mineral rights
November 18, 2013 11:04 AM   Subscribe

Through a long series of events I have come to own some mineral rights on some acreage near Norman, OK. I found out I owned when I was contacted by a landman offering to lease it. I thought the offer fair, so I took the money. But now I am getting offers to outright buy it.

And the problem is I don't know what it is worth. A couple of years ago I got offers of 1K an acre and now I got one for 6k and acre. Is there some company I can pay in OK to research my rights and tell me what they are worth? Much as in getting comparables when trying to sell a house? Any other ideas would be appreciated.
posted by jtexman1 to Work & Money (7 answers total)
Short answer - without having a geologist and a petroleum / natural gas marketer on call, there is not much way for you to know. You have no idea how many minerals are under the ground and you have no idea what your share of production would be (given that your acreage will almost certainly be "unitized"). There are some message boards for mineral rights owners where people go and post what they've gotten by way of lease bonuses, etc., but there is little objective way for you to find out what your mineral rights are worth.
posted by chicxulub at 11:14 AM on November 18, 2013

It may be worth chatting with one of these guys to see what they can do.
posted by craven_morhead at 11:46 AM on November 18, 2013

I have a friend who has sold mineral rights in West Virginia. I believe he worked with an attorney who specialized in mineral rights transactions and worked on the seller-side. You could try finding someone similar in OK.

It is also likely that other people in the area are getting offers. Have you tried looking around to see if you can talk with other rights owners to see what they are getting?
posted by alms at 11:55 AM on November 18, 2013 [1 favorite]

there are lots of attorneys that specialize in this kind of thing and i would suggest contacting one before you do much else. It is can be confusing. I will tell you the following though from conventional wisdom in these here parts:

general rule of thumb - do not sell mineral rights. lease them and then retain them for later once the lease is over. best case scenario, they drill the best well ever and you get royalties and the lease continues. worst case scenario, you get nothing but your signing bonus and the lease expires to be leased again another day. surface land purchases virtually never come with mineral rights. there is a reason for that. i have lived through 2 "boom" times, and i am not 50 yet. this one is not quite over but on the downswing. i know literally dozens of people who get royalty checks. some of them small some of them not.

another general rule of thumb - they are worth what someone is willing to pay you for them. you can find out who also owns rights in the same section and see what they are being offered but it can vary widely. as i said, drilling has slowed way down in the last 9 months or so. 2 years ago, people were getting crazy amounts per acre, now not so much. it is not a steady or sure thing.
posted by domino at 1:05 PM on November 18, 2013 [1 favorite]

I own some mineral rights, but in Arkansas. (the royalties are now like $30 a year, but that's what less than a thousandth interest gets you) My dad was a landman, so I saw a bunch of these sorts of transactions as a kid. That is the extent of my experience, but I will share what I remember:

Typically, the sale price of a given set of mineral rights will be equal to a certain number of years of your royalties unless there is a new well being planned, in which case there may be a premium. I've seen 3 years and 5 years as common periods. In my experience, most lease offers come with a choice of a bonus up front and a lower ongoing royalty or a higher royalty and no bonus.

Working interests are a bit different, but you'd know if you had a working interest by the invoices you'd get in the mail asking you to please pay your share of drilling and marketing costs.
posted by wierdo at 1:26 PM on November 18, 2013 [1 favorite]

If you think of it being worth what the highest bidder is willing to pay for it, you need to get more bids. And see if you can find any comps for reference.
posted by Dansaman at 6:03 PM on November 18, 2013

For a local referral, you might be able to take advantage of the fact that one of the best geology and petroleum engineering schools in the US is located in Norman. Poking around on their site turned up this FAQ for Oklahoma mineral rights valuation from the Oklahoma Geological Survey, which is associated with the college. The appendix includes several local and state organizations that deal with mineral-rights valuation, particularly the trade organization the Oklahoma City Geological Society if you want to go the local expert route. Good luck!
posted by ormondsacker at 10:02 PM on November 18, 2013 [1 favorite]

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