Like many, I have 2 unsolicited offers for 15k per nra. Any information as to value, drilling permits etc would be greatly appreciated. I do not see and new activity on the NM OCD. Many thanks in advance.
MWB,
Like you say, there are no permits or new drilling in those sections. Map below on the left has all of the horizontal wells or active horizontal permits in the area, with Poker Lake as the light blue outline. Poker Lake is, for the most part, just populated with old BOPCO wells, most of them in the shallow Delaware (the diagonal lines). It’s largely a blank canvas, which is good and bad for you IMO. The map in the middle is the same area with only permits shown. XTO has permitted around 20 wells in each of 5 locations inside PLU. They look to have drilled up the part labeled (A) and have moved 4 rigs to the part labeled (B). So, if they get to your acreage they are drilling a lot of wells, that is good. The bad is the timing. Looks like they have been running 4 rigs in PLU, so they are more/less drilling up 40 wells (or 2 locations) per year. Poker Lake is 70,000 acres…if each group of wells covers 1280 acres, then they have 54 locations of 20 undrilled wells which could take 27 years at the current pace to drill up. Or something like that. You’d figure they will add more rigs, but its still a lot of wells to drill. It looks like maybe they are starting in places that are offset by other operator’s wells just outside the PLU boundary. Your acreage is mostly in the middle. It certainly seems like they will be busy the next few years drilling up the remaining permitted wells. So, I would not expect anything on your acreage until after that at best.
As far your value, here is my $0.02. Poker Lake should be good rock. Really good rock with expectations of near term drilling is selling for over $20k/NRA in SE Eddy and SW Lea. IMO, good rock that may not get drilled up for 10 years is going to be worth something around what you are getting offered. But who knows, lots of folks who buy minerals are jazzed about XOM/XTO as they are one of the few operators who has not dropped rigs and they have made a lot of public announcements about their commitment and plans in the Permian. So that may lift your offers. In the end, if you are a seller, it’s worth what somebody will pay you. If you are getting $15k with no negotiations, you’d assume you can get more than that.
This is sort of the Delaware in a microcosm. There is a whole lot of oil/gas in place in the core areas, in a very thick section of rock. Which means eventually each 1000 acres or so might need 16-36 wells. If your acreage gets that many wells soon, they your minerals are worth a whole lot. If it takes 20 years, then they are not. Not every place can get wells soon. In general, people are guessing at when drilling will take place (like me here), and mineral prices being offered are representative of an average timing guess with some implied discount rate.
This is all obviously tinged with a lot of opinion, so grain of salt, but hopefully that helps some. Apologies I kind of rambled on here a bit. Good luck.
Thank you very much. Your insight is clear and valuable. I am blown away with your kindness in taking the time to provide this information. I think you are spot on. The latest offer is $17k with negotiation (from initial $14k). (I apologize for not getting back to you sooner, but was traveling.) I will post the final results so it may be off help to others. MWB