Texican and anyone else who knows: oil/gas lease question

ErinP · #21 06/30/13, 07:54 AM

That's kind of where we're at Riverdale. Even the high offer of $25ac. still comes to just $1000.
That'd be nice, but isn't really nice enough to convince us, I guess...

Cindy in PA · #22 06/30/13, 11:21 AM

We were approached in 2005 for $10/acre in Tioga County PA. This was the TBR formation & before the Marcellus crap. Then when it hit the fan in 2008 we got an offer for $2500/acre before everything crashed and we missed out. Most of our neighbors signed in between those times for about $75/acre. In 2010 we got our offer up to $4000/acre & 20% royalty, but they left without telling us & moved on. Fast forward to 2011 & we managed to get an OK lease, not the great ones people had gotten in the period before & signed for $4000 but only 18% royalty, so we did lose some in the deal. In PA there is no forced pooling, so we could have lost out with only 11 acres. Our are has many wells drilled by 2 other companies, but only one near us. It seems like many who have wells that are pumping are getting increasingly frustrated with the mounting deductions etc. & low royalty payouts. I wish it would all go away and am sure no one will do really well except the gas companies & the government.

If they are just starting to make offers, do your research and take your time. The first offer of $10 was too low to even go to a lawyer, so we passed. You could lose out, but not for refusing $25/acre. Contact some gas companies that may be working around the area & ask about a lease. Good luck.

luvrulz · #23 06/30/13, 02:36 PM

And here in Ky, the royalties would only amount to 12.5% of whatever they drill. That is the max we would've gotten..... Bleh! Not so interested. When hubby told the guy he'd have to talk to his wife, the guy made an apt to talk to the 2 of us, but then never showed up! LOL And what a mess they make of your property!!!!

Pugnacious · #24 06/30/13, 06:41 PM

Lets take 12.5 percent of a 100 bbl per day well. Oil is currently around 100 dollars per bbl. That's somewhere around 1250 dollars per day. Not chump change and some wells are well over a thousand bbls per day. You can do the same math with natural gas.......

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pheasantplucker · #25 07/01/13, 04:56 AM

Quote:

Originally Posted by ErinP

So we're screwed no matter what.
If everyone else signs for a low-ball offer, we have to do the same or get nothing.

That's exactly the same boat my wife and I were in...

ErinP · #26 07/01/13, 11:12 AM

OK, the "forced pooling" comment got me curious. I just looked it up and apparently Kansas is "compulsory unitization"
(A nifty link here, to see what the laws of the various states are: http://projects.propublica.org/tables/forced-pooling )

Melissa · #27 07/01/13, 11:40 AM

We were in a group (10's of thousands of acres altogether) that negotiated for two years before making a deal with an energy company. The end result was $6250 an acre and 22% royalties. Some people have been paid this past month, we have to do some work on our deed yet but the lawyer says we should be ok. If you can get a group together and sign that way it really helps.

ErinP · #28 07/01/13, 12:01 PM

Was the OH oil play already in full swing at the time, Melissa?
Or was it still speculative with a few older wells here and there (which is where we're currently at)?

And yeah, the group thing has shown up a couple of times in the research I've been doing. I'm headed to the courthouse today to see where leases currently stand, and then I'm going to start calling my neighbors. Of the 30-50,000 acres or so that surround us, they're held by about six families, including us with our little 40ac. patch.
I can't decide if that's a good thing or a bad thing, actually. Each family controls such a large amount (except us, obviously), that they might not see the need to "group."

ErinP · #29 07/01/13, 07:52 PM

Went to town today and did a little legwork. Stopped at the courthouse first to see what they could share. The girls said they didn't know specifics, of course (since leases aren't registered), however they both have heard scuttlebutt that there have been a couple of leases that were in the $100 an acre range, up toward the Nebraska line. Like us.

Then I talked to a local realtor (who also own a thousand acres or so) and he said he would never even talk to anyone for less than $35/3yrs. Which still sounds low...
However, he also had some really good advice on lease specifics and was happy to share any experience.

And finally, I ran in to yet another neighbor at the laundromat. She asked me if the landman had found us yet.
When I pointed out that she was the third person to ask that question, she made the point that he sure had put in some effort to track us down...
I also learned, via Google, that he represents a company that works with a smaller driller who doesn't currently have the ability to horizontal drill.

Pugnacious · #30 07/01/13, 08:26 PM

Quote:

Originally Posted by ErinP

Went to town today and did a little legwork. Stopped at the courthouse first to see what they could share. The girls said they didn't know specifics, of course (since leases aren't registered), however they both have heard scuttlebutt that there have been a couple of leases that were in the $100 an acre range, up toward the Nebraska line. Like us.

