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Message
Reservation of mineral rights
Posted on 2/25/16 at 8:29 am
Posted on 2/25/16 at 8:29 am
I am looking at purchasing a residential piece of property (roughly 2 acres) where the seller is reserving mineral rights. We have been negotiating around appraised value but I am not sure how to factor this into the price.
There previously has been mineral production from the property but not currently. I estimate he received less than $1,000 per month for approximately 2 years.
Any thoughts appreciated.
There previously has been mineral production from the property but not currently. I estimate he received less than $1,000 per month for approximately 2 years.
Any thoughts appreciated.
5
Posted on 2/25/16 at 8:39 am to poule deau
Just curious. You in Louisiana?
And how did you estimate the production level and time?
And how did you estimate the production level and time?
Posted on 2/25/16 at 9:10 am to ItzMe1972
quote:
You in Louisiana?
Yes
quote:
And how did you estimate the production level and time?
I asked the neighbor
Posted on 2/25/16 at 9:48 am to poule deau
Can you give me the section, township, range and parish of this property?
How long has it been unproductive?
Are you familiar with the term prescription as it applies to mineral rights?
How long has it been unproductive?
Are you familiar with the term prescription as it applies to mineral rights?
This post was edited on 2/25/16 at 9:49 am
Posted on 2/25/16 at 9:55 am to ForeverLSU02
quote:
Can you give me the section, township, range and parish of this property?
don't have that handy
quote:
How long has it been unproductive?
maybe two years
quote:
Are you familiar with the term prescription as it applies to mineral rights?
no
Posted on 2/25/16 at 9:56 am to poule deau
Would the mineral reservation waive surface rights? If he wants to be able to drill a well that would be a bigger deal.
As to factoring into the sales price, my off-the-cuff thought was to value it at around 3 years of expected royalty, and a quick search shows that apparently that is within the standard range:
https://www.mineralhub.com/value-your-minerals/
Where is the property located? Tuscaloosa Marine Shale?
As to factoring into the sales price, my off-the-cuff thought was to value it at around 3 years of expected royalty, and a quick search shows that apparently that is within the standard range:
https://www.mineralhub.com/value-your-minerals/
quote:
Mineral owners with producing minerals who decide to sell their mineral rights can usually expect to get between 36 and 72 times the average of their monthly income over the past six months.
Where is the property located? Tuscaloosa Marine Shale?
Posted on 2/25/16 at 9:56 am to poule deau
If the property were still producing you're looking at 30-40 months of current income for a fair market value possibly. The fact that it's non-productive currently and with the current oil prices as low as they are the value is going to be much less
Posted on 2/25/16 at 10:02 am to studentsect
quote:
Would the mineral reservation waive surface rights? If he wants to be able to drill a well that would be a bigger deal.
we didn't discuss in detail but I believe he just wants the revenue if off site production starts back up. I would include waiver of surface rights for him to maintain mineral rights.
quote:
3 years of expected royalty
so basically, the rights aren't worth much off the purchase price for me right now?
Posted on 2/25/16 at 10:04 am to ForeverLSU02
quote:
If the property were still producing you're looking at 30-40 months of current income for a fair market value possibly. The fact that it's non-productive currently and with the current oil prices as low as they are the value is going to be much less
Thanks.
so I don't have much of a bargaining chip here then?
Posted on 2/25/16 at 10:07 am to poule deau
Mineral servitudes in Louisiana are subject to prescription of non-use. If you don't use your servitude for the purpose for which it was created for 10 consecutive years, the servitude ceases to exist by force of law. Basically what this says is if there is no exploration or oil & gas activity conducted on the property for 10 years the minerals 'prescribe' to the owner of the land. So if the minerals aren't pursued within 10 years, the servitude would revert back to you, the landowner. I would possibly contact an attorney for more advice regarding this
Posted on 2/25/16 at 10:08 am to poule deau
If you are interested and want to do some digging, type "sonris" into google and go to the GIS map. You should be able to find the property and pull well information for the wells close to the property.
Posted on 2/25/16 at 10:08 am to poule deau
quote:Probably not. What parish is this in? What's the closest city?
so I don't have much of a bargaining chip here then?
Posted on 2/25/16 at 10:15 am to poule deau
quote:
so basically, the rights aren't worth much off the purchase price for me right now?
Might be worth looking into nearby production for some sort of baseline so that you at least go in with a number that you can support, but yea, pretty much.
The good news is that at least you're in Louisiana and if there is no production for 10 years the mineral ownership reverts back to the surface owner.
Posted on 2/25/16 at 10:17 am to ForeverLSU02
quote:
Basically what this says is if there is no exploration or oil & gas activity conducted on the property for 10 years the minerals 'prescribe' to the owner of the land.
Ok. Thanks.
I knew this, just didn't know it was called prescription.
Posted on 2/25/16 at 10:20 am to ForeverLSU02
quote:
Mineral servitudes in Louisiana are subject to prescription of non-use. If you don't use your servitude for the purpose for which it was created for 10 consecutive years, the servitude ceases to exist by force of law. Basically what this says is if there is no exploration or oil & gas activity conducted on the property for 10 years the minerals 'prescribe' to the owner of the land. So if the minerals aren't pursued within 10 years, the servitude would revert back to you, the landowner. I would possibly contact an attorney for more advice regarding this
Definitely consult an attorney because this is where it could get tricky. Based on the lease agreement, what is defined as "exploration and oil & gas activity"? That 10 year clock potentially could get reset at the most minor of things.
Posted on 2/25/16 at 10:21 am to ForeverLSU02
(no message)
This post was edited on 2/25/16 at 10:34 am
Posted on 2/25/16 at 10:33 am to poule deau
Do you know if these wells are just shut-in or if they are plugged? The operator could have the wells shut-in waiting on prices to rebound and then put them back online. Or the minerals could be depleted and the wells have been plugged. It would be great if I had a location description of the property or if I had the well names.
Permitted wells in parish of interest
47 wells in 2012
37 wells in 2013
50 wells in 2014
6 wells in 2015
The above shows how much activity has slowed in that area recently.
Permitted wells in parish of interest
47 wells in 2012
37 wells in 2013
50 wells in 2014
6 wells in 2015
The above shows how much activity has slowed in that area recently.
This post was edited on 2/25/16 at 10:40 am
Posted on 2/25/16 at 10:36 am to ForeverLSU02
Would you like me to remove the location from my post?
Posted on 2/25/16 at 10:37 am to ForeverLSU02
quote:
The operator could have the wells shut-in waiting on prices to rebound and then put them back online.
I believe this is the case here but not sure.
Permitted wells means new drilling or ongoing production?
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