I have 20 acres of rights in the Bakken field which are producing currently. I have received unsolicited offers of up to $6500 per acre for my rights and wondered if anyone can tell me what a decent price plus fees paid to sell are?
Anyone offering to help you here is going to need a lot more information. Are the minerals leased? What County? How long producing?...etc...in fact there are too many etcs to be of any use....and this is all assuming you have to sell because if not, then that is a whole new game too..........I know a guy who sold 5 acres to a family member for $10,000 an acre in a new Bakken well spacing....he only sold some of the acres in order to have money to participate in that well........anyway.....if anyone is going to help you, be prepared to offer way more information.
Thank you, I'm new at this. The wells have been producing for about 4 years, McKinley county and I don't have to sell, just considering it. I understand 2 more wells are coming on that aren't announced yet.
On another blog it was stated that the IRS considers 3X Annual income as a value for minerals, so real value would be more than that depending upon activity and many other factors including the "1H" wells that allow 4 wells per pad or more!
Then the next important question is whether your minerals are leased or not and the terms, most relevant I would think at this point would be royalty % If I were considering buying someone's minerals I would be thinking that I am not really buying 100% of the minerals, only the % I would receive any income from...the royalty.
In short...I feel a lease, in the Bakken, that is held by production, at let's say 20% royalty, has sold the other 80% to the leasee....for all practical purposes. So it is possible, (if you have a 15%-16% royalty, which wasn't uncommon for a lease 4 years ago because a lot of those leases were soon to be expiring 3 and 5 primary year leases.) that you might consider selling your 16% for $6,500 an acre. But you should do a little simple math first to feel good about any decision
Calculate how much you have been getting every month for the last 4 years, per well. Then throw in some numbers for each possible future well....future and current money needs....then see how that balances with selling........This is all filler here by the way until the experts show up and ask you the following......where are your minerals by geographic specific location...they can then look it up, see who the current operator is, the quality of the wells, a little speculation on the EUR, and then give you some useful advice.
My final 2 cents is that you consider what your royalty percentage is and assume that your lease will be held by production until all economically recoverable minerals are gone, thereby practically owning what ever your royalty percentage is in those minerals.......and even though the industry will tell you that you can't consider the following, I do.......When these operators lease from people they do not figure the bonuses on a "per well" basis...so obviously they don't consider that when valuing the minerals, "when it comes to buying or offering leases that is".......we all should.......divide the bonus and value per acre by the number of wells and then see how it looks.
Some spacings are going to see more than 8 wells....I doubt any producing spacing right now will end up with less than 8 before this is over........any way good luck
You folks are very fast! It's been leased by Conoco Phillips the entire time and I'll have to look up the other issues. There are 80 acres divided between heirs, my share is 20 acres.
Whatever they offered you, it is low because that is how the game works. Good comments below.
I am attaching a spreadsheet where you can enter your net mineral acres and whatever royalty you are getting. It is designed for the Woodford in Oklahoma, but you can get a feel for the Bakken. I chose a four year time span because that is where the majority of the production comes. I have one set of numbers for a bonus situation, the next one down for No Bonus (or a second bonus with a different royalty) and a sell option. You can change the numbers in yellow. Put in reasonable oil and gas rates for the wells in your section or nearby. The tax rate is for OK, so ND may have different incentives-not all that important to the answer. Then a I have revenues for one well, two wells, six wells, nine wells, so you can get an idea of what happens with multiple wells. Since these wells produce for many years, these are just ball park numbers for comparison and are probably low. If someone has some good Bakken decline curve numbers to insert, we can adjust the spreadsheet.
I am from the mindset of never sell your minerals, but I know that sometimes it is a necessity. Maybe only sell half. You also need to read the investor presentations from the operators in the area. It is not just the Bakken but the Three Forks and even some new horizons that you need to think about. This is a huge play that is going to last for a long time. Think about your heirs…..
2097-NMACalculationsimple.xls (43 KB)Be aware that ONE driller in North Dakota has gotten permission to drill 24 Wells on one huge pad; and as Mr. Barnes stated, there is not just the Bakken layer, but Three Forks and others, so the different wells are
drawing from MORE than one pool so may ALL produce heavily, making a small amount of acreage in a
well pad giving you a lot of money!!!
