Replies to This Discussion

Permalink Reply by Dan Arnold on April 9, 2010 at 8:01

I do not own any part of any oil or gas company anywhere. I work in the industry. I have only been attempting to share another perspective. I did not realize how much open hostility there is toward the industry.
I get your point about how it might be possible under certain extremely rare conditions that someone could be stuck with having to take lease terms that they had rejected. That would be unfair, but that could only happen under highly uncommon and extreme curcumstances, and that is exactly why we have a legal system. It could not happen just because their neighbors were leased an they were not.

Again, I am only attempting to provide food for thought. These are very difficult times for all of us. When I say "all of us", i mean you and me and everyone else. People are wise to seek information wherever they can get it. This public forum is an example of people having an opportunity for open discussion about the oil & gas activity.

I don't mean to say that 'the oil companies are doing us a favor by leasing and drilling." It is not a favor, they do so because that is the business they are in and they want to turn a reasonable profit and not turn to the government for a "bail out" It is true that some of the biggest oil companies make an incredible profit, but they are highly diversified and internatinal in scope.
If you or I could acquire the lands and drill the wells ourselves we would, wouldn't we?

Permalink Reply by Allen67 on April 9, 2010 at 13:34

I was only giving you a hard time because I believe you are a land man. Its not personal. I believe everyone wants the oil companies to be here and to drill. Just some of the tactics they use are unacceptable. I dont know of any oil company that comes in with a honest approach to lease . It just seems to me that it would be sooo much easier to be on the up and up. People have a bad taste from previous dealings with this type of behavior. I do know that gas prices are down but it wont stay that way. Its just a matter of time. Look as oil prices! WOW! now thats a high price!! lol If you are a landman , please tell us what approach you would do to a mineral owner and also what type of lease would you offer? I do disagree that something is better than nothing way of offering a lease. Is this the kind that you use? If you want, please inform us !

Permalink Reply by BirdDawg, plain ole' idiot on April 8, 2010 at 13:38

Dan Arnold,
I agree that it is not the day of the Haynesville Shale in South Arkansas. But to incourage people to take "something" is repulsive. I think you oughta take your landman ass to the house. And stay there.
I have been the first to say that these people need to be realistic. But to say they need to take "something" rather than nothing? You offend everyone (almost) on this site.
You need to get together with J.R. Ewing on this site.

Permalink Reply by Aubrey C. Sanders, Jr. on April 8, 2010 at 17:59

JT,

Good thinking, me thinks. As I have often stated on this site: A mineral lease will certainly be one of the very most important contracts you will ever sign and with any luck it may outlive you. It warrants the utmost scrutiny. My lawyer always told me that "form" leases are written by attornies employed by oil companies. Form type leases are o.k. with me, if amended by Pugh clauses.

I personally know of leases in Haynesville Field which have been in effect (HBP) since 1919. Fina drilled well on this lease a couple of years ago, so looks like it will be held by production for long time to come. And, as you may guess this is a 1/8th royalty lease!!!

Permalink Reply by The_Baron on April 14, 2010 at 9:27

JT:

vertical Pugh clause releases undrilled strata after the expiration of the primary term, but will still HBP the drilled strata. usually releases (as in frees up, not leases again) 100' below the deepest well drilled, but can vary.. Also there is a horizontal pugh, which would release all lands not in a producing unit after the primary.

Permalink Reply by Arkansas Traveler on April 8, 2010 at 17:30

Some other factors that needs to be taken into consideration are when is the last time this property has been leased and what per cent of the minerals does the owner actually owns. If a tract hasn't been leased in 30 years or so there might be a reason for that.

Permalink Reply by Dan Arnold on April 14, 2010 at 7:12

It is good that we all have the opportunity to express our opinions.
If 25% royalty were typical or the "norm", then that is what would be offered because every company would have to offer that just to stay competitive.
It appears that you do not have experience leasing in other states, different counties within a state or for a variety of oil & gas companies in different prospects.
I have been working in the industry for many years. I have been leasing in two states and four counties over the last 18 months for three different oil & gas companies. I do not remember leasing anyone with a 25% royalty last year, and I have not done so this year either. Yes, some people with highly desirable acreage have been able to get leased at 25% in some places. That is the exception, not the rule. People are being leased all over the country for 1/8, 3/16/ 1/5 and rarely 1/4. In another post I explained why there are exceptional situations.
You have every right to express your opinion. I myself would love to see every mineral owner get 25% royalty. I could lease every tract in sight, but that is not the case because it is not practical for any company.
It is not practicle, because as I also mentioned earlier the companies spend multi millions of dollars on geologists, research, analysis, technology, lease acquistion, exploration, production, marketing, etc. you say that you don't think there is any risk. Try to think in terms of ROI. Risk or no, that is an investment that may well take 1, 2, 3 or more years to see ROI. The person who has leased their minerals will have already been paid the lease bonus and if there is production from minerals they own, they will have been getting royalty checks from the sale of the product from the beginning of the sales. Most mineral owners will only get the bonus money, because the land where their minerals are is not utilized. The company spends money for years before they get to realize any of the profit.

