M Barnes,
Your second line is confusing to me.
Bonus to me pertain to lease bonus.
Mineral sale are when you no longer want your minerals and you sell them for cash.
Sorry to confuse. The bonus is for the lease, but if you end up with production, it is essentially a sale of your liquids with you retaining a royalty percentage. No title is passed, just liquids go down the pipeline and you get cash. You retain the minerals rights.
Mineral rights sales are when you give up your title and all your rights to everything and title does pass to someone else in exchange for cash.
Right, I always try to help when I can but the actual numbers are not available to me in most cases so usually have to advise that a person needs to hire a landman and maybe give a couple of referrals. Plus, sometimes I can tell someone if an offer seems low or reasonable but that is only based on offers I've had and I can tell you that they can vary by $$$$/NMA. And, of course there is the big lie, that just because someone sends you a big offer in the mail, say $15,000/NMA, it isn't binding and doesn't mean that is what they will really offer when it comes to contract time. Most offers are too low but I've also had plenty of ones that were high that just get you to bite and then the real work and real offer comes out to be disappointing. I think that a good landman is the best option and I understand people balking at the thought of spending a few hundred or several thousand dollars to get what they need but if it's important then you will probably have to spend some money. My experience is that a good landman is an investment and he/she will be worth the investment.
The operative word here being "good" landman. They can also take advantage of people. Been there before, too.
PV10 has nothing to do with "fair value"... a 10% discount rate is a popular reference as it's the rate used by the SEC for reserve reporting. Producing properties trade on the characteristics of the properties underlying the production. Furthermore, a general formulaic method described by the engineer fails to consider market realities as it doesn't take into consideration the risks associated with different properties nor does it factor in any potential upside. At times producing properties can trade at PV0 - basically is a buyer feel commodity prices are low and will increase. If investors feel prices are too high, then they may require a higher rate of return and hence a higher discount rate.
I honestly would be concerned with an engineer that feels a reserve report truly reflects 'fair market' value, it is simply a calculation of worth based on the assumptions utilized in the report.
I think you need to consider what someone's motivation is in a transaction or relationship.
Landmen are exactly that - men (or women) that are motivated the same way any other human are motivate....money prestige or otherwise, they have their best interest in mind first and foremost.
Definitely! You need to get a reliable, experienced, honest landman so you need to get a referral from someone who will vouch for the landman otherwise it's like going to the first real estate salesperson you run into on the street, risky!
what's a referral worth? how do you know that the referral source knows what they are talking about?
It's obviously a business but you shouldn't be paranoid and think that a landman is going to put his/her interests above yours. If they are AAPL and knowledgeable they are going to work for you since you are paying them to do a job and get the best deal they can and best information for you, that's what they are being paid for. If they "sell out" to someone else the word is going to get around and that will be the end of their business. No one is going to hire someone they can't trust!
I like the confidential clause issue. Let's say you receive a bonus of $1,250 per acre. The info you would suggest is to not accept anything less than $1,000 per acre. There is a zero violation since you have not released your personal information. That means that all info furnished to fellow royalty owners would be benchmark amounts only - never actual or even close to the amount you received.
THAT IS A VERY GOOD POINT! My recent experience with a couple of referrals proved your point as I recently accepted referrals only to find that the people I was referred to were unreliable and did not do their work and it has cost me in time and money. But, as some have warned me, that's the oil business and it happens all the time. If you are not local to your mineral interests and don't personally know and trust the people doing work for you then you are at a major disadvantage!
AMEN! My latest experience proves that.
Really enjoyed reading these Q&A’s along with the comments. Thanks all