Replies to This Discussion

Permalink Reply by FXEF on September 14, 2011 at 16:06

Wheel Man,

There maybe a few instances where selling minerals may work to your advantage, however the letters you are receiving are just scams to buy your minerals for pennies on the dollar and sometimes fractions of a penny on the dollar. Sometimes they will send a check with the proposal, do not cash the check, just shred and throw in the trash. 

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Permalink Reply by Dion Warr, CPL on September 14, 2011 at 17:41

Wheel:

I would say that there are more scenarios where selling royalties makes more sense than selling minerals. Further, landman sayeth not.

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Permalink Reply by The_Baron on September 15, 2011 at 3:41

I agree. except maybe in cases where you don't own any surface rights.  Its also a good idea to consider when selling any rights to consider only selling a portion of those rights...

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Permalink Reply by Joe Aldridge on September 15, 2011 at 8:04

My Father told me a long time ago to never sell Royalty/mineral rights - period. If you do sell them they may be gone forever or at least for a very long time. I agree with FXEF You are only getting a penny on the dollar or less.

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Permalink Reply by Joe Aldridge on September 15, 2011 at 11:25

Thanks.......... I just try to sort things out. I hate to see someone taken advantage of because of a lack of knowledge or because they are trying to help get things started for exploration of the area. Again thanks and I think we all need to show our appreciation to Keith for starting this site and maintaining it. It has helped me GREATLY!!!!!

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Permalink Reply by Wheel Man on September 15, 2011 at 10:29

Thanks for the responses. That's pretty much what I was thinking. I remember back in the old Tuscaloosa Trend days that people I know were getting dozens of offers to buy royalties. Don't know if they took them or not. But it seems that once you are under a mineral lease, you're better off waiting to see if you get included in a production unit, or better yet, to get a well drilled on your  property. I am a newcomer and a novice, but it seems to me that lots of money is being invested here, and all it will take is for Devon or somebody else to start producing some good daily totals for a lot more wells to be permitted. Guess if we start seeing a flurry of applications for new well permits we'll know that somebody got it right.

 

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Permalink Reply by Jay Rossi on September 15, 2011 at 14:44

I think there are several factors to consider when you ask "is it ever a good idea to sell your rights/royalties?"

I.E.  your age, your current financial situation, the fact that taxes on royalties are extremely likely to rise in 2012 or for sure 2013..... not everyone is in the wait and see scenario. Unfortunately, many people today live paycheck to paycheck and times are tough. Therefore, selling may be a good idea for a certain percentage of mineral owners. I think people are too quick to say no,no,no, when you have minerals and there are buyers, many of which you can negotiate a fair price. I am just saying.....

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Permalink Reply by Sharon on January 16, 2015 at 9:50

Notice lot of these post are older one so wit gas prices steady droppin do you still feel same way about sellin royalties, im in haynseville an considering. I m a senior citizen an could use money for aomething i m sure

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Permalink Reply by Skip Peel - Mineral Consultant on January 16, 2015 at 11:06

Sharon, buyer interest in LA Haynesville Shale minerals has increased over the course of 2014.  Value is generally dependent on location and lease terms particularly the royalty fraction.  Click on this link (in blue) and read my white paper on the Fundamentals of Selling Minerals.

http://www.gohaynesvilleshale.com/mineral-owner-rights-101

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Permalink Reply by Lerret on January 21, 2015 at 6:12

I see a terrible trend in the Fayetteville and it certainly won't be only in that play.

People get a well drilled in a unit. The well declines after 3 - 4 years to the point the landowner is getting only a small annual check.  Someone offers them 3 x the annual check for the property and they take it.

The fact is that single well is likely going to be supplemented with 7 or more additional wells sooner or later and in doing so this interest will be worth multiples of the annual income PER ACRE.

Just because the production of a single well has dropped is no reason to sell.  The unit will develop and frankly with low prices, I would as soon as wait for better prices even if it means my children and grandchildren benefit if I can't.

Secondly, if you have minerals and are elderly, then you in the future may need to get Medicaid to help pay for a nursing home or home care.  If you do and own mineral rights, then it can throw a monkey wrench in the application.  You need to get the interest out of your name and into a separate LLC or family partnership so that you family owns the property, not you the individual should that need arise. Otherwise, someone will have to pay for the care while you try and get the interest gifted away and wait out a waiting period. Time to consult your financial advisor.

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Permalink Reply by Skip Peel - Mineral Consultant on January 21, 2015 at 6:44

The important distinction to be made in evaluating the validity of an offer to purchase producing mineral rights or royalties is the existence or potential for unconventional reserves.  Where the value of minerals is based on production from an unconventional reservoir, purchase offers based on a monthly royalty payments and a multiplier (any multiplier) are inappropriate.  Those who make offers using that formula are depending on mineral lessors not understanding the pattern of development employed in unconventional plays (alternate unit wells).  Mineral lessors need to understand unit sizes, well spacing and how a particular operator tends to develop their leasehold.

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Permalink Reply by William Howard Pritchartt on January 23, 2015 at 8:21

Good point and well said.

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