Then I talked to a local realtor (who also own a thousand acres or so) and he said he would never even talk to anyone for less than $35/3yrs. Which still sounds low...
However, he also had some really good advice on lease specifics and was happy to share any experience.

And finally, I ran in to yet another neighbor at the laundromat. She asked me if the landman had found us yet.
When I pointed out that she was the third person to ask that question, she made the point that he sure had put in some effort to track us down...
I also learned, via Google, that he represents a company that works with a smaller driller who doesn't currently have the ability to horizontal drill.

Ummmm. What company does he represent? Most companies contract with multiple drilling companies and almost any drilling rig can drill horizontally. If that is the best way. Some formations cannot handle horizontal drilling and others are of no benefit to drill that way.

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texican · #31 07/01/13, 08:36 PM

Having a land line or cell phone is irrelevant. If a Landman wants to get in touch with you, he'll first try and call you... Trust me, it doesn't matter if you have a phone, they "know" how to find you, and sooner or later, they'll knock on your door and introduce themselves with an offer from their company.

I'm guessing that this 25$/acre is for seismic exploration... the thumper trucks. Seismic crews are usually subcontractors working for someone else, or they'll sell their data to many different actual exploration companies.

Not signing a seismic exploration lease doesn't mean your homestead will be safe from future drilling. If you had several thousand acres, it might make a difference... with a 40 acre tract, they can extrapolate the lack of data, if they have surrounding farms. They came in and did our entire county a few years back (never had been seismic'd before)... they utilized the roads around recalcitrant landowners. I wish they had come down my road and did my acreage, but it wasn't necessary for their data plats.

Do not sign anything you don't fully understand. One little word can change the entire meaning of a lease. If/when you sign an oil gas lease, you should already know what you want added to the lease. The lease presented to you will be completely in favor of the exploration company. Depending on location, you can get numerous addendums added to a lease, to make it in your favor. Off the top of my head, I'd include water testing of your springs or well waters before any drilling takes place, for a baseline of quality. No surface occupation is a biggie... Dust control on roads. Fences. Firearms. Livestock safety. Free royalty (no production costs taken out of your royalties). I'd shoot for 25% royalty, but might accept 22.5%. The upfront lease money is nice, but a lot of people get stars in their eyes at mongo bonus money (some people here got 40K/acre in the boom... and they never actually drilled, and the lease lapsed back in 2008), but they got screwed on low royalty, in the 12 to 16% range, which can be huge in the long run.

It is in your interest to sign a production lease. Even if you are adamantly against oil/gas exploration, sign, and get the money. You can give the proceeds to Greenpeace, the Church, or set up a charity. Depending on the borehole of the well, you could have them take your oil/gas without paying anything... if it's x feet away from the well, you have to be included. If you don't sign, your giving away all of your wealth.

Since you only own 50% of the minerals, everything I've said may be a moot point. Mineral rights are usually senior rights over surface rights... in other words, mineral owners can lease their (share of) minerals, and the surface owner 'may' get some damages. Not legally required, but usually good faith (to keep landowner happy) money.

IF a Landman shows up with a lease, tell him you'll need to look at it and you'll contact him next week. Never sign anything in haste. Ask who he works for. Do they drill? or are they a lease flipper... buying your lease for peanuts, selling for a fortune, and taking as much royalty in override as you'd be making.

texican · #32 07/01/13, 09:08 PM

Quote:

Originally Posted by ErinP

Yeah. Because they might quit developing the shale play in our area any minute now...

If it's gas, maybe... oil, doubtful...

Quote:

Originally Posted by ErinP

I also learned, via Google, that he represents a company that works with a smaller driller who doesn't currently have the ability to horizontal drill.

Sounds like a flipper.... buys cheap leases, sells them for a handsome profit and cut (usually more than the landowner gets) of the royalties.

I'd try and find out if there is any actual drilling going on, and try and deal directly with those people. Some companies prefer to have brokers do the leg work, and they can just pay for a 'complete lease' package for an entire drilling unit.

ErinP · #33 07/01/13, 09:59 PM

He said they work primarily with Murfin. And they and Berexco, both out of Wichita, seem to be the only drillers active in our county in the last year. According to the state geologic office, there have been a total of 9 wells drilled (all oil) with two being dry, since last May.

And we aren't even remotely against drilling. We just want to procede with as much information as possible, and not short-change ourselves.

Melissa · #34 07/02/13, 11:33 AM

Quote:

Originally Posted by ErinP

Was the OH oil play already in full swing at the time, Melissa?
Or was it still speculative with a few older wells here and there (which is where we're currently at)?

