s an older lease. But let’s assume its 1/4, the best case.
Other operators in the area are Mewbourne and Devon. Like you say, not much current royalty there, I assume you are getting paid small amounts on Carson City 25 by EOG. You don’t have any horizontal wells, there is very little correlation between what you are currently getting paid and the value of this.
Here is a map of the horizontal wells drilled in this area.
Note the 4 Mewbourne wells just north of you, called Chile Verde. They have been online since 2023. Here is how the average of those wells has produced and a guess at how they will continue to produce.
Let’s say hypothetically Matador drills 2 wells in the N2 of Sec 25 and 26 (in your acreage), they drill them in 2 years from now. If they produce like the Mewbourne wells, in 5 more years they will have made a total of 730,000 barrels of oil and 2.6 BCF of gas. If you own 40 acres at 25% royalty, you will get 40/640 x .25 = .015625 (1.5625%) of the revenue from that. IF these wells are drilled. At $70 oil and $2 gas, that means your share would be like $880k, from 2027-2032. Then you’d get more revenue in years 6+, plus even more if other wells get drilled. BUT, IMO, that is a reasonable total amount to expect to get paid for 40 acres leased at 25% today.
Just as some perspective. If your lease is less than 25%, just ratio it accordingly. You may have gotten offered more, maybe less, but this is a general description of how someone might value the wells on your property that do not currently exist (and might never exist, in fairness).
If your predecessor in title is leased you can find that in the Eddy County courthouse records. There were a whole bunch of leases signed in Sec 25 in the late 90s prior the vertical well being drilled, I didn’t look through them all to find your tract, but the ones I saw were 3/16 royalty (so 75% of the $ numbers I said above).
Thank you for the very detailed response, it is greatly appreciated.
Cheers. Well, I was a bit wrong on nothing happening here.
Satellite photos over the past month below. Matador built two pads. They have applied for permits with the BLM here for the Whitby wells, nothing is approved by the state so I assumed nothing going on. But if they built pads, then there is a pretty good chance the BLM has approved their permits and the state will soon follow, and you’d guess they are drilling wells here reasonably soon.
So, yeah, that probably makes this worth 33-50% more as the risk that nothing happens has gotten very very low and timing moved up.
Hey NM, where could I find satellite photos like those above? Thanks!
You have to pay somebody for them unfortunately.
I have received a letter from Arroyo Energy Partners, who extend me a very very attractive offer (way more than anything I received before) to buy all my interest in land I own at 22S 27E sec.7. I do know that many recommend keeping Mineral oil interest but feel I need to maybe entertain this offer, hopefully legit. Has anyone else received similar offer? Also if someone could tell me if there is any activity in the area. Who I should trust/engage to assist me with potential sale. I appreciate any advise on how to best proceed?
Buyers frequent make offers when there is new drilling either pending or just completed. They want the royalties from the new wells. There is quite a bit of activity in the township. You have a new horizontal permit by Permian Resources for section 7 and into section 12 to the west. Many of the sections have multiple horizontal wells, so someone may know something about your pending activity. First offers tend to be low, so if you want to sell, ask for more. If you do not need to sell, then sit back and see what happens.
Buyers make offers anywhere where they think they can make a buck in the long run or frankly (these days) where they think anyone might sell.
You can get all kinds of generalized advice. I would guess that your offer is legit. I would guess you could probably get more. You are probably better off if you get multiple offers. As your minerals aren’t making anything right now, and you may not have a great feel for the market, the range of what “attractive” could be is very large and subjective IMO. Who should you trust? Probably close to nobody. Especially not me, I’m from Artesia. But if you do, and you tell me what you were offered I can tell you if that’s a good offer or not. Probably should be something over $12,000 per NRA.
How important any of this is just depends on how much you own. If its an acre, then whatever, go nuts. If its 80 acres, then you probably want to dig into this a bit more.
As mentioned above there are 2 Permian Resources permits here, taken over from the old SPC/Santos permits. Development/drilling is slowly moving out further West (i.e. from East of Carlsbad to West side) as well results continue to be pretty good heading that direction.
Thank you M_Barnes. I can imagine that something is going on. Who do I trust to move forward. I think you advised me in the past after receiving the mineral rights. If I have more questions, I will contact you again.
