Mississippi - Outer Areas of the Haynesville and Brown Dense Shales
New to the forum. Just wanted to post a few questions. My family and I inherited appx 700 acres of farmland in Holmes County, Mississippi (near the town of Tchula). I own a minority share (appx 12%). We do not personally handle any of the farming operation, we have a guy who manages all this for us.
We were recently approached by a company that has been leasing mineral rights in Holmes County and Humphreys County. The guy who manages our land told us that this company is exploring for the outer areas of the Haynesville and Brown Dense Shales.
I know nothing about oil and gas leases. After hearing the news, I began to do a little research online and read up on the Haynesville Shale. I began to get a little excited seeing how well many land owners were doing with the gas leases.
My questions: If a company leases the mineral rights, does that mean that they are going to drill, or, can they decide not to? Is the money they are going to pay per acre done on a monthly basis, yearly basis, or just a one time payment? Approximately, how much money does an operating well bring in?
Thanks for the help.
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Replies to This Discussion
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Permalink Reply by HBP on -
I know the area you are talking about, I used to hunt at a camp near Lexington a few years back.
If a company leases it does not mean they are going to drill, it means they have taken a step in that direction, but many companies lease only for speculative purposes. Unitization and other actions are what to watch for, especially in that area of MS.
The money they pay for the lease is likely "paid up" over there - one time bonus. It is possible to lease with rentals, but I doubt any company is doing that in Holmes County right now - most you'll see are paid up and probably have an option which technically only benefits the one purchasing the lease. If the lease has a producing well, then you may get production payments monthly, but no more for the lease.
How much money does it bring in? Nobody can really answer that unless we know for sure what formation they will target and then have similar wells in a tight geographic cluster to model off of. Even then it will still be a guess.
Continue to read up, since its good to be informed, but be careful over there in the MS Delta. I think its more speculative leasing in many areas as you get further away from Yazoo City, so get the whole story about who the company is and their drilling plans before signing a lease. Also, I've seen them want 5-10 yr leases in the Delta and I never recommend that long of a lease. It's not going to be the same big "haynesville bonus" you may read about online.
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Permalink Reply by Justin Powell on
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Thanks for the quick reply. You are right, they were wanting a 10 year lease but our land manager got it down to 5 years. What exactly do you mean by the money is "paid up"?
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Permalink Reply by HBP on
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Its probably a one time bonus payment for the initial lease term, then if you have an option they would pay that (at their option) at that time. The royalties paid under the lease would be separate and contingent upon actual production occurring.
I agree with your land manager cutting it down to 5. But 5 years is still a long time. If you are considering signing, make sure you know the company and their plans for the lease. Also that is alot of acreage to lock up under the terms of the leaes, so I'm sure your land manager has worked with the lease language...
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