Howdy Ags,

Class of '93 here with a good news/bad news situation.

The bad news: My three siblings and I recently inherited our small family farm. We're doing fine and are moving forward so no problems with the bad news.

The good news: The farm is in north Karnes county near Wilson county and the four of us also inherited all the mineral rights for the 50 acres. Effectively we each have 12.5 acres which has been producing for the last 10+ years.

The situation is that my youngest brother and sister prefer to sell the land and interest rights while my oldest brother just retired and wants to buy the land and mineral rights from us so he can live out being a farmer (or at least pretending to be a farmer with 50 acres). I'm leaning towards selling myself but we all agree to keep the farm and rights in the family as best as possible. My oldest brother did ask the three of us to come up with what we think would be a fair value of the land and mineral rights so we all feel comfortable with the deal.

Land is easy to appraise and I've done the internet searching to understand how to appraise mineral rights. Of course the internet methods and numbers are all over the place so I figured it's best to get a professional opinion. What is the best way to figure out a fair value for producing mineral rights in northern Karnes county?

Thoughts, Ags?

Good luck. Our Austin Chalk almost nothing blew up into something recently, over 50 years later. Drilling and fracking technology changes. The valuation can change drastically over time. The time can be next month or 50 years down the road. We've also seen leases for $3k/acre on property that hasn't produced. They'll be back. We pretty much know not to trust any evaluation. Only thing for sure is once you start to get offers, the checks are about to get bigger.

Everything listed above is either wrong or overcomplicated. Amongst family, it's 5X.

Take the average production from last 3-5 years. Multiple the average times five. That's the value.

birdman said:

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Everything listed above is either wrong or overcomplicated. Amongst family, it's 5X.

Take the average production from last 3-5 years. Multiple the average times five. That's the value.

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Average production per year?

FishrCoAg said:

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birdman said:

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Everything listed above is either wrong or overcomplicated. Amongst family, it's 5X.

Take the average production from last 3-5 years. Multiple the average times five. That's the value.

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Average production per year?

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Yes. It probably would have been clearer if I said, "royalty checks". These are producing minerals, so you only need to pay attention to dollars.

HECUBUS said:

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Good luck. Our Austin Chalk almost nothing blew up into something recently, over 50 years later. Drilling and fracking technology changes. The valuation can change drastically over time. The time can be next month or 50 years down the road. We've also seen leases for $3k/acre on property that hasn't produced. They'll be back. We pretty much know not to trust any evaluation. Only thing for sure is once you start to get offers, the checks are about to get bigger.

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Curious as to where you are, if you don't mind saying. We have Eagle Ford production on our land, but nobody has ever tapped the Austin Chalk overlying it. In light of what you are saying, I agree it must be a wild guess as to what mineral rights are worth over time. There is no way to predict how much new technologies will affect future production, the appetite to undergo new drilling, etc.

We are the opposite. Eagle ford pulled in big lease money West of Schulenburg (still no drilling). Austin Chalk between Burton and Carmine got a well, but it wasn't much until last year. We agreed to allow four or five slant wells from that location after getting a seemingly ridiculous offer for the minerals. That offer was 10x the current production now which is even more insane in Austin Chalk. In the past, some Austin Chalk wells were known to go dry in a few years.

Good stuff! Congrats

This is close to a ballpark. For minerals, average monthly cash flow over the last year multiplied by 3-5 depending on how flat the production is. Future drilling potential is unknown without seeing where on the map you are. The Austin Chalk isn't economic everywhere.

I WOULD NOT sell based on past production.

I know you didn't ask for this advice, but my 2 cents would be to sell your brother the land and for you to buy 25% more mineral rights (or all kids keep their 25% mineral rights). That way, your brother gets 100% of the land so he can farm and use. You have half the mineral rights which will allow you to be involved when/if he sells the land (you mentioned your dad wanted it to stay in the family).

Just a thought.

That's what would do as someone in the business.

Another vote to not sell mineral rights.

YEARS and years ago, my dad's great grandfather donated lots of land in West Virginia to the county, but retained the mineral rights. That was the best decision ever.

Many years after he died, the heirs were contacted about putting in some natural gas stuff. They got paid. For the first 10 years, I think the lines were capped, but it got to the end of the contract where they had to **** or get off the pot, so they started producing (or whatever the terminology is, its not regular gas).

It will continue down the lineage, and it will be mine and brothers (plus all the other portions) once my mom has passed. That extra money was a shock, but equally as awesome to my parents all these past years.

My mom's siblings all have some small land in Louisiana that isn't worth anything. I told them I would buy it for the mineral rights before they sell it elsewhere.

I have land in north Karnes... split the surface and mineral estates.

Mailbox money (minerals) is always nice to keep for the future and they are starting to produce more.

edit to add... the numbers I get from flyers on mineral chasers have ranged greatly through the years.