Replies to This Discussion

Permalink Reply by Two Dogs, Pirate on March 30, 2013 at 11:37

I don't  think that the size of a tract would make any difference for the clauses that I mentioned. A lot has to do with who you are. Big timber, railroads and large mineral owners generally get their way regardless of  the amount of property they have in the unit. Most operators want 100% leased. Some may not want to give in to terms like the cost free  royalty clause but others will. The mineral owner can hold out and try to work the deal to the end but that will backfire on them in many situations. I guess it would  just depend on what the mineral owner is asking for and who the operator is.

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Permalink Reply by adubu on March 30, 2013 at 12:09

Two Dog--- my question was about your statement above you said  11.7 acres in a 80 acre lease would be a big lease ( Yes agree because it would be 15% of unit). I be surprised if any one has their way unless they have the majority of land/minerals in plan unit operator desires to drill. Skip Peel IL  and I both agree if you small and hold out it may back fire on you. My question was simple in your opinion how many acres or % of acres in unit do you have to own to be able to have some power to negotiate the best Terms possible ( Not everything so that operator could not get good return on RISK of investment to drill )   

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Permalink Reply by Two Dogs, Pirate on March 30, 2013 at 12:26

You are trying to pin down something that can't be pinned down. I tried to buy a lease on a tract that was less than the amount that would have killed unitization but still a good size tract, more than 40 acres in a 640 acre unit. One clause in the lessor's lease killed the deal and they let him ride the well down. This was a major mineral owner in the Haynesville Shale.

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Permalink Reply by adubu on March 30, 2013 at 12:40

Two Dog--- OK I guess you have no opinion then on my question that's OK  --not trying to pin you down it was just a simple question--- just looking for your opinion -- sorry

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Permalink Reply by Two Dogs, Pirate on March 30, 2013 at 13:16

Adubu there is no answer to the question because every deal is different. What would be the clauses asked for that would place the lease into some special deal that only large mineral owners would get? 11.7 acres will not get you a deal to drill within one year maybe 8000 acres would.

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Permalink Reply by david kenneth merritt on March 30, 2013 at 13:45

THINK I'LL TAKE THE 150 PER ACRE PLUS 1/4 ROYALTY

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Permalink Reply by adubu on March 30, 2013 at 13:50

David-- probably good thing to do because 25% R hard to get today -- like Skip suggest could ask for $250 (a good way is just ask the landsman " Is $150 all you can offer me--what the max you are authorized by the Lessees")but don't let the deal go if $150 all they can do.

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Permalink Reply by david kenneth merritt on March 30, 2013 at 13:52

 I AGREE THE MAIN THING IS THE 25%

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Permalink Reply by adubu on March 30, 2013 at 12:15

The easy way that a lot of operators get around the royalty free clause is to sell it into a pipeline very near well site (before anything like compression etc. done to gas) for that price is their gross. CHK does this a lot if not all the time.

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Permalink Reply by Two Dogs, Pirate on March 30, 2013 at 13:23

Some operators stand by the deals they make. Those are the operators that I work for. I learned in the mid 90's that CHK was not an operator that I would ever want to work for again unless they changed the way they did biz.

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Permalink Reply by Skip Peel - Mineral Consultant on April 1, 2013 at 8:08

The lease offered to Mr. Merritt by Cypress Operating, in addition to a quarter royalty, included standard vertical and horizontal Pugh clauses and a No Cost Royalty clause.  Further more the lease was only effective to 7000' subsurface.  Cypress is exploring the Pettit formation in that area and did not request an "all depth lease".  IMO it was a very straight forward and appropriate lease.  Considering the good royalty and other lease language I suggested that Mr. Merritt accept it.

As to the question of unleased acres in a drilling unit, the State of Louisiana does not require a minimum number of acres be leased within stipulated unit boundaries in order to issue a Unit Order.  When dealing with tracts with undivided ownership an operator must have 80% of the undivided ownership interest under lease in order to develop. 

As to how many acres it takes to have negotiating leverage, there is no set answer.  Depends on specifics.  And is unique to each and every play and operator. IMO, when all other lands within a unit are leased, the owner or owners of tracts in excess of 10% have significant leverage.  Knowing what to do with that leverage is actually more important. 

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Permalink Reply by adubu on April 1, 2013 at 10:04

Skip---- Thanks that was number I was looking for opinion 10%( only after other have leased) in your opinion sound reasonable to me and agree knowing what to do with that leverage is most important and unless you (the mineral owner) knows what to do with it is when you should hire a expert professional Oil & Gas person to review and consult with to assistant you in negotiating  a good lease. A good professional's fee is well worth it for a lease you hope to life with for a life time.

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