We own 100 acres in Reeves County, Section 11, Block 6 that are leased through February 2017. We are receiving inquiries about leasing and offers to buy.
I would really appreciate any insight as to what kind of activity is taking place in this area.
Reeves County is really active. A bonus for a top lease is unlike to be as high as for open minerals. You only receive a small portion, maybe 10%, upfront and get the rest if and when lease expires. Better to let a lot of companies compete. Also, you should prepare in advance for the specific lease terms, such as cost-free royalties, that you want in the lease.
Norma,
Your minerals are in a great area. It looks like in June of this year that Rosetta Resources assigned your leases to COG Operating (aka, Concho Resources). They also assigned Rebecca Shear's, Keri Pharris', and Phillip Shear's leases at the same time. All of which likely expire in March of 2017.
Concho is one of the best operators in the Permian, and I find it highly unlikely that they would purchase these leases in June, and 9 months later decide they would rather let them expire. Consequently, I find it a bit suspicious that companies would take a risk top leasing this acreage. Are the lease offers that you've been receiving "Oil and Gas Royalty Lease" offers? If so, these are essentially term royalty deeds, and are somewhat deceptive as they resemble a normal oil and gas lease, but they have far reaching consequences for the mineral owner. I would just sit back and wait to see what happens next year. Odds are a well will get drilled before your lease expires, by one of the best operators in the business.
If you are wanting to sell, I would advise reaching out to one of the forum sponsors to see what pricing they're witnessing in your area, but again...I would be hesitant to sell in light of all the facts. Best of luck!
http://marketplace.mineralrightsforum.com/ad-category/minerals-management-consultants/
Thanks for the info. We are relatively new to this and your advice is appreciated.
Thanks for your timely response. We are receivinh offers to buy the property and have received some phone inquiries about leasing. The information you provided is very helpful.
Norma,
Re read Wolfcamp's message and read between the lines. In my opinion, you will be rewarded generously by being patient. No matter which way Concho goes, your minerals will be much more valuable if you are patient. The worst thing you can do is sign a long term sale agreement without the money in the bank or worse yet, sign a top lease and get into a legal contest where you will surely be the looser. If Concho wants an extension of your lease, they should be willing to pay a very pretty price. Many multiples of your current lease bonus and be very happy in doing so. Don't deal with anyone else until the lease expires.
Be aware that there is a whole new world oil business in the Permian Basin. If you are not sure of what is going on with the relative values, don't jump until you do.
Gary L Hutchinson
Minerals Managment
Gary,
Thanks for the advice. It is very helpful and I appreciate it.
Norma