What is the present value of 1 acre of minerals leased in the core of the play that is presently unitized by a proven HS producer (HK, CHK, ECA, Questar)?

I wouldn't advise anyone to sell there mineral rights, but what is the PRESENT going rate.

Some people misunderstood my EUR discussion as misunderstanding the time value of money. That is not the case. Since it has been brought up a couple of times, let's dig into it deeper.

Anyone know any ACTUAL figures?

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Permalink Reply by E & E on August 4, 2009 at 6:14
Good Luck Parker,
I'm bettin on a low ball coming.......
Earlene the barefooted UMO
Permalink Reply by w.r. frank on August 4, 2009 at 7:06
Lots of variables. Assume $6 NG. 30 day IP of 10 mmcfd. Decline rate (1st: 80%; 2: 30%; 3: 15%; Terminal Rate 8%). 8 wells/section (one in Year 4, and one each year thereafter through year 11). Severance Tax of $.331 in year 3 of each well. Discount Rate: 10%. No value to any other formation than Lower Haynesville.

Result: $41,470/acre. Answer is nobody will pay that today!

It is just math!
Permalink Reply by Bobi Carr ("parker") on August 4, 2009 at 7:12
Hi w.r.,

BTW, I like Chesapeake's numbers. $142,187.50 sounds much better than $81,250.

I posted this because of the following response to my other topic:

Reply by Tom adams 14 hours ago
Delete The math in your calculation works; however, you are omitting the time value of money. To a achieve those reserves/section you will need 8 wells/section which may take 3-10 years depending upon how long gas prices stay at the current depressed prices. Also, you will have to pay LA advalorem and severance tax out of your proceeds unless you have a way around that. (Lot's of folks would be interested in how to do that..).
When you factor in risk and time value of money after state taxes you get a number considerably lower than that for value of minerals... I believe minerals have been sold in the area in the $10-15K/acre. Royalty acre sales are a completely different sale and involve computation of royalty acres (8 to 1) vs mineral acres...(another topic for another day)...
I haven't seen anyone projecting $7 gas lately.. most of the big guys drilling out here are placing hedges for just over $5/mmbtu in 2010...
Permalink Reply by Bobi Carr ("parker") on August 4, 2009 at 7:15
w.r.,

In the 20 mmcfd. neighborhood. Would I just double this figure?
Permalink Reply by w.r. frank on August 4, 2009 at 7:31
Yes.
Permalink Reply by Henry on August 4, 2009 at 7:24
Maybe someone can tell us about any credible offers they have heard of....? That is the true PV of your mineral rights.
Permalink Reply by Checkmateking on August 4, 2009 at 7:26
I have seen offers in the 4000-8000 dollar range, laughable. I have heard horror stories of people who sold minerals for 8000 and acre when their neighbors leased for 15-20 thousand. Just pure stupidity.
Permalink Reply by w.r. frank on August 4, 2009 at 7:33
Current cash price would indeed be "market."
Permalink Reply by Checkmateking on August 4, 2009 at 7:37
Yeah it's always a good idea to sell out at the bottom of the market, LOL.
Permalink Reply by adubu on August 4, 2009 at 11:18
Every one that is runing math numbers you must also calculate in another varible that is if you own the minerals then that include all formations that may produce commerial paying hydrocarbons that could include TP, Cotton Valley, lime and other formations shallow or deeper and who knows maybe Oil in addition to Gas. So you can not calculate market value except for that formation at this point in time in history. Another reason you never want to sell your minerals unless bad things going on with your finances.
Permalink Reply by Bobi Carr ("parker") on August 4, 2009 at 12:20
adubu,

Good point as to the value of the additional formations, but you can sell the zones separately.
Permalink Reply by w.r. frank on August 4, 2009 at 12:26
Agree with you!!! Particularly with recent Upper Haynesville completion by CRK in Desoto Parish BSMC 7 2H at 11.6 mmcfd.

Presentation by ECA at an industry conference in February indicated more GIP in one test well in Upper Haynesville(Middle Bossier?) than Lower Haynesville.

According to CRK they have data from 14 Upper Haynesville wells, including 6 or 7 horizontals. Upper HA is 100' to 250' thick, but not as wide-spread as Lower HA. Lower HA is 190' to 250'.

We need results from ECA Colbert well.

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