Replies to This Discussion

Permalink Reply by Skip Peel - Mineral Consultant on March 8, 2022 at 5:22

billy, you are not the only one who is clueless.  Put whomever mentioned the shale oil under the Haynesville at the top of the list.  That rumor was short lived and debunked early in the play.  Like thirteen years ago.  As I have mentioned a number of times lately, the offers by letter or phone call use the wording, "up to", whenever a price is mentioned.  Many of the offers currently are coming from new players that know little about the Haynesville play.  They are just looking for someone to express interest and get in a discussion.

Here are a few things a buyer won't tell you.  Your section has proven Haynesville and Bossier shale.  There is currently only the one well as you mention but that means there are eleven wells to come at some point in the future.  Five more Haynesville and six Bossier.  Tellurian also operates the unit (section) to the immediate south so that 25 and 36 set up for the long laterals that operators now wish to drill.  Tellurian doesn't have many HA units to develop so the chances are decent that 25 will get new wells in the not too distant future although there are no current public record indication of new wells soon.

A lot of other details are important to the value of your minerals especially the number of acres you own and the royalty fraction of your lease.  Good luck.

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Permalink Reply by billy on March 8, 2022 at 5:26

Thank you Skip for the valuable information.

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Permalink Reply by Skip Peel - Mineral Consultant on March 8, 2022 at 5:44

You're welcome, billy.  I don't have any objection to someone entertaining offers for their minerals but I wish them to be informed and to understand how minerals are valued.  Your section will get many more wells in the future.  As soon as Tellurian makes an application for alternate wells, the offers will increase in number and in price.  When there are well permits issued for those approved alternate wells, the offers and the prices will go up again.  Personally, I think you should wait and learn how to keep up with the alternate well applications and well permits.  When a rig shows up to drill those wells is when the value of your minerals will be at their highest.

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Permalink Reply by Mister Sunday on March 8, 2022 at 7:24

Thanks Skip!  You are so patient when it comes to folks asking the same question.  I guess what I find most comforting is the answer is always consistent.

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Permalink Reply by Skip Peel - Mineral Consultant on March 8, 2022 at 8:42

Thanks.  Long ago I got used to answering the same questions over and over because I realized just how arcane and unique the E&P business model is and how hard it was for mineral owners to navigate the relationship with their operators.  Even folks with high education attainment and considerable business experience find that neither prepares them for dealing with the O&G companies and understanding state regulations that govern their mineral rights.  This is a crazy business but one I find challenging and satisfying.......most of the time.  :-)

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Permalink Reply by Hale Yayuh on March 10, 2022 at 5:35

Billy, be aware of this... there is zero guarantee any more wells will be drilled in your unit. You or I or somebody else might think it is likely but that's all it is, an opinion. Many factors beyond your control are at play. And what if you do get another well or a bunch of wells but it's 15 to 20 years from now? I don't know about you, but I'll probably be dead then. And if I were young, the value of income 20 years from now is hugely discounted from its value today.

I am not saying sell, just making you aware that there are risks in holding. Especially in this crazy 2022 world.

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Permalink Reply by Skip Peel - Mineral Consultant on March 10, 2022 at 7:11

I'd say the chances for additional HA and BO wells is 100% in the not too distant future.  Whether that is all eleven in say the next ten years, it is too early to estimate.  Hale is correct that there are many unknowns and everyone from the operator to the lessee to the lessor has some share in the risks.  For those reasons I counsel my clients with significant acreage, and therefore significant exposure to risk, to have a divestment plan that anticipates selling some fractional portion of their 100% interest every time the market for mineral rights peaks.  In this way you maximize your sales prices and eliminate some of your risk.  The O&G industry and indeed the mineral rights market operates on eighths with eight eighths being 100% of what you own.  You can sell in those increments based on the prevailing fair market value of minerals whenever there is a spike in buyer interest.  For example at this point when natural gas is looking good for the next few years, you might sell a quarter, 2/8ths.  If the price of natural gas rises you will still reap royalty benefits on your remaining 6/8ths.  The next time the market spikes, you can reevaluate what the immediate future for natural gas looks like.  Maybe you sell a half, 4/8ths.  Now should something unforeseen happen with the demand and price for natural gas, you are 75% divested.

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Permalink Reply by billy on March 10, 2022 at 10:46

Thank you Skip, that looks like a fairly conservative approach. It is good to see movement again. 

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Permalink Reply by billy on March 10, 2022 at 10:39

Thank you for your input, much appreciated. 

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Permalink Reply by Lisa Ross on March 14, 2022 at 5:12

I am in the same situation, several wells in the DeSoto Parish, mostly Comstock. Just received another call today from someone wanting to purchase mineral rights. I inherited these rights in 1999 and for years received $5 checks. In 2018 I started receiving significant income. Now, getting closer to retirement it’s hard to decide whether or not to sell. Or at what point, just received division orders for two more wells. Does anyone have any insite as to what’s going on in the DeSoto Parish?

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Permalink Reply by Skip Peel - Mineral Consultant on March 14, 2022 at 5:38

Lisa, activity in DeSoto is not relevant but in a very general sense.  What is important is what pertains specifically to the section or sections where your mineral rights are located.  If you are in a part of DeSoto where there is proven Bossier Shale, your minerals will have over time 12 wells, 6 Haynesville and 6 Bossier, less of course what has already been drilled.  Then the terms of your lease becomes a major factor in the value of your mineral rights.  A sale has certain advantages relative to the time value of a dollar (your get a lump sum as opposed to income over time that is subject to the erosion of inflation) and you get tax advantages (a sale qualifies for federal long term capital gains while royalty income is taxed as regular income or "rents" depending on how your accountant handles it).  Then there is the question of whether a sale at this time benefits you in some substantial way.  For example: paying off indebtedness, sending someone to college, or some financial emergency.  If nothing like that pertains, do you have an idea of where you would invest the proceeds of a sale for future benefit?

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Permalink Reply by Lisa Ross on March 15, 2022 at 4:51

Thanks for the reply Skip, more than likely I would use the proceeds to pay off my house.  It's just such a tough decision, had two new wells that started producing, the first check was over $10,000, but I realize they could trickle down to nothing pretty quickly.

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