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S Tx mineral rights evaluation

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Harkrider 93
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1:09p, 9/16/19
AG
I have someone that owns only the mineral rights on 400 acres in Dimmitt County (some of it is in Zavala). There isn't any lease on it at this time.

If she was looking to sell the rights, what would be a fair price?

Where would she go to see what the market is paying?
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Stan Crowch
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1:36p, 9/16/19
AG
Does she own 400 net mineral acres? The fact that she isn't already leased is a bit concerning. Has she been leased before or approached with an offer?
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EnglishElhew07
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1:37p, 9/16/19
There is no central marketplace for minerals, so you will not be able to get comps in the same way that you will get them with Real Estate. Has it been leased recently and the lease has expired or has it not been leased at all? If it has not been leased at all, she either does not own the minerals or there is very interest in them. If they are unleased and have been unleased for the last 10 years there is not much value to them. Do you know where in Dimmitt it is? Could you find out a Survey Name or Abstract number?
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Stan Crowch
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1:40p, 9/16/19
AG
To start she could put together a plat with a simple mineral ownership report along with some supporting docs and blast out to active mineral buying companies in the county.
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deadbq03
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In reply to Stan Crowch • 4:44p, 9/16/19
AG
I'll echo these comments.

There's not too much unleased land along the border of those two counties, so it's concerning that she hasn't been approached. Either she doesn't actually own what she thinks she does or the operators don't like the land (right now).

Just curious- is she also the surface owner?
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Harkrider 93
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5:33p, 9/16/19
AG
Thanks so much. I will get back with her on more details to answer all of your questions. I know she doesn't own the surface land. It is old family land. She does know the guy next to her. He told her not to sell. He feels strongly that they can lease.

I don't think they have had anyone on it before, but not positive.
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John Francis Donaghy
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In reply to Harkrider 93 • 11:16p, 9/16/19
If she's serious about a sale she might consider hiring a landman to put a mineral ownership report together for her to make sure she owns what she thinks she owns, and be able to know for sure what she's selling before she starts shopping it around.

Just because the deed that sold the surface says the minerals are reserved for her, that's no guarantee that there were any minerals left in her name to reserve at the time of that sale.
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Harkrider 93
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In reply to John Francis Donaghy • 5:26a, 9/17/19
AG
John Francis Donaghy said:
If she's serious about a sale she might consider hiring a landman to put a mineral ownership report together for her to make sure she owns what she thinks she owns, and be able to know for sure what she's selling before she starts shopping it around.

Just because the deed that sold the surface says the minerals are reserved for her, that's no guarantee that there were any minerals left in her name to reserve at the time of that sale.
Is the latter portion to protect the buyer and a common practice?
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John Francis Donaghy
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In reply to Harkrider 93 • 8:23a, 9/17/19
Harkrider 93 said:
John Francis Donaghy said:
If she's serious about a sale she might consider hiring a landman to put a mineral ownership report together for her to make sure she owns what she thinks she owns, and be able to know for sure what she's selling before she starts shopping it around.

Just because the deed that sold the surface says the minerals are reserved for her, that's no guarantee that there were any minerals left in her name to reserve at the time of that sale.
Is the latter portion to protect the buyer and a common practice?


The buyer is going to have an army of landmen at their disposal to do their own due diligence. They'll know exactly what your friend owns or does not own. The question is whether your friend is comfortable trusting the buyer's report, or wants to commision her own report. Personally, I'd say it's worth it to get my own report done.

But be prepared for the possibility that she pays for the report, and it turns out she owns nothing. That's a good size chunk of land in a pretty active area. The fact that no one has reached to her about it makes that very real possibility.
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Harkrider 93
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In reply to John Francis Donaghy • 8:29a, 9/17/19
AG
I am almost positive she has received an offer, but she wasn't sure how to value the offer. Also, the offer was more of a fishing offer in the mail.
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Harkrider 93
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In reply to Stan Crowch • 9:00a, 9/17/19
AG
The land was leased before. Back in the 80-90s time frame. She was approached recently by someone who wanted to be the middle man. He would find someone to lease it.

She is pretty confident that there is oil/gas because they didn't use fracking back then when it was leased. Also, El Toro has hit some wells nearby.

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Harkrider 93
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In reply to EnglishElhew07 • 9:02a, 9/17/19
AG
The acreage is on Hwy 277 12 miles west outside of Corrizo Springs on the way to Eagle Pass.

Pretty sure I answered your other questions above.
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Harkrider 93
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In reply to deadbq03 • 9:36a, 9/17/19
AG
She says there are some unleased properties out there. She mentioned that once fracking came about, the leasing picked up again.
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Harkrider 93
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In reply to John Francis Donaghy • 9:38a, 9/17/19
AG
I don't understand hardly any of what you or anyone else is talking about.

I brought up the landman thing. She said she has a bunch or reports and data on the land and what is under it. I didn't ask how old that data is.

She asked the current surface owner if he would buy the mineral rights. He is considering it.
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Harkrider 93
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9:40a, 9/17/19
AG
For now, let's assume there is evidence that something is there.

What is the best way to value it? A poster above mentioned sending it out to a bunch of companies. Is that the best way?

Her mom told her to never sell it under $1000/acre, but that sounds awfully high to me. She isn't committed to that price, but at this point, we don't know a good way to value it.
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Stan Crowch
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10:04a, 9/17/19
AG
Buying/Selling of non-producing minerals is an opaque market to say the least. You are not going to get an easy or straightforward answer on market value. The best thing she can do is get as much exposure as possible to the most active market participants.
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Ribeye-Rare
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In reply to Harkrider 93 • 10:44a, 9/17/19
AG
Harkrider,

I'm not very familiar with that end of the Eagle Ford, but unless the geology and/or gas/oil/water mix in that spot is terrible, I would think the bonus value alone on a 3-year lease would be worth at least $550.00/acre.

