Replies to This Discussion

Permalink Reply by Skip Peel - Mineral Consultant on July 12, 2018 at 11:36

Anyone who cares to reply here needs to post their acreage and their royalty fraction. Specific location by section-township-range is important. Mineral values vary considerably across DeSoto Parish so keep that in mind

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Permalink Reply by Bill R on July 12, 2018 at 13:20

I was offered $18K per mineral acre to SELL, not lease for San Augustine holdings.

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Permalink Reply by Andrew on July 15, 2018 at 6:39

Hard not to think seriously about that.....would you buy it today for the price they are offering you? If not, might consider selling.  

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Permalink Reply by Andrew on July 13, 2018 at 6:17

Offers in Desoto can vary greatly as Skip accurately pointed out. I have personally seen them range from $2000/NMA with 25% lease to $25,000/NMA with 25% lease. 

Factors influencing the pricing include in order of importance: 

1. Lease rate

2. Visibility to, and number of any planned wells? 

3. Estimated timeline for wells to be drilled on this acreage. 

4. Geologic location / proximity to activity

5. Operator quality/financial condition/and how much other inventory they have to drill. 

$7000 is generally a pretty fairway number for good areas of the basin if there isn't any on-going activity on the acreage. 

What people should consider when they receive an offer is that in-fact holding minerals is the same thing as buying minerals. In other words, would you buy the property for the amount of cash being offered to you? If not, then you should seriously consider selling all or part. "If you ain't sellin, your buyin" is a very true phrase in all asset classes.

Also, folks should ask themselves honestly and examine their financial situation as to whether they can take the risk that they turn down the money and nothing happens. Passing on the money is also passing on the opportunity to immediately invest and/or utilize the money for other purposes. I've personally seen folks in dire financial situations turn down multi-million offers and then horrible wells get drilled on them or the area becomes condemned.

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Permalink Reply by kittycatmama on July 15, 2018 at 5:20

I have a friend who is trying to get over $6000 an ac. in Desoto and mineral buyers are telling her that the section she is in has different operators to south and to the north and that is affecting her lower offer. I have friends in SOUTH Caddo and NO ONE will even bid on their 10 ac. They are investors and knowledgeable about buying and selling minerals and this is first time they have seen no offers in Caddo. It seems everyone wants Desoto only and that becomes even more specific with central Desoto from T15/14 SOUTH.

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Permalink Reply by Andrew on July 15, 2018 at 6:38

At $6000/acre (assuming a 25% royalty) an investor would have to have relatively high confidence for development of multiple new wells in a 3-4 year period. If there are factors that could make development less likely, like sections north and south being controlled by other operators, it reduces that confidence and therefore the pricing. To illustrate, if a buyer paid $6000/NMA with a 25% royalty and it took 8 years to get 3 wells, their internal rate of return would be 5-6% at best; no buyer knowingly invests for these kinds of returns. 

Caddo can be a good area, but it is significantly less proven than the historical core and there is an enormous amount of drilling inventory which lends itself to the possibility of waiting many years for development - which means the potential for delay must be priced in. Without knowing the specific section, a section in southern Caddo attracting no offers might be acreage tied up in one of several bankruptcies, be a random section owned by an operator without any activity in the area, or caught up litigation. Your friends might also not be talking to every buyer active in the basin. I would encourage them to discuss with more buyers.  

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Permalink Reply by kittycatmama on July 23, 2018 at 14:11

I agree Andrew. My friend in Desoto has 5 acres with a 1/6th lease. I told her she would be lucky to get $4000 an ac. She never gets any call backs from mineral buyers and I think it is because she wants too much. People get talking to friends and everyone has an opinion. LOL. The is 85 and no heirs. I told her just leave them to her favorite charity.

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Permalink Reply by Andrew on July 23, 2018 at 15:33

With that lease rate, it might be more like $1700-2000/acre. Also the size is so small it’s not worth most buyers messing with it. It costs just as much time and money to do a 5 acre deal as a 50 or 500 acre deal. 

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Permalink Reply by Hale Yayuh on July 24, 2018 at 1:37

Charities don't want minerals, they don't like paperwork. They like cash.

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Permalink Reply by Larry Franklin on July 21, 2018 at 4:46

Bill R, I would sell mine in desoto parish for that amount. I’m in 11-12-15, 12-12-15, 28-12-15 would like to know who offered that amount. If needed I will send you my contact info
Thanks
Larry F

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Permalink Reply by Hale Yayuh on July 21, 2018 at 6:08

I didn't believe the offer and I contacted him and I must say that his offer was not what he posted. It was for houses, buildings, land and minerals for over 2,000 acres. Everybody should realize that the reported number was WAY too high. Be very leery of anything you read on the internet! People can say anything.

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Permalink Reply by Hale Yayuh on July 21, 2018 at 6:13

Also, to Andrew... it seems worth mentioning that any offer you post about regarding a sale in 2008, maybe 2009 (I am guessing) doesn't matter, as it is almost a given that nobody will ever again receive that kind of money. Members don't do people any good by even mentioning such numbers, as mineral sellers will expect such a number or close to it and it ain't gonna happen.

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