A friend has an offer from West Oak Resources for mineral interest in Martin County.
Has anyone dealt with West Oak Resources? Were you able to close the deal?
Please provide any insights you have/can/willing to share.
Thanks
I have received maybe 40 or more offers this year alone on interest in Martin County. Many are written but some have found a way to track me down via my cell.
The story is usually that they have so much money and interest rates are so very low that they just want a very low return. When pressed as to the source of those funds, i have learned that some are actually affiliates or former affiliate of equity sources i have used in commercial real estate endeavors. I can assure that the real estate investors were seeking mid teen hurdles and allowing the operator a 20-25% carry after the irr. Those were not little returns in real estate so not sure why that might have changed, or might they be misrepresenting?
Back to my offers, and looking back through the years, they originally started at about $10k, then moved to mid five figure, then upper five figures, and more recently up to mid six figure. All this on acreage held by a vertical well providing about $150 per month in royalty.
Now the have producing four wells with about a two mile latterals with first payment covering a large part of the current offers.
I would encourage your friend to make sure he understands, that once sold, the goose that lays the golden egg is dead.
Good luck.
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Thank you so much for your post. Like you we have received various offer through the last 8 years when we inherited the mineral rights. The offers also began around 10K but have lately increased to mid six figures. We have about 35 net acres. We hate to sell because of the large capital gains tax, and plan to leave it to our kids who will have a stepped up base. We know that the values could also decrease and because of the new electric engines we are tempted to sell. I have thought about a 310 exchange but don’t know enough about it.
I appreciate any info you or others can give. Our royalties are about $125 a month on 2 vertical wells.
when the offers start coming in, at least for us, it was because a number of wells had been permitted.
take a look at the gis viewer and see if you see that on your land.
how long have you had it Nancy? Capital gains might not be as bad as you think. 1031 exchanges are great if you have something in mind - maybe some land you could lease out to farm, or maybe buy a vacation rental? If your being held by 2 old vertical wells, you might not see much more from it for a long time.
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We inherited the mineral rights in 1998. We would consider the 1031 exchange if we had more information.
A statewide search of West Oak only shows one mineral transaction in Reeves County. Doesn’t mean that they have any trouble closing deals other than what any of those companies run into.
If I have identified your interests correctly, based on 2018 information, it looks like you are in very good acreage under two very good operators. It also looks like you you may be under two leases instead of just two verticals. RRC shows two producing verticals with Endeavor and two producing verticals with Pioneer. For 35 net acres in this area, under those operators and with the surrounding activity I would guess that the value of your assets would be closer to high 6 figures instead of mid.
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I can’t agree with the high 6 figures. Your acreage is held by old vertical leases. They don’t need to drill anytime soon, so chances are they won’t. Are these old 1/8th royalty leases? If so, high six figures would mean they would be paying mid 20s we acre. That’s not realistic at all, considering there’s no new permits or anything. I personally think your previous offer seems much more reasonable. Take everyone’s opinions with a grain of salt, or you might miss a good deal when it comes along. There’s a lot of people in a lot of places (particularly Oklahoma at the moment) that are wishing they would have accepted some deals within the last year or so. Because they are long gone now(production in certain areas are much less than what was expected)
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