landowner

how is price of mineral rights determined? Sell or lease?

5 months agoI was offered 1,500 an acre for mineral rights in La Salle county with 1/5th royalty, for 3 years plus 2.  I do not own the land.  Immediately after the letter, the company pulled the offer off the table.  No dscussion, no negotiating, no counter offers.  We have never been offered 1/4th of a million dollars, then told oops, not interested.   Someone said that the company researches these offers to death, knows what is there, otherwise the company would not have offered top price to begin with.  How are prices determined and what is going on?  It was a landman representing himself for Chesapeake.  He now said that Chesapeake is interested in east Texas only.  Any comments will be appreciated. 

Update: I found out today that the property is:  La Salle county Abstract  A 331 lot 4, survey , # 5. ( ??)  It is part of a 641 acre parcel.  I think that is how the r.r. co surveyed back then.  We have a 160 acres more or less but do not own the land.  Can someone tell me how to find out where that is on a map?  We inherited the mineral rights and did not know we owned them unitil the landman for Chesapeake wrote that letter back in July.   I have had quite a few offers through this forum.  People  want to buy the mineral rights and said if the property is south, I am probably in a donut hole and it is not worth much.  Of course they would buy it tomorrow for $1,500 per acre (they say) but one said I could get a lot more.  Should I consider that and what would be a good price? 

Thank you!

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landownerPermalink Reply by adubu on November 12, 2010 at 10:42
was this a lease offer or was it a offer to buy your minerals?

landownerPermalink Reply by gummipuppe on November 12, 2010 at 13:36
It was a lease offer for three years with an option for two more years. I don't think purchases include royalties, do they? Thank you for your reply.

landownerPermalink Reply by Mac Davis on November 12, 2010 at 17:31
I'll point out that a lot of what's said on this site is relevant to Louisiana law. And to the Haynesville Shale.

LaSalle county is down south of San Antonio, right? Does anyone know what kind of oil/gas there is down there? I know it's not in the Haynesville Shale.

It's not uncommon to get an offer that's not really an offer. They may pay you with a "draft" instead of a check. You can't cash the draft for a month or so, and they can cancel the draft any time they want to. Or they make you an offer, but they haven't signed their side of it yet.

It's not uncommon to get a legitimate deal that they honestly want to get one day and have them change their mind the next day, as finances change, other well results come in, other deals get signed, prices change, etc. Chesapeake and others have been pulling out of areas they used to be very interested in.

If the deal ever looks like it will happen, get a good local oil and gas attorney to review everything before you sign ANYTHING. Lots of snakes in the business.

Many people will tell you to never take the first offer.

landownerPermalink Reply by gummipuppe on November 12, 2010 at 18:15
Thank you for your answer.

landownerPermalink Reply by benny688 on November 12, 2010 at 19:20
La Salle county is just SW of the Eagle Ford which is centered in Atacosa County. The Eagle Ford has a much higher liquid content that will probably make it more profitable in the short term than acreage on the Haynesville.

On last conference call Petrohawk said they would be shifting focus from the Haynesville to the Eagle Ford.

gummi's offer wasn't all that good. Should probably wait out market conditions.

GLTA

landownerPermalink Reply by gummipuppe on November 13, 2010 at 7:07
That is encouraging, thanks for the info.

Oil & Gas ProPermalink Reply by Dan Arnold on November 15, 2010 at 8:36
To be clear about the difference between leasing the mineral interest vs selling the mineral interest, leasing is for a limited period of time and includes bonus money and royalty from possible production. Selling that mineral interest is exactly that, exchanging ownership of the mineral interest for a one time payment.
For a person who does not own the surface land, but has mineral ownership I generally recommend not selling, because once they are sold, there will never be anymore revenue to you from those minerals. Long term benefits of mineral ownership include the possibility of regular income from lease bonuses, to yourself or your family, and (if they own the rights to royalty) in the event of production, regular paychecks for the life of the well(s), either in the near term or for future generations. I say generally, because there are of course instances in which the benefits a person might get from the sale of their mineral ownership could be a life saver in the short term. Many believe that no one should ever sell their mineral interest for any reason.
There are plenty of individuals and outfits out there that will buy the mineral and/or royalty rights, at prices set by them. There is no simple formula to determine actual value as there are far too many unknowns and variables.
Lease bonuses are determined by negotiation between the Lessor and the Lessee, within the local market parameters, IE Haynesville Shale lands vs some other land miles away . The difference of the value of land for lease can be sharply different within a surprisingly short distance. This is why the question of exactly where your mineral interest is located is so important.

landownerPermalink Reply by gummipuppe on November 15, 2010 at 12:28
Thank you for your reply and great info. I am 4000 miles away and can not get any info on it. Patience is virtue. LOL

landownerPermalink Reply by Mac Davis on November 14, 2010 at 14:37
By the way, if they offered you $1500 an acre, they have calculated the probable final value of the minerals is a LOT more. Doesn't mean they're right or that you'll be able to get a better offer.

You'll see a lot of discussion on this site about 10 year limits on mineral ownership. I don't believe that that applies in Texas, but verify this yourself. IANAL.

"People want to buy the mineral rights and said if the property is south, I am probably in a donut hole and it is not worth much." They could be right, but take anything a buyer says with a large grain of salt. Take anything you get told in the oil and gas business with an even larger grain of salt.

landownerPermalink Reply by gummipuppe on November 15, 2010 at 12:33
We inherited these mineral rights from our father who was in the real estate business part time in what used to be the sleepy town of Cotulla. Apparently he flipped the property, keeping the mineral rights. He passed away 25 years ago, so I doubt the 10 year limit. I am in touch with the courthouse, hoping to get some survey info and / or deed facts. Thank you so much.

landownerPermalink Reply by Henry on November 14, 2010 at 14:56
None of us really knows how to determine the "true" price of minerals in the Haynesville Shale. But, I was told by one attorney that people selling minerals, that are leased at 25% royalty, are typically getting $5500 - $7500 per acre, depending on location, lease terms, etc. This was for Louisiana land in good areas.

landownerPermalink Reply by Mac Davis on November 14, 2010 at 15:10
Henry, are you talking about lease bonuses for people leasing their minerals or sale price for people selling their minerals?

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