And, you'd still have the potential for royalty income if produced, or the possibility of leasing it again (another bonus) if not.

But, I do know there are a few guys who advertise for minerals listed on the Mineral Rights Forum.

Mineral Buyers

I also regularly get suspect-looking solicitations from mineral rights buyers, but these things smell like they're trying to catch someone sleeping at the switch, or desperate for a quick check.

Good luck. I know you mentioned leasing on the acreage in the '80s, but I imagine those (if drilled) were vertical wells, and there are plenty of areas now where old dry hole vertical wells have producing horizontal wells. The oil and gas boys have come a long way in 30 years.

It all depends. If oil and gas E&P were a 'sure thing', everybody would be doing it.
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deadbq03
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In reply to Harkrider 93 • 10:45a, 9/17/19
AG
Think I might've found it. Is it actually off County Road 1980 with just a tiny sliver in Zavala? Just curious, specific location doesn't really change my opinion.

That area has a lot of old dry holes (meaning they were drilled but didn't produce). There was also a round of leasing in the early-mid 2000s in the area with a lot of them going undrilled and expiring.

All that tells me that the area hasn't been lucrative, but as mentioned above, tech changes can turn old dry holes into producers, but the cost-benefit still need to be there before they bother. Especially if there's more lucrative prospects elsewhere. And the market is still such that companies are basically breaking themselves to drill to hold onto their current leaseholds... a lot of them simply aren't looking to get new leases.

There's a recently drilled El Toro in production to the east, and a 10 month old El Toro permit to the west that hasn't been drilled yet. If that one actually gets drilled, that would be a really good sign that they like the area. Maybe it'd be prudent to wait till then, but ultimately I agree with everyone else that she should hire a consultant in order to evaluate her options and/or make sure she's getting a fair price if someone comes knocking.
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Harkrider 93
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11:22a, 9/17/19
AG
Thank y'all so much!

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hbtheduce
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In reply to Harkrider 93 • 2:53p, 9/17/19
AG
Harkrider 93 said:
For now, let's assume there is evidence that something is there.

What is the best way to value it? A poster above mentioned sending it out to a bunch of companies. Is that the best way?

Her mom told her to never sell it under $1000/acre, but that sounds awfully high to me. She isn't committed to that price, but at this point, we don't know a good way to value it.
More information on how this all works:

I evaluate mineral properties all the time. The value comes down to the projected cashflow of that property. We project how much each well should produce, and estimate when and how many wells get drilled. That cashflow stream is the value of the property.


Now because this area is highly speculative and outside the core of the eagleford, I have to agree with another poster above. The value is really opaque and its worth is what someone is willing to pay. So expanding the pool of bidders should get you an idea what its worth.


In addition to mineral buyers, I would reach out to El Toro Resources (the most active operator) and see what they would offer to lease or purchase the minerals. Make sure everything is leased because that is a low risk way to make money without selling the minerals. If they don't drill it, lease it again in 3-5 years.





$1000/acre sounds high to you, but in the Permian you see acreage values anywhere from $5,000-$20,000/acre. I don't think her rock is that good so if might be fair. I believe the old rule of thumb was to sell your minerals at 2.5-3x your lease bonus (if you can lease it for $500, sell for $1500) because without production that's how much $$$ you will make in 9-15 years just leasing.



*disclaimer* I could be wrong on this rule of thumb because I'm not an old school landman. Also this is only my opinion and not investment advice or whatever legal disclaimers people add to "advice"


Feel free to dm me if you have any questions!
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Comeby!
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12:59p, 9/18/19
AG
We are an operator but have an in-house mineral buyer/broker that I can have give you a free evaluation you can use in your discussions. He also has comps and supervises mineral market sales on behalf of our equity provider who has a large mineral/royalty portfolio. Let me know and I can send you my info.
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Trolley Problems
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In reply to Ribeye-Rare • 1:47p, 9/18/19
Ribeye-Rare said:
Harkrider,

I'm not very familiar with that end of the Eagle Ford, but unless the geology and/or gas/oil/water mix in that spot is terrible, I would think the bonus value alone on a 3-year lease would be worth at least $550.00/acre.

And, you'd still have the potential for royalty income if produced, or the possibility of leasing it again (another bonus) if not.

But, I do know there are a few guys who advertise for minerals listed on the Mineral Rights Forum.

Mineral Buyers

I also regularly get suspect-looking solicitations from mineral rights buyers, but these things smell like they're trying to catch someone sleeping at the switch, or desperate for a quick check.

Good luck. I know you mentioned leasing on the acreage in the '80s, but I imagine those (if drilled) were vertical wells, and there are plenty of areas now where old dry hole vertical wells have producing horizontal wells. The oil and gas boys have come a long way in 30 years.

It all depends. If oil and gas E&P were a 'sure thing', everybody would be doing it.

I know that part of the Eagle Ford pretty well. It's black oil, and it's shallow. The wells are marginal to uneconomic because it's difficult to get an effective completion put away due to the localized geomechanics of the area.

To the OP - I'd probably sit on the minerals for a while. As previously mentioned, valuation is tricky in this situation and any offer you receive now or in the near future is going to likely be a low-ball. Hang on to them. Lease them out if someone comes looking. NEVER sell minerals.
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texags82
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8:42p, 9/18/19
AG
Tell her to not sell the minerals. They are also drilling Austin Chalk and Buda wells in northern Dimmit county.
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