Bette ..there are mineral rights buyers in the Marketplace portion of this website. That might be a good way for you to get more than one offer.
I'm afraid I'm really dumb about this whole process. I fought the inheritance through with the oil company for the whole family but none of us were smart enough to negotiate anything when we signed the lease.
Bette, you don't want to sell anything with 2 new wells coming on if you don't have to. Collect the royalty for a couple years until production slows. The acres will still maintain their value according to my observations the difference is you will have gotten the cream off the top in royalty and the purchase price.
M Barnes brings up the most pertinent point, other formations, the possibility, depending on exactly where you are, of 10 to 15 wells eventually.
I think you were referring to McKenzie county? I have acreage there myself and received an offer of $10,000 per acre if my royalty was 3/16 or better. Bette, if you can give the legal description found on your lease, I and others would be able to advise you on what the future may hold for your acres. Welcome to the forum.
Thank you, I'll get after this in the next few days.
Bette,
Unsolicited offers from non producers are often an attempt to tie up your property for a long period of time while the "buyer" finds a way to make a profit by selling at a better price or discounting the purchase and sale agreement with you or both. Remember that buyers are in the business of buying low and selling high at the lowest risk possible. NO BUYER WILL OVER PAY!!.
The Bakken Geologic System is a very dynamic oil province that will be continually changing as exploration and development continue. If you are in Williams, McKenzie, or Mountrail Counties (I could not find McKinley county) and indifferent as to ownership of minerals, I believe you will enjoy a long term economic advantage of holding and conservatively investing the royalties fro your existing wells and the multiple of wells yet to be drilled. However, if your lifestyle would be enhanced through the sale of an asset, after taxes of course, you may consider what that net after tax amount would be, then get some professional advise as the the true value of your minerals to a legitimate buyer and set a sale price. You then, can solicit buyers that may be interested in your minerals with a lump sum offer to sell. If you close a deal under that concept, everybody will be happy.
Location and control of oil resources is key to value for the foreseeable future. Last year, I valued family owned Williams acreage at $10,000-$60,000/acre based on current technology. If anticipated research and development prove to be sound, those rates could double. A buyer's needs for Return on Investment will be the determining factor in what it will pay when factored by ownership determination, risk aversity, cash availability, opportunity cost, and asset control name a few. Buying and selling minerals, like single family homes, is not a retail business.
There should be a "Like" button....................a big amen to what Gary just posted.
I misspoke, it's McKenzie. Thank you, I wish I'd talked to you all before we signed a lease!
I simply echo what I'm hearing above. The real money is in royalties...not in leases, bonuses, or by sale! Yes, you may get some great up front money, but in the long haul...it's pennies on the dollar when you consider long term royalties and multi pad wells, and more and more.
Thus, I state what has been suggested above. Unless you are incredibly pressed for some reason I did not read above: DO NOT feel pressure to sell. DO NOT SELL unless you absolutely have to!!
Bette,
I will generally buy minerals in ND if I like the area and would consider making a counter offer to your other potential buyer (pretty much anything in Williams County is good to me). You've gotten stellar advice here, I think the most important being all the deep stuff you might have that is yet to be explored, not to mention technology improvements that continue to improve recovery rates, which would be gone if you sell.
One thing I'll add: if you simply lease your minerals to an oil company and it gets drilled, it's a pretty good deal for the non-pro who has inherited minerals. However, if you do not lease and elect to participate in the well, you'll make much, much more. Somewhere on the order of 5-10x more. Even if you sold half the minerals and used the proceeds to participate in future wells on the remaining half, you could still make roughly 3x more.
A non-pro who decides to participate would be faced with a new set of accounting and tax requirements, however. I've been participating in most of the wells I own minerals under since the 80's. I'm considering (but haven't done it yet) working with those who want to participate in exchange for selling me part of the interest. I know your stuff is leased so it wouldn't apply but if you do want to sell, I can still evaluate and make you an offer, as stated above.
