Replies to This Discussion

Permalink Reply by RONNY on July 3, 2010 at 13:29

If someone is 60 or 70 years old, and does not care about leaving anything to heirs then royalties 30 or 40 years down the road are meaningless. $25000 per acre is good money for royalty even in these parts. If it makes you happy I say go for it. JMO

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Permalink Reply by sesport on July 3, 2010 at 13:42

Hi Ronny - Here's my thought on the "meaninglessness" of this issue. Selling minerals puts the control, use, and revenues of OUR resources into someone else's hands, usually some kind of investor. At some point, that investor will, in all liklihood, decide to cash in that investment. Now, it is possible that those minerals could be sold to the drilling companies, and it's possible they could be sold to foreign interests.

Personally, for the "cherry tomatoes" that I own under my house, I wouldn't even entertain such thoughts. I know several elderly folks that count on their mineral royalties, large & small, to offset pensions that don't keep up with the cost of living. And that will be without end. And I'm sure those without heirs can find some worthy individual or charitable foundation, heck ... they should perhaps establish their own foundation ... that would honor their wishes to "pay it forward."

But it is, most definitely, a personal decision. Yet, I wonder why the majority of mineral owners here advocate holding on to their minerals and it's usually the "buyers" that come out advocating the upside to "be happy."

80)

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Permalink Reply by DJG on July 3, 2010 at 14:11

I think that even in the scenario above, the math still works in your favor to hold on to your minerals and royalty.

Unless there is IMMEDIATE need for a bundle of cash urgently in the next 1-4 years, then even at $25K/acre you would still be better off in the medium run to wait it out.

If you are in one of the core areas that is seeing IP's in 15-20 mmcfd range and above, it would only take 2 or 3 wells working for you in order to for you to see more than that 25K/acre in royalty.

The unknown variable is how long will you be looking at until you would have those 2 or 3 wells drilled in your unit? Might be 3 years might be 5, who knows, but if the O&G company does have any reasonable timeframe plans to continue with the in-fill production of your unit, then it is not inconcievable that you would already have made back more than that initial 25K in royalty somewhere in the range of 5 to 10 years.

All additional royalties after that period would then be gravy that you would not have otherwise seen if indeed you sold out in the short run.

By the way, the math on a fully produced unit with 6-8 wells in those core areas seeing 20 mmcfd IP's is projecting out to over $150K/acre - per formation - over the production life of the unit. And, keeping in mind the likelihood of stacked formations in many of these areas (Bossier/ Haynesville / Cotton Valley / others) than the overall value per acre has the potential to be double, triple, more?

That said, even if I was 60 or 70 with no heirs, I think I'd be just fine waiting the 3-5 years to make the $25K per acre without giving up the other 100's of thousands of $$$ of potential per acre in the long run.

Still going to make that 25K/acre anyways, just going to need to wait a few years longer to have it in hand.

Even if no worries about heirs to give those extra 100's of thousands of $$$ per acre to, maybe someone would feel good about donating those extra funds to their favorite church or charitable foundation.

Perhaps set up a few scholarship funds.

Hell, even leave it to your cats.

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Permalink Reply by Jack Blake on July 3, 2010 at 14:30

Amen cried Jack Blake! If no heirs, donate it to church, scholarships etc.....

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Permalink Reply by Two Dogs, Pirate on July 3, 2010 at 15:06

HERE IS TO THE LEGACY OF JACK BLAKE, WAILED TWO DOGS.

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Permalink Reply by sesport on July 3, 2010 at 17:37

This PBS program, "History Detectives," is brought to you in part by funding from the JACK BLAKE CHARITABLE TRUST, established with generous proceeds from THAT IMMENSE NATURAL RESOURCE KNOWN AS THE FANTABULOUS HAYNESVILLE SHALE!

How does that sound for a promo? Just needs a logo. lol

80)

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Permalink Reply by Two Dogs, Pirate on July 3, 2010 at 14:45

I would think that every time a frac was done close to an older hole, that an increase in production would be seen in the old hole.

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Permalink Reply by RONNY on July 4, 2010 at 1:01

According to the calculator presented, 1 acre at 20 million per day IP with $5 gas reaches $25000 in year 9 and that's assuming a third well has been drilled.

Scenario A: Average man's vehicle blows up and he has no means to purchase another(no cash and bad credit) and must get to work everyday. He can remain unemployed and hope they quickly drill a really big well or:

Scenario B: Average man sells 1 acre of holdings for $25000 and buys a new Ford F150. By letting his land work for him in the present he can get to work, save his job, and will be able to continue feeding his family.

Everyone would like to opt for the best long term outcome, but life in the present for some is much more important than what may or may not happen in 20-40 years. JMO

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Permalink Reply by sesport on July 4, 2010 at 1:29

IMO, in year 9 that mineral acre is worth considerably more, as an asset, than that Ford F150 (depreciated).

lol, The vehicle salesman is well versed in finding ways to get credit for his customers. And a new, "all-the-bells-and-whistles" vehicle that guzzles gas (and that precious paycheck needed to support family) isn't the only option for transportation.

Just sayin' 80)

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Permalink Reply by jffree1 on July 4, 2010 at 3:30

You forgot to factor in the value of the job the man got to keep because he had transportation and the family income... possibly the roof over their heads, that truck provided. I'd sell an acre to feed my family, and never look back.

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Permalink Reply by BirdDawg, plain ole' idiot on July 4, 2010 at 6:31

I agree Henry. I have not heard of any $20,000 or $25,000 an acre prices.
I have heard as much as $5,000/royalty acre. That would be $10,000 per acre for minerals subject to a 25% royalty lease.

And I agree jffree1. People need to realize that every persons situation is different, and what is good for one person could prove to be disastrous for another.

Perhaps some people that feel it necessary to sell some minerals could perhaps sell a portion of their minerals and keep some for future income.

Permalink Reply by Henry on July 4, 2010 at 5:39

The problem is, I don't think anyone is paying $25k/acre for royalties. From what I've heard, the going number is well under $10k/acre. Can anyone out there vouch for such a price?

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