Replies to This Discussion

Permalink Reply by Gale on October 19, 2010 at 15:04

Over the years that my family has recieved royalty payments and having recieved hundreds of offers it appears to me the offers are figured about 2 1/2 X's the yearly amount you recieve in payment. If I am not mistaken I was told that tax appraisals are figured this way. True to that info the offers we recieve typically equal this equation. But seriously why would anyone consider selling any mineral interest, eventually the price will rally back up and what your offer is now you could see within a 6 month period. In 2008 we were recieving as high
as $15 today we are getting about $4, thats a massive difference. Just hold on and enjoy the free ride it's only going to go UP!!! 

• ▶ Reply

Permalink Reply by Parkdota on October 19, 2010 at 16:10

Gale, serious companies making serious royalty offers have very intricate and finite mathematical equations for coming up with offers...not 2 1/2 x's anything. I am an appraiser and tax appraisals are in no way performed in the way you mentioned. Also, you'll never see $15cf again. You'll be lucky to see $7 in the next 3-5 years. 2018 futures aren't even hitting $7cf. People consider selling minerals for a plethora of reasons. One might be on their death bed, one might need immediate money, one might think their acreage won't produce, one might think they are located on a fault line, one might be paying 60%+ in taxes and would rather sell for only 15% capital gain taxes, etc. There are also cases of operators holding leases and not drilling for decades on pre HA leases.

Example = If one has 100 ac and sells for $10k/ac after capital gains 15% they’d get 850k. This with modest 10-12% returns would be around $1.25m in 5 years. A 5mcf/day well for someone already paying 60%+ in income taxes (35% fed, 15% self employed, 5% state, 5+% sales) would net them around only $175k in five years. Yes, the well could be better….or it could be worse….or even a dry hole. If I were advanced in years I’d rather have $1.25million as opposed to $175k or less. This is why some people consider selling…and this is only one example. I don’t believe in selling as a rule but to not run the numbers per each individual’s one circumstance makes no sense.

• ▶ Reply

Permalink Reply by Henry on October 19, 2010 at 22:57

Parkdota,
I'd be thrilled to get those "modest" 10-12% returns annually.

• ▶ Reply

Permalink Reply by Parkdota on October 20, 2010 at 4:14

Henry & Adubu, I get 20-30% ROI all day long in real estate with many projects coming in at 100%+. Sounds crazy, right? I graduated with $500 and no where to live and by age 30 had turned that in to millions (net).

• ▶ Reply

Permalink Reply by adubu on October 20, 2010 at 4:41

Parkdota---you must have brought from RTC in 1989 when they unloaded at 15 to 20 cents on dollar. I had a lot of that so call "Income producing" real estate purchased in mid-to late 70s when it made financial sense to leverage and carry at -20% cash flow but pay NO INCOME TAX so after mortgage payments your person cash flow was not -20% but +20 after taxes. The Passive Tax Law change under Reagan in 1986 was the largest Tax increase in history ( I still voted for him and would again) and is the Primary cause of the S&L Crisis and $500 Billion loss to tax payer. If the RTC has not unloaded all the property and held the tax payer would not have loss one cent. The reason for the Passive Tax law change was due to the massive over building of offices etc and was only why to controll it which is one of the driver that causes changes to be made in tax law. It is some places still a landlord market if you can purchase without leveraged money. If you turn 500 into million by age 30 then I would guess you age to be about early to mid-50s today

• ▶ Reply

Permalink Reply by Parkdota on October 20, 2010 at 5:30

No, I'm 33...been very blessed, but I work very hard. You know all the real estate infomercial junk on tv that came out in the 2000's. I was doing that in the 90's and had little to no competition. The Jackson, MS market is a dream for RE investment as you can literally spend $10k to $20k on a property with $800-900/mn government funded rent. I'm not in that genre any more, as the headaches are abundant, but it's a great place to get started. Before the market tanked you could buy, renovate, and sell property in 2-3 months for sometimes 100+% profit. I would assume Shreveport and Memphis to be very similar. Now is the time to load up on inventory and wait for the "give everyone a home" something for nothing loans to come back as they'll be back....they'll always be around as long as you have politicians.

• ▶ Reply

Permalink Reply by adubu on October 20, 2010 at 5:46

Parkdota---You did that starting as a teenager WOW.

• ▶ Reply

Permalink Reply by Linda Whatley on October 21, 2010 at 10:29

Yea, me too Henry........10-12% sounds pretty darn good!

• ▶ Reply

Permalink Reply by adubu on October 20, 2010 at 0:18

Parkdota--- The only place you can protentially get 10-12% or more return on investing may be to buy minerals. All the calculation I see people talking about to value their minerals is either one well or one formation. What about the future of production in other formation other than the shale? Several years ago no one knew that the tight sands and tight shale could be commerically produced. Who know what the future may be. As you say very difficult to value minerals. To predict we will never see NG prices at $15 again reminds me when NG hit $5 1st time I was told it would not stay there but few months( he thought it would return to $1-2 soon) he was right but wrong way as you know it hit $14+ and stayed above $5 from 2001 to 2008 and now $3+ WE WILL SEE HIGHER PRICES IN FUTURE. I'm a buyer thru the stock market of oil & gas stock now because IMO they are the most undervalued stock group.

• ▶ Reply

Permalink Reply by Parkdota on October 20, 2010 at 4:12

Adubu, you're right that one never knows what the future holds. Prices will go up but very doubtful to $15cf. I was trying to accentuate that not every situation is the same and that it definitely makes sense to run the numbers per each individual’s situation. Like I said, I’m not for selling one’s minerals but there are plenty of wells that have come in as busts, hit fault lines, or are not even being drilled. It’s just good business to explore the options.

• ▶ Reply

Permalink Reply by Gale on October 20, 2010 at 7:00

Parkdota,
  Perhaps for some you are correct, I prefer to be optimistic as I have seen the highs and the lows. However considering that this was given to me and it's reaped bountifully in my eyes only a fool would consider selling. To make it even better the tax incentives that were put on tight sand wells in the 1990's made mine virtually tax free also. Seems to me you might would be a person wishing to buy mineral right if I read between the lines correct.

• ▶ Reply

Permalink Reply by Parkdota on October 20, 2010 at 7:23

Gale, no I don't want to buy minerals as it is not my expertise. I just wish for the readers to understand that everyone's situation is not the same. Whether people buy or sell minerals, make leases with operators, contracts on pipeline right-a-ways, water sales, etc. we all need to explore all avenues while making decisions based on our own needs that are in turn based on educated findings. The majority of folks should not sell their minerals, yet there will be a small portion of which selling makes sense for whatever their reasons. We gather on this site to educate ourselves. I knew very little about natgas so I've scoured this site for years learning as it is a wonderful education. Your optimism is wonderful but I've found that sometimes optimism is a formula for poor business decisions as is being pessimistic. Temperance, control, and informed decision making are the keys.

• ▶ Reply

• ‹ Previous
• 1
• 2
• 3
• 4
• Next ›
• Page