I don't even know if I'm using the right language for this, I'm so far out of my league.

Like others, I receive unsolicited offers on mineral rights that I've inherited. I've read on this board that unsolicited offers are usually very low.

Where do I go to learn about how much my mineral rights might actually be valued, in the case that I become interested in selling down the road? Seems dumb to turn around and ask the people making the offers for help on this - alas, I ask TexAgs.

My mindset has been not to entertain any offers, no matter what. But they've been getting quite a bit larger lately and I want to educate myself so I can make competent decision.

Thank you for any help / directive on this.

Good position to be in! I have always advised against selling mineral rights. You can be fairly sure they are worth more than you are being offered.

People are wrong to say never accept any offer ever. However, if you are going to accept an offer, it would be beneficial to you to contact the operators in the area of your interest. They are likely to offer more than the mineral/royalty buyers, who are generally trying to flip your interest quickly. Also, the operators will be in the best position to know how quickly your minerals might be developed (assuming they aren't already producing), and that is one of the most important parts of their value.

If the minerals are producing, at least the producing part of that interest can be calculated by someone with access to Aries or some other production software relatively easily. Any undeveloped land/depths would still be subject to the "how quickly would it be developed" issue.

Great advice on shopping the offer for the highest bidder, eg. operators in the area. I don't know where to find that info, either; I'm assuming Google is not a likely source for this type of thing.

Some are producing, some are about to be (I think). I also own the right to any future wells that could be established on the surface level of a set number of acres where production is already occurring.

Who / what kind of professional would have access to Aries / other development software who could advise me? I'd rather seek guidance from someone without looking to gain from me and maybe compare that info with what the production company has to offer. Happy to pay for their services / time.

Check out Pecan Tree Inc. for help with a quick valuation. You could hire a third party reserves auditor but that may cost more than you want so I think companies like Pecan or 4Cast could get you what you need at this point.

3X the annual revenue is the common yardstick.

If the number of offers and the price has gone up lately, I expect there is drilling activity in the area.

Without knowing how many mineral nma and surface acres are involved it is difficult to give good advice. If large, I would start with an experienced oil and gas attorney. If small and you just don't want to deal with it then some multiple of valuation would be fine.

Personally, I would not sell unless I desperately needed the money.

That's a similar situation that I'm in. The original well has not produced since 2006 or so but in the last several years, new wells have been built and are producing, although production has already slowed. I received notice that additional wells would be built but have not yet received the division orders. Who knows what's up with that - will contact the operator.

The advice of hiring an O&G attorney is a good one. I had one a few years ago for a dispute and could probably go back, although I know not all attorneys are created equal. I don't recall him being able to do the valuation but he's probably got a guy, so maybe I'll start there.

I have 200 acres of surface area, so prob considered small. It's also off 290 between Houston and Austin, so not as though it's Midland / Odessa. I am small potatoes, but that's why a $4M offer gets my attention.

I appreciate the advice, thanks to all of you with input.

I, too, have heard to never sell and am inclined to follow the advice. But I receive communications for which I don't understand what any of it means so I'm blindly turning things down, and that's what I'm uncomfortable with. I don't know what I don't know and I don't feel good about it. Even if I continue to turn things down, I want to at least understand what the hell is coming at me.

Just look on RRC website. I'd be shocked if your tract wasn't permitted for new well.

I'll also make another strong wager.

That $4MM offer has some small print in it. Somewhere in there it will say "assuming you have 100% of minerals and royalty".

You might be on top of the Giddings field or the eastern eagleford (probably bth) A $4mln offer might be worth $8. With this amount of potential value you need a professional opinion. Unfortunately (or fortunately) this is not a DIY situation. Good luck.

Again, if it was me I wouldn't sell unless absolutely pressed to do so. Good luck.

I would be surprised if an attorney would be much help with valuation of mineral interests. It might be that he or she could let you know what other clients are getting in the area. My attorney was a tax client of mine and he has substantial mineral interests, working interests, royalty interest, and an interest in a deep water project. Oil and gas was his specialty and there were a lot of sad faces when he retired. I know he never did any valuation of mineral interests for others.

It is a starting place, Einstein. He would know who would.

birdman said:

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Just look on RRC website. I'd be shocked if your tract wasn't permitted for new well.

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You're giving me more credit than I deserve. My knowledge allows me to locate the RRC site and then it stops. No idea what to do from there.

GasAg90 said:

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You might be on top of the Giddings field or the eastern eagleford (probably bth) A $4mln offer might be worth $8. With this amount of potential value you need a professional opinion. Unfortunately (or fortunately) this is not a DIY situation. Good luck.

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This is validating, thank you.

713nervy said:

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birdman said:

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Just look on RRC website. I'd be shocked if your tract wasn't permitted for new well.

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You're giving me more credit than I deserve. My knowledge allows me to locate the RRC site and then it stops. No idea what to do from there.

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The legal description of your property is probably on the offer letter. Look for something like

A-333
John Smith Survey

I hope that Combey! can help you out here. An attorney with experience in oil and gas can help you negotiate a lease and determine your proportionate share of mineral rights ownership, but that won't necessarily help you be able to value a mineral rights purchase offer.

I would say to get facile with the RRC website, in particular with the W-1 queries, which others have mentioned. If your royalties pass through Enverus, there are additional products that you can purchase through that site which, with the aid of others, might be able to help you out.

At the end of the day, I think it is really difficult to evaluate the value of your mineral rights. Obviously, any pro forma that you do is going have to build in a lot of contingencies. Companies offering you a buyout of your mineral rights are not charities - they're only going to make you an offer if they think they will make money off of the deal. Every offer I get, through the mail or over the phone, immediately goes into my trash. But I have no need for immediate money and have plans for what I leave behind. You might be in a different position.

Lastly, I have a friend that holds tens of millions of dollars worth of mineral rights who was seeing increasingly higher offers for his mineral rights. This guy has a Ph.D. in Economics from M.I.T. and he enlisted the help of a geologist with decades of experience in the oil patch, and the analysis took a significant amount of time to come up with an estimate of a proper valuation. I have no idea what these mineral rights purchasing groups use to do their analysis, and I am sure they sometimes get "burned" purchasing royalties, but there's only so much you can do to properly evaluate your mineral rights' value.

All the best.