I’ve recently received an offer to purchase my mineral interests for what seems like a large amount in relation to the annual royalty money I receive - over 20 years of royalties.
Location is Section 36 & 25, T151N, R101W in McKenzie County, ND
How do I learn more about what is going on in the area to determine if this is a fair offer?
There isn’t anything in particular going on there, other than that it is under-drilled relative to the fully developed units around it. The one Murex well makes around 1000 barrels per month. Somebody goes and drills 6-7 new wells, and that unit will make >150,000 barrels per month (or so, for a bit).
It might not happen. I don’t see any permits and Murex isn’t exactly an active operator. But nature abhors a vacuum. Any “fair” offer for your interests is going to be paying for some risked portion of those undrilled wells. That might be 20 years of royalties, but I’d guess its more like 25-30+ years.
Typically what happens in the Bakken these days is that they offer to buy something because they want to drill on it. This is from the ND Hearing dockets: Case No. 30748: Application of Continental Resources, Inc. for an order amending the field rules for the Alexander-Bakken Pool, Patent Gate-Bakken Pool, and/or Spring Creek-Bakken Pool, McKenzie County, ND**, so as to create and establish two overlapping 2560-acre spacing units comprised of Sections 25 and 36, T.151N., R.101W. and Sections 30 and 31, T.151N., R.100W., and Sections 29, 30, 31 and 32, T.151N., R.100W., authorizing the drilling of a horizontal well on or near the section line between the existing spacing units of each proposed overlapping 2560-acre spacing unit, and such further relief as appropriate.
So a well is planned to run into your section 36.
Thank you for this info! Super helpful. Once a case like that happens, what is the usual timing for something like this to happen? Months? Years?
Yes… this is the sweetest of situations for mineral buyers - when an owner is of the mindset that this “seems like” a large amount. It almost never is an amount that approaches the current net present value of the asset. As always, put on your common sense hat.
The answer almost always is - there is future development near, and that is where the majority (usually the highly disproportionate amount of the value) lies.
It’s hard to say. Permits expire and get renewed. Delays happen…companies change their minds. I can only say keep that number and if you are familiar with the ND Oil and Gas website, check the status with the permit # to see what is happening. If a well is drilled, it is on confidential status for 6 months and then shortly thereafter, if the paperwork is all in order, you could maybe expect a payment. I believe you can see the well on the confidential list, like a spud date, but no production information.
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I subscribe to the McKenzie County Farmer, which was my father’s hometown newspaper, and read the oil and gas activity report every week. You can see who is getting permits where to figure out when areas are opening up.
Let me add that we (sisters who each inherited a share from our father) have rights in T151N 101W Section 13 that never paid much in royalties. We suddenly started receiving offers about 2-3 years ago. Grayson began drilling there in 2022. When we got our first checks from the new wells about a year ago, the first month’s check was way more than we received for the previous 10 years in total. As of now, I think what we’ve received is about equal to what we were offered for our rights. Yes, production is slowing, but we probably have many more years of getting almost as much each year as we get in Social Security.
The best part of that story is that my father bought that land with his brother sometime after WWII. The story my parents told was that he could have used that money to buy my mother an engagement ring (they had a whirlwind wartime romance and she never got one), but she said since she didn’t care much for jewelry anyway, he might as well buy the land.
I bet 75% of the owners on this board recieved high ball offers, didnt sell and the production never matched the offer, myself included. Net present value is impossible to determine due to the uncertianites of pricing and offsetting wells that have yet to be drilled. Its a crap shoot for mineral sellers and buyers at the end of the day
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