Sale of royalties
a family member just got an offer to sell they O&G royalties. They own about 25 acres under a 1/4th royalty lease and the land is located just SE of Mansfield. There is currently one ten year old HA well that is still plugging along. CHK is the operator, and CHK just filed to create 4 CULs that include all of their section and another full section.
The offer is about $6,000 per acre, or $150.000.
For discussion purposes, let's assume that the owner is retired, has children that would inherit the land, doesn't badly need the money, but the money wouldn't hurt.
My suggestion to the family member is that if they don't need the money, then don't sell unless they are getting a huge permium.. Just the income tax hit on the $150K would diminish the value received. If they need money, consider selling 1/2 of their royalties. but shop them around.
If CHK drills all 4 wells, they may get close to $150K in the first 18 months, and can continue to collect for the next 10 - 20 years.
Thoughts by any of the knowledgable ones on here?
Views: 1386
Replies to This Discussion
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Permalink Reply by Bill R on
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Thank you Skip, you stated what I was saying in a far more eloquent manner... of the four proposal offers that I received, each of them has only one existing Well if anywhere from four to eight planned or projected per Pad... to myself, it is well worth the risk of maintaining possession of my Holdings vs. selling to Speculators, since they are all from inheritance and nothing that I have really earned, nor invested in. Really wish I understood more about the O&G Industry, but I am learning and that is primarily from the people like you on here.
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Permalink Reply by Skip Peel - Mineral Consultant on -
You're welcome, Bill. I have run across sellers with many good and rational reasons for selling but at this time a sale that just puts the funds into a money market or savings account at lousy interest rates isn't worth it. If there is a good use for the money, sell all or just the portion needed to accomplish the goal. If not, sit tight. As always the details matter and because we focus on Haynesville/Bossier E&P, the outlook for natural gas is better than for oil. There is a caveat to that statement. The next 2 to 3 years will provide a much better position from which to project natural gas usage. Whether oil or gas, no mineral owner wants to be stuck with stranded reserves.
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Permalink Reply by Renee Brown on
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I’m in a similar predicament but the stakes are slightly higher. Currently receiving monthly residuals on several wells. Nothing over about 5k a month. Now the offers are flowing in via phone and mail. One land man who originally offered 250k, then offered 300k and now 400k to purchase my mineral rights. Certainly something is brewing for them to make such a fuss when I’m only making 5k at the peak of oil production for several wells?
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