Replies to This Discussion

Permalink Reply by Skip Peel - Mineral Consultant on October 11, 2021 at 10:59

billy, natural gas in general is once again popular with investors and the Haynesville Shale is getting lots of attention.  There are numerous companies making offers and offers have steadily risen over the last sixty days.  Although I am seeing a number of offers one and half to two times what you mention, every mineral interest is a unique case.  Location of minerals, number of mineral acres owned, number of existing wells (this tells how many are remaining to be drilled), whether there are approved well spacing orders for a particular section, whether there are live permits to drill for a particular section, etc. etc.  Anyone interested in selling their minerals should do their due diligence or get professional assistance.  Just as the bottom dropped out of lease offers in late 2008, these very aggressive offers to buy mineral rights will not last forever.  And could go away without any warning just as the lease offers dropped overnight.

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Permalink Reply by Steve P on October 11, 2021 at 15:41

my "calls per week" has gone up recently.  Of course, I have 3 wells due to be fracked this week, so, of course, the interest has gone up.

Late last year, I had a relative with about 25 acres, leased at 1/4, with only one existing HA well, and she was getting a great deal of interest, and, based on her age, was weighing a potential sale.  At the family's request, I got involved, and the offer was a pretty good deal.  But having said that, if she didn't need the money right now (as opposed to the regular royalty checks), it was her (and her heirs) interest to hang on and ride out the future royalties.  There is one clear advantage to selling your royalties - under current federal law, the sales proceeds will be treated as "long term capital gains" assuming you have owned those minerals for more than ... I think, 2 years, but don't quote me on that.  Currently, long term capital gains are taxed at a lower rate than ordinary income.

If you make enough money to worry about federal income taxes, then you should at least consult with someone before you sell.  Someone in the business would likely be able to get you a much better price if you decide to sell.  

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Permalink Reply by Skip Peel - Mineral Consultant on October 12, 2021 at 1:25

To qualify for long term capital gains, an asset must be held for a year and a day, 366 days total.  The tax is 15% up to a dollar amount based on the filing status of the mineral owner: single, married filing jointly, married filing separately, etc.  Depending on the filing status, the tax increases to 20% at approximately $450,000.  A simple Google search will provide the specifics.  The long term capital gains tax will likely change over time as federal tax policy evolves.  It could be different in 2021 for example.

The value that investors place on minerals varies over time and energy demand.  We've seen $12 gas in 2008, $1.50 gas last year and currently $5.80 gas.  This is the way commodities vary over time based on supply and demand.  Not long ago, investors coveted oil reserves.  Now they covet natural gas reserves.

Temporary spikes in value are to be expected for the remaining life of hydrocarbon based energy.  Investor consensus for the long term economic life span of oil is changing.  Gas reserves may be the better long term investment although oil will continue to be a good short term investment for another decade.  For those that wish to sell, selling during a spike such as we are experiencing now is a good decision.  For those with large mineral holdings, I have been suggesting for several years now that they sell a portion of their minerals each time offers peak.  The mineral trade has a tradition of dealing in eighths.  A mineral owner with a divestment plan might sell one eighth eight times, a quarter interest four times or any variation of fractional interests over a period of time.  It is quite difficult to provide specific guidance without specific knowledge of the mineral interest, the needs and/or opportunities to reinvest of the individual and the tax implications of a sale.  It can be complicated.  I suggest interested sellers get professional assistance.

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Permalink Reply by Iris on October 17, 2021 at 8:19

Wow, I didn't know till I received a letter Saturday and then read a post or two on  here there was so much interest again.   Someone came by my brother's house about a year ago and offered something like a $100 per acre.  Of course he told him no and we never received a request either.  On one side, I hear so much about fracking and environmental concerns, I also don't want to be force pooled and combined mineral royalties.  If push comes to shove I prefer to lease rather than sell. Where do I start?  I obviously can't go to meeting Nov. 3rd.

Help!

I'm grateful that I spent some time in 2008-2009 but I also believe it made my dry eyes worse. Think sad emoji

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Permalink Reply by Skip Peel - Mineral Consultant on October 17, 2021 at 8:27

Fracking is not issue around here.  The meeting on the 3rd., if it is requested by an "interested party", is a waste of time for mineral owners to attend.  Don't bother, you won't learn anything that is not in the notice letter and the unit plat.

You start by confirming that your title to the minerals in question is clearly evidenced in the public record.  If it is, you keep up with developments on GHS and wait to be contacted with a lease offer.  Since there are a couple or more family owners in these minerals, it may be possible to work together to have a little more negotiating leverage depends on number of acres and location of any surface ownership.

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Permalink Reply by Iris on October 17, 2021 at 9:04

Thank you Skip for your reply.  I've also thought about reaching out to a newer neighbor whose name is listed on the plat sent me,  My name is listed on the plat the attorneys firm sent me, also they sent me letter, I guess that is public record and I pay taxes on property myself.  So I'll wait a bit but keep checking.  Right now they seem to be wanting to change the section or something in addition to forced pooling and joined leases.

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Permalink Reply by billy on October 13, 2021 at 7:04

Thank you, I appreciate that.

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Permalink Reply by billy on October 13, 2021 at 7:02

Thank you Skip

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Permalink Reply by Skip Peel - Mineral Consultant on October 13, 2021 at 7:27

You're welcome.  Good luck.

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