What information is available to a royalty interest buying company evaluating a tract of land to arrive at an offer price for royalty interest for a potential customer before drilling has begun in a section? Are they looking at production rates from current nearby wells? Is there some math formula a landowner might use in hopes of determing if a current offer is fair or not ? How do royalty buying companies arrive at an "educated" dollar offer amount that landowner gets in the mail and does not know about while no wells are being drilled in the section but are being drilled in nearby sections? How can a landowner insure that an offering royalty interest company has made a current fair price for future, unknown production revenue (s) before a drilling operator drills in a section and just accept a price offer blindly, which may winding up being foolish in the future??? This is not a question if one or one does not need the immediate cash. Thanks in advance for your information.
In 11n 14w section 5 came in over 10million cubic feet/day, sec 18 right at 10mcf/day, sec 19 right at 9mcf/day, sec 30 at 6mcf/day, sec 31 just over 5mcf/day, and sec 33 over 8mcf/day. That is an average of around 9mcf/day which is roughly 60% of the 15mcf/day scenario as described there in. So, basically I’d estimate you’d have to make over 20% return on investment of the up front funds paid for one’s royalties for it to be a good deal but as mentioned the operator is likely to drill more wells, although in what time frame only they know for sure. With the production in surrounding wells in 11n 14w I wouldn’t sell. You also have the Bossier to be drilled at some point as well. The above map shows that you might be in a strong BO area.