John B. Gustavson, CPG, CMA Gustavson Associates
Boulder, CO
2015 SME Annual Meeting
Abstract: The market for mineral properties in the Marcellus has matured. First, acreage with historic low-royalty and lease bonus, some Held-by-Production, was augmented by a giant land rush with high royalties (16-20%) and bonus in the thousands of dollars/acre. The latter enabled mineral appraisal by the lease bonus approach. This was followed by discoveries of liquid-rich “sweet spots”. Royalty or rather mineral property buyers
finally appeared including long-term individual investors as well as funds, brokers, and even syndicators. Examples, some of them crass, will be given. These buyers together with selling landowners now present a dynamic market. The transactions can be researched and adjusted to provide comparable sales of actual mineral property. Ways to arrive at ""confidential"" sales prices will be shown for Butler County.
Many parameters must be included when adjusting these sales prices to appraise undeveloped mineral rights. Examples will be shown. Also, the old rule-of-thumb that Fair Market Value equals a multiple of lease bonus was found still to be valid, albeit adjusted to reflect the resource play nature of this and other shale plays.
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