One thing I'd caution on: if anyone does not lease but also fails to elect to participate, they can become force-pooled, it's the worst possible situation, don't let it happen. It means the oil company will pay your working interest bills and then legally receive all your income until they get their working interest money back + an additional 1-300%. The mineral owner gets peanuts on the back-end.
Good luck, feel free to add me and pm me for more.
Bart Barton
Barton Oil Producers - Hobbs, NM
I have to disagree that the mineral owner will be penalized 1-300% which I presume is 100% to 300%. If you read and understand NDCC 38-08-08 you will find that the well must recover cost of drilling plus a 50% actual cost of drilling and completing the well penalty.
The mineral owner receives the average weighted royalty that mineral owners leased for in the spacing or 16% whichever the operator elects, from the very first barrel of oil. When the well cost and recovery of the risk penalty is paid off, the mineral owner receives 100% less cost of production which can be laughably low. Many people leased for 1/6th which is 16.67% and is not a far cry from the 16% that they would have received from being non-consent, but if they were non-consent they could receive the equivalent of effective royalty of 80% or more for half of their oil and 16% royalty up to that point. You don't need to be a rocket scientist to see the long term benefit.
100%-300% penalty in ND for mineral owner sounds like bad landman lies, which I heard alot when I was considering non-consent. I have gone non-consent and I am about as happy as I can be with the decision.
If you leased the minerals from someone else (the actual mineral owner) and don't assign your interest to the operator for cash and and an override, you could be subject to 200%-300% penalty for being non-consent. The LAW sets the risk penalty for mineral OWNERS at 50%.
I and my brother consider non-consent to be the best solution if you are risk averse (or short of cash) and still would like to see more upside from production of your minerals because you never pay out of pocket until your well and penalty are paid off, you receive royalty up to that point generally equal to 75% or more of the royalty you would have received as leased in ND.
Wow Bart was Mr. Kennedy kind to you in response to your 100% erroneous information regarding non-consent in North Dakota.
I only chime in here just in case someone is new to the site, and has just read your information vs Mr. Kennedy's and doesn't know what to make of this "he said, he said" especially when this type of horribly bad information could cause someone to decide something based on it.
The short of it.....if you own minerals, and you don't lease, and they drill a well in a spacing that contains your minerals, you will receive 16% a month royalty, the other 84% goes to your share of the cost of the well. Then after 100% is recovered by the operator they will collect 50% of the 84% (now this is my reading of the rule because the 16% is cost free and it specifically states that it is not subject to the penalty) however, I have heard no one hear agree with me so maybe I don't know how to read very well.
In my personal experience...and opinion....going non-consent is the best possible way to go if you a) don't need instant cash from a bonus and b) don't mind getting 16% royalty for a while and c) don't mind hiring a CPA one day to take advantage of all the tax breaks...IDC baby for one.....and if for some reason you don't want the headache once your royalty interests converts into a working interest...then see how easy it will be to find someone(s) to take that working interest off your hands.
Non-consent is far from being the worse situation....AT LEAST IN NORTH DAKOTA.....that is very important to add.
I'm pretty sure the idea is for everyone to be kind in their online doings so it's always appreciated.
I was incorrect on the maximum penalty allowed in North Dakota, and it is indeed 50%. Had to check with my Dad on that one and should have before the reply. In New Mexico, one can certainly be penalized up to 300%. I plan to defer all North Dakota questions to the padre in the future as that's his area, while I work NM.
The 50% maximum penalty does change the math somewhat but I do stand behind the overall point I made, which is that the highest return comes from participating in wells; also that it is more lucrative to sell half one's minerals (if the price is right) and use the proceeds to participate on the other half than to either 1) lease or 2) go non-consent.
For what it's worth, I'm not a certified landman, still learning, it's always ongoing. I worked in corporate finance following pipeline stocks for Prudential Securities for years, all the while buying minerals.....now they're producing, and paying the bills and I'm trying to deploy excess cash.....so again if you're selling or leasing minerals, I can make you an offer. If you want to learn the ins and outs of participating, I'd be willing to talk about that too. Otherwise, I can always put the excess cash into Berkshire Hathaway. Long live North Dakota and the US oil business.
Cheers all