Replies to This Discussion

Permalink Reply by Skip Peel - Mineral Consultant on December 6, 2022 at 15:02

Ed, what focus on shutting down fossil fuel?  Where in the world are you getting your news?  Welcome to the world of the rest of the Haynesville Shale mineral owners who have been receiving letters and phone calls constantly for the last year or so.  Lots of mineral lessors receive small checks for units with only the original unit well drilled ten, twelve or fourteen years ago.  The usual reason that you would get an offer letter with an impressive dollar amount is that your section/unit is in line for new wells.  The new wells are much more productive and companies usually drill 2 or 3 or 4 at a time.  Makes a big, big difference in the royalty income.  Without knowing your section-township-range, it is impossible to provide you with a reason for the offer(s).

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Permalink Reply by Ed James on December 6, 2022 at 16:58

Skip, Thanks for the quick response.  I hope that this country will realize how badly we still need our fossil fuels.  Our current administration in Washington sure is trying to kill it...which will fail eventually.  The private companies that drill on private lands should be doing well these days. 

We own 3.285 acres in Section 21-15N- 14W.  The offer we got from this company is for $9K an acre.  We can't find any information online about this company and it just seems like its possibly another scam.  Maybe they know something we don't about the future of the area.  Royalty payments have been less than $400 a year over the last several years and we suspect that the current company is just producing enough to keep the lease active and in place per the terms of the original lease my Dad signed with Chesapeake way back when. 

Thanks so much for your response.  When you family doesn't live in the area anymore its hard to keep your ear to the ground.

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Permalink Reply by Skip Peel - Mineral Consultant on December 7, 2022 at 3:22

Ed, you're welcome.  Our country needs to get off of all fossil fuels in a timely and rational manner.  Anything you are hearing about an impact on current exploration and production that leads you to think that current federal energy policy is a problem is bunk.  The industry is sitting on 10M acres of federal leases that they are not developing.  They got it for a few dollars an acre and pay the government (you and me) a one eighth royalty whenever they do produce it.  All of this has zero to do with your minerals and this offer.

I suspect that there is more to the name than Reserve Energy.  Might it be Reserve Energy Exploration?  Regardless, I have never heard of them and that doesn't make the company illegitimate.  They are simply one of many dozens of companies looking to acquire Haynesville Shale mineral rights.  Knowing your section-township-range and your total acres helps but without knowing your royalty fraction, it's impossible to provide an opinion of the fair market value of your minerals.  It's an important part of the value.  Regardless of what the fraction is, $9K per acre is a low ball offer.  There are no current indications of new wells coming for Section 21 in the near future.  The two producing wells are largely depleted but should continue to produce a sufficient volume to hold your lease for another couple of years.  Of course Southwestern could choose to drill new wells at any time.  I think that in that case you would receive a notice letter for SWN's application to the state for the spacing of new wells.  At $9K per acre, Reserve Energy could afford to wait a couple of years for new wells and they would make out nicely.

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Permalink Reply by Ed James on December 7, 2022 at 5:38

Thanks Skip.  I agree with you on all fronts. Thanks again for your input. 

All this letter lists is Reserve Energy Partners as the company name.  We have 1/4 royalty per the original lease back in 2010.  

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Permalink Reply by Ryan Howrish on December 12, 2022 at 7:07

Good afternoon Ed,

Out of curiosity, does the letter state $9000 per net mineral acre or $9000 per net royalty acre.  That will have an impact on determining whether the offer is a lowball offer or not.

Ryan

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Permalink Reply by Ed James on December 12, 2022 at 10:06

Hi Ryan,

It's pretty generic.  It just states they are paying $9000 per acre in our acre.  No real specifics beyond that. We decided to sit back and keep our ears open at this time,

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Permalink Reply by Skip Peel - Mineral Consultant on December 12, 2022 at 10:24

Mineral buyers do not talk to mineral owners in royalty acres.  I've never seen an offer letter or heard of a phone contact that uses the term royalty acres.  I have numerous discussion posts that tell mineral owners that mineral buyers talk amongst themselves in royalty acres and have explained the concept of a royalty acre.  It is a value concept that mineral owners should be aware of and it is an easily grasped concept that an mineral acre burdened by a lease with a 20% royalty is worth less than the same acre at a 25% royalty.

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Permalink Reply by Ryan Howrish on December 12, 2022 at 10:36

I have to disagree with you Skip.  In the last few months I have seen several offers that were in net royalty acres.

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Permalink Reply by Skip Peel - Mineral Consultant on December 12, 2022 at 10:40

You may have.  I've seen hundreds and not seen one mention of royalty acres.  Buyers don't care to confuse individuals who they hope will sell their mineral rights.

Permalink Reply by Cecil N Cannon on December 28, 2022 at 11:03

We talk in Royalty acres exclusively, as does anyone legitimate 

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Permalink Reply by Skip Peel - Mineral Consultant on December 28, 2022 at 11:05

I know you do, Cecil.  You are in the business.

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