Hello NMoilboy. Thank you for your answer. So I received a first offer for 226’950. I have 8.9 mineral acres. That seems a lot compared to previous offers. And if I did want to sell, what is the tax on sale of mineral rights? And yes, who to trust and how would I get more offers. So many questions come to mind…
You would get taxed as long term capital gains. Assuming you have held these properties for a year. What that rate is depends on your income but its better than it just being regular income. The highest rate is currently 20%. You would get to subtract your cost basis for them which just means what you paid or some attempt to guess the value of them when you acquired them (inheritance etc).
On the surface that sounds like 17.8 net royalty acres (assuming leased at 25%) at a price of $12750 per net royalty acre (NRA). I would guess the offer says something like $25500 per net mineral acre assuming 25% royalty. So yeah that makes sense to me as a fairly reasonable offer. (if first guess at market is > $12k/NRA). Assuming I have any idea what reasonable is.
You can contact EnergyNet or EnergyDomain or US mineral Exchange etc, they are all people who market people’s minerals and could get your more offers. And will charge you like 3-6% to do it. I would think in the very best case they may be able to get you something +/- 20% higher. But again, I’m sorta educational guessing.
Thank you so much for your knowledgeable answers. I still do not know what to do. Just as an idea, if I kept the mineral rights, what could I expect, if it were drilled and if if if. Thank you.
Thank you all for the answers and discussion to Daltone111’s questions. I am in a similar situation. I have 6.5 acres of mineral rights in Eddy County on a southern edge of Carlsbad. Over the last few years, I have received many lowball offers. Recently those offers have increased dramatically. I have offers from Core Resources, Arroyo Energy, and Tilden Capital. Some offers are 10x more than the total of all past payments. Something is going on and I would love to know more about it and the actual value of my mineral rights.
I wouldn’t put too much into what the past payments were. Chances are they were from old Morrow vertical wells and it’s just apples to oranges.
What is the value of your mineral rights? Well, that’s a tough question. It’s an easy question if you want to sell, it’s what somebody will pay you. I’d guess if you are getting multiple offers from multiple people that you are kind of getting a feel for the market.
If you want to keep it or might sell it…well then it’s actual value is all about how you personally view possible future dollars vs a dollar today. Pretty much any reasonable person is going to view X dollars spread out over 30 years as being worth some fraction of X dollars today. A half? A third? A fourth? Less? And these dollars from wells getting drilled (for wells that are not drilled yet) might just be complete fairie dust. Might never happen, might not happen as well as you think. Or, maybe more will happen than we even think is possible today. It’s a guess. A bet. Even if you are someone with all of the information.
It’s complicated. IMO, if somebody is paying you over $12k perNRA (or $24k per NMA assuming 25% lease) then that’s a reasonable representation of the bet/market on south side of Carlsbad. You just have to decide if you want to take that side of the bet or not, the other side of the bet in this area is:
I spend a lot of time looking at things like these. A lot. And at best I have a guess at what is going to happen, especially in areas where there is no clear near term development. If you want to buy minerals you absolutely have to believe in (b) or (d) or be using somebody else’s money. If your offers are going up it just means buyers are more convinced that the likelihood of (b) happening are getting higher. Which is probably true. Rigs and drilling in the area. People will tell you all sorts of things, but there is no obvious right or wrong answer today. It’s just guesses. Which is sort of what an efficient market should look like, both sides hoping they made a good choice but worried that they didn’t.
That’s just my opinion.
NMoilboy, thanks for your informative reply. It sounds like I need to get some professional consultation before making any decisions.
Thank you NM. This is all great food for thought’s, even though I am not quite sure what I am thinking anymore right now.
I mean not to toot one’s horn, but that was a professional consultation. 
I used to own X0 acres or so in 21s27e, it didn’t look too great. I sold it to Devon in 2019, felt like I needed the money to juice kid’s 529 plans. Sold it for maybe 60% of what I could sell it for today. But shrug, seemed like a fine decision at the time. And everybody is going to college. It just so happens that I keep looking at that area for other people and I know what has gone on since, otherwise I’d have moved on and not worried about it.
It’s like all of life, there are a million sliding doors…you pick a path, you keep moving forward. Sell, keep, whatever. Just don’t sell for what is obviously too little at the time, and don’t keep it thinking it’s going to be a magic money machine.
Sorry, philosophical Tuesday.
Sorry NMoilboy, I did not mean to insult you. I thought I was replying to the welcome message from the Forum Administrator. And maybe that’s you? I certainly appreciate your advice (philosophical and practical) while still seeking out other perspectives and experiences related to my situation.
Not insulted, was trying to make a joke. 
Also not the forum administrator.
