I have received an offer on some mineral interest that seems to good to be true but the company seems legit and they have also contacted other relatives with interest in the same minerals. My question is, who can I talk to to discuss this and decide what to do? I know there are alot of factors and info and would like to make sure I am considering everything.

Alpine said:

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I have received an offer on some mineral interest that seems to good to be true but the company seems legit and they have also contacted other relatives with interest in the same minerals. My question is, who can I talk to to discuss this and decide what to do? I know there are alot of factors and info and would like to make sure I am considering everything.

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You need an attorney who specializes in O&G. Pay them for an hour of their time and discuss things with them.

Any recommendations for one in the west Houston area ?

Alpine said:

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I have received an offer on some mineral interest that seems to good to be true but the company seems legit and they have also contacted other relatives with interest in the same minerals. My question is, who can I talk to to discuss this and decide what to do? I know there are alot of factors and info and would like to make sure I am considering everything.

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If you could provide more detail, some may be able to answer here.

An attorney would be useful. Depending on the amount of money we're talking, you may want to hire a petroleum consultant like VSO or Haas (or many others, those are two that I am very familiar with) to do an appraisal to make sure you are getting a fair offer.

I just typed up something and then accidentally deleted it. Basically the offer is 3.5 times more than what I understand to be a reasonable offer which would indicate something is going on. I don't necessarily want to sell but at that amount it may be wise. I know there are alot of factors to consider.

About how much would an appraisal cost?

I don't know that an appraisal from an engineering firm will really get you that far. I also think that a lawyer will protect you as far as making sure the paperwork matches what you believe are the terms of the transaction. But most lawyers have no idea as to what the "market value" of Oil and Gas properties is, they might tell you they know but it is not their area of expertise.

Can you post the location of the acreage? I am happy to look on DrillingInfo to see if there are any new permits etc on the acreage. Short of new activity I am sure there are people on this board that will be familiar with the area and could tell you more about what is happening.

Why do you believe that the offer is 3.5x the value? I am curious as to the logic here.

Alpine said:

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I just typed up something and then accidentally deleted it. Basically the offer is 3.5 times more than what I understand to be a reasonable offer which would indicate something is going on. I don't necessarily want to sell but at that amount it may be wise. I know there are alot of factors to consider.

About how much would an appraisal cost?

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not enough information.

Where is the property located?

who is the company making the offer?

are there known reserves in the area?

EnglishElhew07 said:

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I don't know that an appraisal from an engineering firm will really get you that far. I also think that a lawyer will protect you as far as making sure the paperwork matches what you believe are the terms of the transaction. But most lawyers have no idea as to what the "market value" of Oil and Gas properties is, they might tell you they know but it is not their area of expertise.

Can you post the location of the acreage? I am happy to look on DrillingInfo to see if there are any new permits etc on the acreage. Short of new activity I am sure there are people on this board that will be familiar with the area and could tell you more about what is happening.

Why do you believe that the offer is 3.5x the value? I am curious as to the logic here.

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There are plenty of engineering firms whose core business is advising A&D decisions, so I definitely think the right firm can help OP understand the value, but I'm not sure if it would be worth it. Really depends on the size of the position.

If the offer is way higher than expected I would think there are permits or something, or the buyer has some inside info. Location information would be very helpful.

GarlandAg2012 said:

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EnglishElhew07 said:

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I don't know that an appraisal from an engineering firm will really get you that far. I also think that a lawyer will protect you as far as making sure the paperwork matches what you believe are the terms of the transaction. But most lawyers have no idea as to what the "market value" of Oil and Gas properties is, they might tell you they know but it is not their area of expertise.

Can you post the location of the acreage? I am happy to look on DrillingInfo to see if there are any new permits etc on the acreage. Short of new activity I am sure there are people on this board that will be familiar with the area and could tell you more about what is happening.

Why do you believe that the offer is 3.5x the value? I am curious as to the logic here.

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There are plenty of engineering firms whose core business is advising A&D decisions, so I definitely think the right firm can help OP understand the value, but I'm not sure if it would be worth it. Really depends on the size of the position.

If the offer is way higher than expected I would think there are permits or something, or the buyer has some inside info. Location information would be very helpful.

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If there is successful drilling activity in the area, I wouldn't sell mineral rights.

Garland Ag - You are right, there absolutely are and Haas is a good one.

Txaggieacct - In general that is good advice but there are many examples of someone selling their minerals and coming out ahead. Biggest example : Basically anyone who sold minerals in the Barnett for 20K/Acre or better in the 2006-2008 timeframe.

If you think you can sell for PV0 today why wouldn't you? There is plenty of dumb money in the mineral space.

If you have received unsolicited offers in the past, but now this one appears to blow those out of the water, perhaps whoever is making the offer knows of upcoming rig activity in the area.

You, or someone that may have the knowledge, can search the RRC's website/GIS Mapping to see what may be going on. I know in some cases these mineral buyers are simply chasing permits hoping to get Mineral Owners to sell their minerals before they realize they're about to get drilled on.

are there known reserves in the area? Yes. To answer the question about the value, I'm currently getting $x and as I understand it, a reasonable offer is $60x (6 years worth). This offer is 3.5 times greater than that.

