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Permalink Reply by Skip Peel - Mineral Consultant on July 22, 2018 at 7:38

I would deem the offer amounts you mention opening offers or fishing expeditions.  The price of natural gas, current or near term future prices, have little impact on an offer.  Good rock and the prospect of near term multiple alternate unit wells is what most buyers are looking for.  Buyers look closely at lease terms beyond the royalty fraction.  Many would prefer a nine-fortieths (22.5%) lease with a good no cost royalty clause over one with a quarter and no such clause.  Buyers look at post production deductions.  There are areas where one operator may have gathering and treating costs of $0.30 per mcf while their neighbor in the same area has a G&T cost of $1.20 per mcf.  If a unit has multiple new wells, how old are they?  Although decline curves are flatter on the new version, long lateral/intense completion wells, the over pressured nature of the Haynesville Shale still creates a scenario where first year production is generally greater than 50% of EUR and likely 75 to 80% for the first 24 months.  Every month that passes those new wells are declining and the mineral value is dropping.

Having a reasonable expectation as to the value of your minerals means knowing a lot of variables, not just what someone down the road got for theirs.  When laymen talk about offer amounts it is rare that they are aware of the variables or the concept of a royalty acre.  Just as discussions about leases and bonuses were short of context in the early days of the Haynesville land rush and GHS and sometimes led to poor decisions, the same applies for discussions regarding the value of mineral rights. 

There are offers in south Caddo, north DeSoto, south DeSoto, Red River, Sabine and, although I haven't heard any recently,  I suspect in Bossier. 

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Permalink Reply by Ed James on July 24, 2018 at 15:32

we just received an offer from Arpent Energy for $7,884 for 6.57 royalty acres (we leased the land about 10 years ago) in Desoto Parish. Section 121, Township 15 North, Range 14 West, Desoto Parish. Land is off Dalton Road in Stonewall

What's going on over there? We have only seen very small royalty checks over the last few years and now a sizeable offer just shows up in the mail.

There obviously must be some good news in this area but since we live in Texas now, we don't hear a lot about this land.

Is Arprent a reputable company? Is this in line with what others are seeing? Thanks EJames

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Permalink Reply by Skip Peel - Mineral Consultant on July 24, 2018 at 15:45

Ed, that is hardly a sizeable offer unless your are saying that the $7,884 is per royalty acre, $51,797.88 total.  Although there is no Section 121 in 15N-14W, all of that township is good rock.  Arpent has been around although I have not dealt with them.  They, like other mineral companies, are looking to acquire mineral rights where they expect new wells to be drilled in the near future.  There has been a good bit of new development activity in that township.

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Permalink Reply by Ed James on July 25, 2018 at 0:01

Thanks Skip,

That's kind of what we thought.  These unsolicited offers are typically not realistic but its the highest offer we have seen.  It's not a per acre offer (just the total of the offer). Glad to hear there are some good signs of future activity going on over there.  

The offer was for $1200 per royalty acre . What do you think a reasonable offer per royalty acre would be?  It's Desoto Parish, Sect. 21, Township 15 N,Range 14W,Desoto Parish (made a typo on my original comment)

Thanks for your response and your expertise!

Ed

Ed

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Permalink Reply by Ed James on July 25, 2018 at 2:30

Thanks Jay,

It's in the file with all the other crazy stuff we get...

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Permalink Reply by Skip Peel - Mineral Consultant on July 25, 2018 at 2:32

Ed, the value will vary over time with perceptions of the potential for new additional wells in your section/unit.  As I mentioned before, 15N - 14W is good rock.  Right now, if there are no applications to the state indicating that new wells are in the works, I would think that $3750 to $4250 per royalty acre would be considered by many to be fair market.  If there were reason to expect more wells in the future, higher depending on the number.  For those that have an interest in selling, if possible if should be done when the value is at its highest.  That is when new wells are planned.  So wait, if you can. 

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Permalink Reply by Ed James on July 25, 2018 at 2:35

Thanks so much, there is no hurry on this end at all.  We own some land in Bienville Parish (near Castor) as well but nothing seems to be happening down there at all.

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Permalink Reply by Skip Peel - Mineral Consultant on July 25, 2018 at 2:51

Good.  There is no Haynesville Shale as far east as Castor.  In the meantime you can learn how to look up alternate well applications on the state O&G database.  That is an easy way to keep up with future wells in your section and township.

https://gohaynesvilleshale.com/group/sonris_help_center

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