landowner

Getting paid on extension

Three year lease was up before well went on line and did not receive payment on 2 year extension. What should happen now?

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landownerPermalink Reply by obed w odom on December 12, 2011 at 17:38

Of course they do.


Oil & Gas ProPermalink Reply by The_Baron on December 13, 2011 at 5:35

Kittycat:

 

The extension is only a pre-negotiated option.

 

They an just let the lease go and hope to re-negotiate, of course it would open to anyone who wanted to lease. Or they can just let it go unleased. and force pool and drill the interest anyways.


landownerPermalink Reply by Greedy Landowner on December 13, 2011 at 7:17
You are correct, the option is their's if they would like to extend. Each section has its own unique set of financial circumstances so its difficult to generalize a yes or no answer on lease extensions and apply it to the entire Haynesville.

landownerPermalink Reply by P.G. on December 13, 2011 at 12:08

Could it be advantageous to a driller to allow a percentage of acreage go unleased so they could use the money they would have been paying out in royalties to be applied to the expense of the well? Especially since NG is so low priced?


landownerPermalink Reply by Greedy Landowner on December 13, 2011 at 12:52
I dont think so because after the well reaches payout the operator loses that income from the unleased owner and pays the owner 100% of their share of production proceeds minus production costs and supervision fees. With the leased owner they retain at least 75% of production proceeds. Long term the operator would lose more money doing it as you have described.

landownerPermalink Reply by P.G. on December 13, 2011 at 14:24

Yes...but they still drill when there are some that haven't been leased or leases expired...


landownerPermalink Reply by Greedy Landowner on December 13, 2011 at 14:49
definately

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