EnglishElhew07 said:

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Garland Ag - You are right, there absolutely are and Haas is a good one.

Txaggieacct - In general that is good advice but there are many examples of someone selling their minerals and coming out ahead. Biggest example : Basically anyone who sold minerals in the Barnett for 20K/Acre or better in the 2006-2008 timeframe.

If you think you can sell for PV0 today why wouldn't you? There is plenty of dumb money in the mineral space.

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Agree, that's why I asked the name of the company making the offer and the location of the property.

A company with a good track record isn't going to make an outrageous offer.

Some unknown variables here

"who is the company making the offer? Would prefer not to say at the moment"

Maybe instead of the name you can provide a profile.

publicly traded?
if public, market valuation of company?
Does this company operate wells or leases in the area or in general?
Are they are working interest owner in properties in the area if not an operator?
do they own mineral rights in the area?
if private or public how many employees (fly by night or established company?

I would hang on to Minerals in Karnes.

If you post the unit name or names I will look on DI and see if there are new permits

Karnes County is the 11th largest natural gas producing county in Texas and the 5th largest crude oil producing county in Texas.

I own a miniscule mineral interest in Midland County and I get several letters each month. Maybe I'm a fool for not looking into selling but we found out 50 years after the fact that some property my dad bought at a foreclosure auction in 1970 had mineral rights which he retained. He never told anyone including my mother that there were minerals so I got the leases signed 4 years ago and haven't even thought of cashing them out. Is 60 really a multiplier?

The 60 is just 5 years in months.

Alpine said:

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The 60 is just 5 years in months.

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And it can be a terrible metric in a lot of situations, e.g. the lands haven't been horizontally developed yet.

Next new thing is oil companies leasing to inject CO2 way underground.

Having bought and sold minerals for a few years now, I think a deal can be made where both parties are ultimately better off. That said, I definitely like owning minerals.

You can always call and ask them what's going on (don't expect the whole truth, but armed with what you know they should give you something).

Ask any neighbors (it wouldn't hurt to go drink some coffee at the Horned Toad Cafe and make a couple of
friends).

Some counties have internet groups of owners that share what they are receiving and/or hearing.

Also, figure that the solicitors expect to get several multiples of what they are offering.

In general, don't sell, unless you need the money soon.

Of course, a local O&G attorney, if honest.

Not sure what else you need. I looked online on the RRC site and there doesn't appear to be anything new.

The contract does not include selling pore space for CCS does it? Could affect value greatly as well but knowing the buyers profile would also help.

I don't have the contract yet but CCS has not been mentioned. Also, we don't own the land just minerals.

https://www.shalexp.com/texas/karnes-county/shinedown-unit/449961

If i put my decimal interest in the valuation in the link above, this company is offering over 6x the amount

If the offer is from the operator of that unit, they are probably planning additional development soon.

If it's a random company you've never heard of that is not an operator…..I'll just say there is definitely some dumb money in the EF. Might be a good deal for you.

If there are a bunch of older (~2015 or before) wells on your acreage and you think it's all drilled up, do some research on re-fracs and shale EOR. There is still plenty of juice left in Karnes.

"If it's a random company you've never heard of that is not an operator…..I'll just say there is definitely some dumb money in the EF. Might be a good deal for you."

This is what I'm trying to figure out. They are not the operator.

I'd be interested to know who made the offer. There are a lot of groups out there that will do mass-mailings and just put silly numbers on their offers trying to catch a fish. When it comes time to enter a PSA, their form will be very poor and unilateral. They'll find whatever excuse to either back out, or lower their price substantially.

One thing I'd recommend doing is searching the county deed records (many are online now). Search for that company and see how many deals they've completed. How many deeds going into them? More importantly, how many deeds going out of them?

If they are buying and holding, paying good money, and can provide you a fair PSA, then it's worth entertaining.

Whatever you do, get more offers if you think about selling. Highly highly unlikely they are the highest bidder out there if it came in unsolicited. Glad to advise if you need help finding competing offers. Have been in the mineral business a long time but haven't bought much in the EF so I am not familiar with current market.

It looks like there are 4 new allocation permits on the Shinedown.
Peppers Green 104H
Peppers Hot 102H
Peppers Mild 1H
Peppers Red 3H

Bascially they are "Allocation Wells" because the Shinedown Unit is not big enough to accommodate the longer laterals. The permits all were filed on or around the 6/26 so that is probably why you are getting new offers.

Also - I am not super knowledgeable about the Eagelford but I would bet that they are drilling two different zones here.

I think you should keep these minerals.

Agree. Don't sell unless you need the cash. If you need the cash, market it and get the most money possible.

You don't sound like you're planning to sell so this is for those who are considering it. Imagine someone sells their $500k house for $120k because they thought it was worth $20k based on a bogus rule of thumb. Minerals are much more difficult to value than real estate obviously because market comps are harder to come by and geology varies. The mineral industry has a lot more buyers and marketers today than 10 years ago so you have a good chance to find the group that will pay $500k and maybe even the crazy guy who will do $750k. The guy sending out mailers generally isn't the $750k guy - and quite often he knows who the $750k guy is…hence the letters.

Also, keep in mind that it's not an all or none proposition. If you think the offer is good but you want to keep some upside, you can almost always just sell a portion