My three siblings and I own mineral rights in Converse County - Smith Creek Unit. We currently have two separate leases. Also, over the past few months a company has been contacting us and wants to purchase our mineral right. Has anyone else experienced this? What is the best method to assess this proposal. We need more knowledge and not sure how to get that.
Lucinda, receiving offers to purchase is common. Typically these are for producing minerals though sometimes they'll offer to buy non-producing one too. I don't follow your Smith Unit so I can't offer advice on that. Yet this is the general process on offers to purchase minerals;
Where there is existing production the offer is usually based on X times the current monthly income. In other words the offer may be 48 times, 60 times, or another multiple, of last month's royalty income. If you're receiving an average of $100 per month then they're offering $4,800, or $6,000, to buy your mineral interest.
The idea is you'll be paid four or five years of income up front today to give away the potential income in the following years. If you really need the money now it may make sense. However, you are likely surrendering a greater ultimate sum which might be collected incrementally over time. How much that 'potential' future sum might be is impossible to know. Just as examples, some of the unknown variables; Production on existing wells will be declining. Yet production could increase if new wells are drilled. Oil prices may climb higher over the next few years. Or, oil prices may decline. Existing tax policies may be changed removing the depletion allowance on production. Or, taxes may be increased on long term capital gains...
Everyone's situation is different. My two bits is sell if you really need the money today. Otherwise don't sell minerals unless you need to. Good Luck.
The Smith Creek Deep Unit is very active. I do believe that Chesapeake is working out some logistical issues currently, a basic lack of sufficient pipeline, transportation and tankage, as a result the production in both Smith and Combs has been low the past few months. There are a number of wells that have been recently spudded, another large number of confidential wells that are ladies in waiting until the infrastructure can support increased activity.
I would agree with Eastern MT, don't sell unless you really need the money. The carpetbaggers constantly call me with regard to my producing and non producing holdings, I don't last long enough with them to even hear their offers.
Thank you for your response. Do you know of any independent appraisers in Converse County who might be able to provide us with the current and future estimates of mineral rights in this area?
Eastern MT said:
Lucinda, receiving offers to purchase is common. Typically these are for producing minerals though sometimes they'll offer to buy non-producing one too. I don't follow your Smith Unit so I can't offer advice on that. Yet this is the general process on offers to purchase minerals;
Where there is existing production the offer is usually based on X times the current monthly income. In other words the offer may be 48 times, 60 times, or another multiple, of last month's royalty income. If you're receiving an average of $100 per month then they're offering $4,800, or $6,000, to buy your mineral interest.
The idea is you'll be paid four or five years of income up front today to give away the potential income in the following years. If you really need the money now it may make sense. However, you are likely surrendering a greater ultimate sum which might be collected incrementally over time. How much that 'potential' future sum might be is impossible to know. Just as examples, some of the unknown variables; Production on existing wells will be declining. Yet production could increase if new wells are drilled. Oil prices may climb higher over the next few years. Or, oil prices may decline. Existing tax policies may be changed removing the depletion allowance on production. Or, taxes may be increased on long term capital gains...
Everyone's situation is different. My two bits is sell if you really need the money today. Otherwise don't sell minerals unless you need to. Good Luck.
Lucinda: I've been asked to represent a client who wants to offer $1000 to $1500 per net mineral acre in Smith Creek and all of the Federal units there in Converse County for non-producing acreage. (Producing acreage is something else again, and is more valuable, of course.) Is this in line with the offers you've received, too low, or higher than what you've been offered? I'd really like to not be wasting my time or my client's money if I can't make a fair deal for everyone involved. I'd be really interested to get your reply as I meet with him on Tuesday.
Thanks.
Smith Creek (Deep) Unit – my family has received an offer on minerals for $5000/per acre. I have read posts of activity in the Smith Creek area dating back to June 2013. Can you share more about what you know? Thanks in advance!!! – Shawn
John…I’d like to connect with you to know more about Smith Creek area…shawn
John P. Giehm said:
The Smith Creek Deep Unit is very active. I do believe that Chesapeake is working out some logistical issues currently, a basic lack of sufficient pipeline, transportation and tankage, as a result the production in both Smith and Combs has been low the past few months. There are a number of wells that have been recently spudded, another large number of confidential wells that are ladies in waiting until the infrastructure can support increased activity.
I would agree with Eastern MT, don’t sell unless you really need the money. The carpetbaggers constantly call me with regard to my producing and non producing holdings, I don’t last long enough with them to even hear their offers.
Are there any new updates about infrastructure in Smith Creek? Some of my siblings were visited by the carpetbaggers who came to their place of employment to purchase mineral rights. That seems anxious. That leads me to believe they know something I don’t. Can anyone comment?