LANDMAN JUST STOPPED BY ABOUT 30 MINUTES AGO (CADDO 19-15-36)

TWIN CITIES DEVELOPMENT LANDMAN STOPPED BY ABOUT 30 MINUTES AGO. WANTED TO DISCUSS LEASING OUR LAND. I TOLD HIM I THOUGHT ALL LEASING HAD COME TO A HALT. HE SAID NO THEY WERE INTERESTED IN OUR AREA BUT LEASE BONUSES WERE WAY DOWN. HE OFFERED $2,000 AND 25%. I ASKED HIM ABOUT THE LETTER WE RECEIVED FROM SAMSON CONTOUR ABOUT THE REDEFINITON APPLICATION. I ASKED IF HE REPRESENTED THEM. HE DID'NT SEEM TO LIKE THIS VERY MUCH AND SAID THAT HE WASN'T SURE WHY SAMSON WOULD APPLY FOR THAT WHEN CHESAPEAKE ALREADY HAD 70% OF THAT LAND LEASED. WE THOUGHT WE WERE IN 19-15-36 ACCORDING TO PROPERTY TAX INFO BUT HE SAID WHEN HE PULLED OUR DEED WE ARE ACTUALLY IN 18-15-01 SOME TYPE OF GLITCH AT THE COURTHOUSE. ANY THOUGHTS...

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Permalink Reply by Lightfoot on November 24, 2008 at 14:56
>> Minerals with a lower lease bonus would be worth more than minerals with a higher lease bonus. Am I missing something here? Believe me, I know I could be.

I'm sorry, DirdDawg, but I'm just not following.

I don't see what the lease bonus would have to do with the value of the royalties. Do you mean a higher or lower percentage for the mineral owner?

Anyway, what does everyone think? If we get a letter from MC Minerals, it's a pretty good sign that we're about to be drilled? I heard of a letter going to a 15-15 owner, which seems to be a serious area of interest for CHK. Are these letters going to everyone or only to very targeted sections?
Permalink Reply by Two Dogs, Pirate on November 24, 2008 at 15:20
I think that they are going to target sections that a going to be drilled in the near future.
Permalink Reply by BirdDawg, plain ole' idiot on November 24, 2008 at 15:36
Lightfoot,
Something just came to me. If you are the owner of the Lease (say Chesapeake) and it has a 20% royalty, then that mineral interest would be worth more than if the lease was subject to a 25% royalty. This comes into play more often when a company is buying a working interest ( and I think I have been maybe "comingling" mineral interest and working interest to some extent). But if an individual is buying a mineral interest subjuct to a 20% royalty, then that mineral interest is worth less than an interest subject to a 25% royalty. Because he would be making a 25% royalty instead of a 20% royalty. Very confusing, depends on the situation of who buys it. Just my opinion.
Permalink Reply by Lightfoot on November 26, 2008 at 5:40
>> Minerals with a greater royalty burden are worth more than minerals with a lesser burden.

Hi, Jim. You're saying that 1/4 royalty is worth more than 1/6 royalty in a sale... yes?

>> all you get when you buy leased minerals is the royalty reserved in the lease.

Right. But I had asked about unleased acres.

If an acre leased at 1/4 can be sold for $1,000, why wouldn't that unleased acre be worth $4,000 (4/4ths)?
Permalink Reply by Bobi Carr ("parker") on November 26, 2008 at 6:56
Lightfoot,

In the scenario, the whole acre would not be worth $4000.00.

The gas company is going to end up with 3/4 through a lease. They pay a bonus for the 1/4 and keep the 3/4 to pay for the well and to pay royalties and dividends to their stock holders, etc.

You would have a very difficult time selling minerals that are not leased (unless your property is in South Caddo near DeSoto).

I would think that a buyer would only want minerals in leased areas, otherwise they stand a greater risk that the minerals would prescribe back to you after 10 years.

I hope my explanation helps. (not nearly as eloquent as Jim, but just trying to be helpful.)
Permalink Reply by The_Baron on November 26, 2008 at 7:00
Not entirly true. Unleased minerals are valuable. You can always have a well drilled to interupt prescription.

I do think we need seperate discusions for selling royalty and selling minerals. They are not the same thing.
Permalink Reply by Bobi Carr ("parker") on November 26, 2008 at 11:34
Jim,

You have experience and a well earned knowledge base, all I have to offer is opinion.
Permalink Reply by Lightfoot on November 26, 2008 at 13:35
It is risky to buy more than one eighth of 8/8 royalty under unleased minerals. There is no guarantee the lessor will lease for 25% royalty or even 20% royalty.

Jim: But if you buy the entire unleased acre, don't you buy the right to lease them yourself? Executive leasing rights, or something like that?

When you say 'actually they are,' are you saying that 4/4ths should be worth 4 times 1/4th?

Thanks for your reply. Sometimes I can tell who's talking to whom about what, though. It might help to throw in some quotebacks or to address the person we're addressing. Just a suggestion.
Permalink Reply by Joel on November 23, 2008 at 7:31
In contrast to others I don't think you want to go in a group in your situation - if CHK has 70% of the property then, any group you could put together would have little leverage and you then would be stuck in a committee mode when time is short. My guess is that leasing to infill sections where they are definitely drilling is going forward, although at current market prizes vs. the summer feeding-frenzy prices.

I had a thought - some lots cross section boundaries - any chance yours may be in two sections?

The other thing I suggest is contactng another landman, maybe one that is not representing the same driller (CHK?) let them know you have an offer from someone representing a major player, and see what they come up with. Competition still is a good way to drive offers to current market prices.

Best of luck,

Joel
Permalink Reply by The_Baron on November 26, 2008 at 5:09
Other companies might be very interested in aquiring leases in an area about to be drilled by CHK. Just don't complain when they make money off your lease.
Permalink Reply by Joel on December 6, 2008 at 3:34
Someone's going to make money from your lease - that's why they do the leases... :)

But that's not the entire point. Getting the other companies to bid, then getting the original guy to respond, and cycling through that until one is the clear winner. That process will get your price to market level fairly quickly, definitely quicker than throwing in with a committee of landowners, or a committee-of-committees consensus approach. With knowledge of that market level, an informed decision can be made - maybe decide to wait, or to go in with a neighborhood association to try for a higher number later, or go for the high offer right then. Unity can be strength but it is generally not speed.

This approach might not work well for a small landowner in an outlying section, but for a large owner or someone in a section about to drill, it should.

Best,

Joel
Permalink Reply by Snake Stewart on November 24, 2008 at 14:33
Permalink Reply by KB 29 minutes ago
Old riddle:

You are in a room with 2 doors, one will lead to paradise and the other will lead to hell. The 2 doors are identical and you do not know which door will lead to which. In front of the 2 doors are 2 computers. One will ALWAYS lie while the other ALWAYS speaks the truth.

You must ask ONE question for you to find out which door leads to paradise or hell. Any type of questions but only one.

So, what's the question?

My question would be ......Where is KB when you need her ? (LOL)

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