And yeah, the group thing has shown up a couple of times in the research I've been doing. I'm headed to the courthouse today to see where leases currently stand, and then I'm going to start calling my neighbors. Of the 30-50,000 acres or so that surround us, they're held by about six families, including us with our little 40ac. patch.
I can't decide if that's a good thing or a bad thing, actually. Each family controls such a large amount (except us, obviously), that they might not see the need to "group."

This is for the Marcellus shale gas, Erin. There are only a few wells being drilled in the county right now, but the expectation is that things are really going to take off in the next few years. I did not go to all the meetings so I don't know a whole lot honestly. When it all started I was still doing chemo and treatments, so Cale has been in charge of all of it. The company we are signed with is also the drilling company.

ErinP · #35 07/02/13, 01:59 PM

OK, so I want to work directly with the driller if that's an option.

In continuing my research, I've found Berexco and Murfin as the two current drillers in our area.
The landman who showed up last week, on the other hand, represents a leasing company.

When Googling for other landmen in the Wichita area, I found this link: http://www.wapl.biz/directory.html
There are 7 landmen directly connected to Murfin and one connected to Berexco.

So what do I do with this info? Take my pick and start calling numbers??

I've also been pondering my neighbor's comment yesterday about how he was really interested in finding us. Their place is currently leased out... About five sections worth. What if they're not the only ones?
Two and three (and four and five and six...) years ago, Noble Energy and Rosewood were poking holes for gas everywhere. I said there's been no oil exploration around here, and of course that's stupid. As soon as the gas guys moved in, there were doing exactly that!
I wonder if they hold the leases for the vast majority of landowners around here...? Otherwise, our little 40 acres just doesn't seem like it should be particularly desirable when everyone else around us holds thousands of acres.

wr · #36 07/02/13, 03:09 PM

Sorry, my mistake.

Pugnacious · #37 07/02/13, 03:17 PM

Rosewood and noble are both big enough companies to get the most out of any wells they drill. I have worked for both.

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texican · #38 07/02/13, 03:55 PM

Quote:

Originally Posted by ErinP

OK, so I want to work directly with the driller if that's an option.

In continuing my research, I've found Berexco and Murfin as the two current drillers in our area.
The landman who showed up last week, on the other hand, represents a leasing company.

When Googling for other landmen in the Wichita area, I found this link: http://www.wapl.biz/directory.html
There are 7 landmen directly connected to Murfin and one connected to Berexco.

So what do I do with this info? Take my pick and start calling numbers??

I've also been pondering my neighbor's comment yesterday about how he was really interested in finding us. Their place is currently leased out... About five sections worth. What if they're not the only ones?
Two and three (and four and five and six...) years ago, Noble Energy and Rosewood were poking holes for gas everywhere. I said there's been no oil exploration around here, and of course that's stupid. As soon as the gas guys moved in, there were doing exactly that!
I wonder if they hold the leases for the vast majority of landowners around here...? Otherwise, our little 40 acres just doesn't seem like it should be particularly desirable when everyone else around us holds thousands of acres.

A lease can only be held so long... for the primary term of normally 3 years, and sometimes (if they include it in the fine print) an extension of 2 years... with an extension, they have to pay more lease money. Your 40 acres could be in a prime spot, or be required because of spacing concerns... Geologists back in the main office determine where they want to drill, the drillsite and the horizontal drilling course... I've seen units where they'd drill over a mile horizontally... all acreage within so many feet of that bore line has to be under lease. They can 'curve' the horizontal drill stem 'around' something, but it's rare from what I've seen... easier to do a straight shot. If your acres are close to that 'line', you've got to be included.

A lot of companies want to sneak in and buy up as much acreage as possible, before instigating a full drilling program.... it keeps out the competition. Why spend hundreds of millions on a program, and leave out acreage, where others can come in and capitalize on your investment. In Texas now, you can drill a gas well on as little as 20 acres, oil well, 40 acres. Use to be a minimum of 640 acres... my, have times changed. IF I had a couple million burning a hole in my pocket, I'd drill my own. Unfortunately that extra million is tied up in the equity markets... I wish...

#39 07/02/13, 08:09 PM

... In addition to all of this wonderful information: they are REQUIRED to pay for lateral (under your place) access.

Also, my Father has been hunted down, by phone by third degrees!
They called my Mother, who called me, who gave the contact info to my Father. They can find you...

ErinP · #40 07/03/13, 12:00 PM

Yeah I know.

What's interesting isn't that he could find us, but rather that he was so insistant on finding us.
So far I've heard from four different people that a landman was looking for us.