Replies to This Discussion

Permalink Reply by Todd M. Baker on February 8, 2009 at 16:24

jd:

The old standard thought in the business was non-producing minerals could be valued @ 2 1/2 times the last lease bonus, ie bonus of $1000/acre @ 3/16ths royalty would be worth $2500 per acre. The recent craziness of the country's shale plays and the recent run up and subsequent run down in ng prices has played havoc with that old thought.

If you are a willing seller, you should determine the price you want and have your own personal reasoning on why it is worth what you are asking. I competent buyer will have done the same. The buyer will use a formula based on his calculations of ultimate recoverable gas in place and the price of the gas so captured. Then he will use some "time value of money" figures to get at the price he is willing to pay. Remember he is trying to make a guestimate of his return on investment, assuming he gets a return of investment. Two very different things.

At the same time, if you are looking to sell, you should be looking at managing your risks. What are the chances the wells make the amount of gas that your research shows them to make and what price will the gas be produced at?

What are your time frames or what is called "time value of money". If you need money know vs. the future, only you know that.

Assuming you have owned the minerals one year, the sale will be subject to capital gains taxes, currently @ 15% but who knows what the tax code will look like this time next year. If you keep the mineals and production is achieved, what tax bracket will the revenue or royalty put you in? Those are things that only you will know.

In my opinion the important thing is know what you intend to do with any money you receive. You are really managing your financial risks. Do your own research and don't listen to those that want to give you advice one way or another. They are not in your shoes and are not paying your bills or planning your future. You are. And remember most of the time the first offer is not the last offer. Most of the time.

Good luck to you and I hope all works out well.

TMB

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Permalink Reply by ELLIS HUGH on February 9, 2009 at 4:26

I guess it depends what you consider the "south area of the HS". There are offers in the southern DeSoto and Red River, but I don't know of many buyers in Natchitoches Parish. I also have to assume you are talking about non-producing royalty interest, right? Makes a huge difference, especially when you are talking about an area outside the immediate focus of current Haynesville drilling.

Offers in what can be considered the edge of the shale is CURRENTLY hard to come by. I know of a couple of buyers, but they are slowly shifting focus toward more active areas.

BTW, if you consider selling anything, I would advise selling royalty interest (not mineral rights). Be sure you know and understand the difference.

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Permalink Reply by j, davis on February 13, 2009 at 15:16

Thanks for your info. Could you explain difference between royalty interest and mineral rights?

Permalink Reply by jr on February 14, 2009 at 0:12

$4750.00 per mineral acre sold near marthaville, La north west natch. parish.

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Permalink Reply by D Miller on February 7, 2009 at 19:10

Any idea on worth on the following. . i have a about 4 acres we acquired (mineral rights not royalty acres) 20% royalty well is being fraced as we speak i am told. caddo parish sec 21 t19 r15. I would sell royalty acres as well as that would allow us to keep some skin in the game.
It was a long term investment but now we may need to sell before production even begins unfortunately. thanks,
DM

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Permalink Reply by Spring Branch,mineral owner on February 9, 2009 at 2:21

That Chesapeake well in 19/15, Section 21 is an old Cotton Valley well that has been re-entered and deepened to the HA formation. There were lease expiration issues is the reason for this particular vertical well. I wouldn't count on getting rich from this well alone. It's primary purpose is to HBP the section.

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Permalink Reply by The_Baron on February 9, 2009 at 5:36

You could sell a portion of your royalty (say for sake of arguement, a 1/8 royalty, leaving you with a 7.5% royalty). This would leave you a cchance for some long term return, while bringing in needed cash now. YOu would retain all of your mineral rights, and thus all rights to any future leasing should this occur (may be valuable in you have a pugh clause or the current lease lapses.).

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