No one ever has to lease. If whoever owns the minerals can produce and market them themselves they will do so. If they cannot they might want to lease them to someone who can.
The good news for everyone is that the price is now up to about $4.25.

Permalink Reply by Dan Arnold on April 14, 2010 at 15:51

I appreciate your approach to the discussion. There are others on this forum who are not able to engage in a rational discussion without casting aspersions and/or engaging in personal attacks.
You asked why someone would be willing to accept a lease that did not seem to offer the most ideal and perfect terms that someone else might desire. There are of course a variety of reasons. One reason might be that they would like to see someone come in and get some production going. Another might be that they may not have leased it in several years and appreciate the opportunity now. Another could be that the money would be very helpful right now. There are other reasons as well, but it would be more appropriate to ask the people who choose to do so. That is their personal business.
I do not believe it is appropriate that some here have suggested that such people are foolish or ignorant. We have all emphasized that they own their minerals and have the right to make their own decisions.
This forum is vey one sided and does not accept input from , nor is it friendly toward the industry or to people like myself. Most of the posts are filled with stories, rumors, innuendos, out right lies, and opinions based on the things i just listed.
I was not raised to call people names or to sugget things about the character of people I do not know. To suggest that all oil & gas companies are greedy and all landmen are wicked and corrupt does not pass the test of basic intelligence, much less thoughtful consideration. In my opinion.
As to the specific terms being offered in any particular situation, that is the personal business of the persons involved. In a general sense to the degree that i am familiar with such terms, the number of years for the lease is the primary term. When there is an option to extend the lease for an additional period of time, there is an additional payment of bonus money if the lease is extended. You asked why someone would do that. Again that is answered above, but in a general sense, if the term is extended it suggests that the company is still very interested in the area and could allow for expanding the drilling area. I have seen that happen in specific areas over the last few years. When they do not choose to extend the leases in an area, someone else usually leases them as soon as the primary term expires. I have seen that happen frequently. I still get calls from people wondering why the company did not use the option to extend on their tract, when they extended their cousin just a couple of miles away. The reason is that the company has narrowed their focus into a very specific area.
As to whether or not a company is going to "flip" a lease or leases that is always a possibility. We all know of a super big company from Oklahoma that had to do that to raise some capitol to continue operations in other areas. They did not intend to do that when they took the leases. If there is a company that desires the leased lands more than the company that took the leases, that can be good for the lessors, because that company would not want to spend that kind of money unless they really wanted to get in there and get something going. On the other hand, if it was really that desirable of an area, they would probably be in there leasing now. It would be much less expensive than buying all those leases and then having to do all the analysis to determine exactly how accurate the title work was that was provided by the selling company. Nothing is ever as simple as someone outside the industry might think it is. It is easy to jump to conclusions.

Permalink Reply by The_Baron on April 14, 2010 at 9:28

We still manage to drill our share of wildcats......

Permalink Reply by Bill Meaney on April 19, 2010 at 10:03

I don't check the site as regularly as I should so I didn't see your post until today. I've been a petroleum geologist for 37-1/2 years and have worked for my current employer, a small family-owned company, for 19 years. Until I read your email I thought I'd done a pretty good job...made more money for my employer than what I caused them to spend. I've caused a lot of wells to be drilled through the years. Unfortunately lots of them were dry but along the way we found some nice fields. At first I was embarassed that I hadn't thought about using some of the new technologies to which you referred...I could have prevented my employer from drilling most of those dry holes. Then I remembered that I have been using those technologies. Go figure! PS--People have opinions and most like to share theirs. Unfortunately when you share an opinion you stand just as great a chance of proving what you don't know as what you do.

Permalink Reply by Danielle Knott on April 7, 2010 at 13:47

i recived lease papers for some land my family owns in sec 35 t18s r20w, in township 35, triad land services sent us our lease papers, they wouldnt give us the name of the oil company, we were offered 200 per acre and 3/16 of mineral rights, which comes out to 18.75%

Permalink Reply by Terry L. Antee on April 8, 2010 at 10:41

What was the term of the lease how many years 3, 5 etc and did it have an option renew at certain price after primary term?

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