go-devil...what is going on is that a lot of these companies are
targeting people who have wells at the permit, drilling or even in
production but confidential stage and not yet sending out toyalty
checks (usually these begin 6 months after production begins or more)
It's pretty easy just by looking at information from the field to
determine if a still confidential well is likely to be a strong
producer or not, based on secondary info such as watching the
truckloading traffic, the size of the flare indicating pressure etc
etc, even when the well is not producing royalty checks. However, many
of the people targeted with these letters live in other states and
this cannot easily go out and look at what is happening right at the
well.
These mailings go out in mass by these companies, much like spam email
goes out. Generally they go out after there is little if any risk that
the well will be a dry hole. There is indeed nothing illegal about
that. A lot of mineral owners have no real clue as to what the size
of their royalty checks might be until they actually have the
experience of seeing the first check. (I have been trying my best to
assist people who want help here in doing the calculations they need
to do to get at least some estimate this, by the way, and will
continue to do so.) These people quickly do some calculations based on
the per acre offer and the number of mineral acres they own and
conclude that they would receive a 5 or even 6 figure check right now
instead of still totally unknown monthly royalty checks. This is like
participating in the TV show "Deal or No Deal", North Dakota style.
Further, these letters often end up in the hands of people who have
lived all their lives without much money, and elderly people nearing
the end of their lives, who are thinking that they may not have time
left on earth to enjoy a long series of monthly royalty payments, and
these people may have a real reason to want a big check right now
instead of a stream of monthly checks.
The companies do their mailings based on the notion that MOST people
will not take them up because they will get several times more money
total if they collect the streamof monthly royalty payments, but a few
will take them up on the offer, and the few that do take them up on
the offer (cash now in exchange for a potentially long but also
potentially variable stream of cash from the royalty checks) make the
acquisition companies enough money to pay for the nextt round of
mailings (including return postage stamps) plus a whole lot more.
I've been trying to figure out what the company mathematicians are
expecting in terms of a stream of revenue over time based on their
recent up front offers. I conclude that if you get any $3,000 per acre
offers, that is good reason to believe that their calculations have
been done for a hum-dinger of a still confidential well.
This is starting to sound a little like a J.G. Wentworth commercial.
J.G.Wentworth buys annuities and structured settlements set up to make
long term payments in exchange for a lump sum now to the previous
owner too, and makes money because the up front cash offer is
substantially less than the discounted value of the payments over the
life of the annuity or structured settlement. (It's YOUR money, why
not use it (blow it all) now (...instead of taking the tiny monthly
payments until you are dead and then the relatives you don't even like
get to blow what's left instead?..sorry, they didn't actually say that
but surely hinted at it ). Then there are the people who get so much
satsfaction from living the high life today that they may not be much
concerned about what could happen at some point in the future.
I have no problem with people who with eyes wide open and brains fully
operational choose to take the cash up front because they need or
would like the cash and would rather have the lump sum of cash now
instead of the long-term stream of payments. Where I do have problems
is when people sell mineral shares with their eyes less than wide
open, and end up cutting a deal that gives them very little total $
relative to the $ stream of monthly payments they otherwise would have
almost definitely received. If the well hasn't been drilled yet and
there is a real risk associated with whether the well will be a good
producer or even a producer at all, the lump sum now may look quite
enticing. Of course, if any of that risk exists, the offer is not
going to be $3,000 an acre either.
But the part that really bothers me and what seems to me to be a form
of a scam is that these companies now instead appear to be targetting
people with wells at least in the drilling and perhaps in the early
production stages but before the royalty checks come out, and without
any real knowledge about the still confidential well production or
even a crude (no pun intended) estimate of the royalty checks, some of
these people might nibble at an offer that within the space of a few
months they will surely regret. Of course, if you sell all the mineral
rights for a lump sum, you will not be receiving monthly royalty check
and you will probably not even know what you missed out on.
David
--~--~---------~--~----~------------~-------~--~----~
You received this message because you are subscribed to the Google Groups
"Bakken Shale Discussion" group.
To post to this group, send email to [email protected]
To unsubscribe from this group, send email to [EMAIL PROTECTED]
For more options, visit this group at
http://groups.google.com/group/bakken-shale-discussion?hl=en
-~----------~----~----~----~------~----~------~--~---
