Replies to This Discussion

Permalink Reply by Robert Craft on November 16, 2013 at 5:28

Nadir means lowest point. Opposite of peak.
http://www.merriam-webster.com/dictionary/nadir

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Permalink Reply by Skip Peel - Mineral Consultant on November 16, 2013 at 7:08

It is a poor time to sell minerals prospective for dry gas. I suggest watchful waiting if possible

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Permalink Reply by 1kw6x71km1v37 on November 16, 2013 at 7:45

There was a guy once up around Mansfield. He owned forty acres and leased it to an operator. The operator drilled a well and it came in good. The operator offered the guy a something like $150,000 for his mineral  rights. He didn't take it. Two months later, the well went dry, his wife left him and the guy was still working at the local sale barn last the toolpusher on the rig heard. There's been a ton+ of good wells drilled in NW Louisiana. You just never know which one is going to belly up next. It truly is a crapshoot to drill, 3D seismic and all.

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Permalink Reply by Aubrey C. Sanders, Jr. on November 16, 2013 at 10:57

cheap shot,

You are making me nervous. This is a high risk business. But, like to think my odds in oil business are better than in a crap game.

I recall an operator named Tandy McElwee back in the 50's. He operated in Haynesville Field. He was millionaire one week and broke the next. This was a pattern for many years, but in the end he did O.K. He always had investors waiting to get in on his next well. On balance he did very well.

One little unknown fault can be a big hazard and cause big loss of capital, even when location is surrounded by productive wells. Lots of things can go wrong when drilling. Nowadays we do not see lots of dry holes, thanks to technological advances

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Permalink Reply by Aubrey C. Sanders, Jr. on November 16, 2013 at 12:25

Katie, be assured that the company which wants to buy your property knows far more about potential than you and the rest of us will ever know. I am not very knowledgeable  about your area. But, I would be surprised if some of the formations other than Haynesville Shale might have potential for producing oil. Maybe Jay can shed light on that.

 

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Permalink Reply by Hopeful About Natural Gas on November 16, 2013 at 21:11

wait a sec ... could this be the way it is worded?

1) the company will buy your royalties and rights for 300 times their current monthly check amount?

2) will they pay you a gross amount - or each month for the next 20 years?

3) if each month then remember that these wells decline very quickly - that's the only way I can figure it would be economic for anyone UNLESS as Aubrey Sanders says the company knows something that others don't.

4) oh, I just remembered that Jay (Shale Geo) lives near you. He should have some good info for you. Please post a wrap up or keep us updated what you do. I think everyone is interested in how bona fide the offer is

5) The Haynesville Shale is at the BOTTOM of it's value - it's already crashed and burned. The HS is "wired and wasted". But, that is all part of the cycle of oil and gas and markets in general. The Haynesville shall rise again (but it may take awhile)

6) In the end - only you can know what is best for you and yours. This is a great board to gather multiple (good) opinions and this thread has been one of our best recently.

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Permalink Reply by Skip Peel - Mineral Consultant on November 17, 2013 at 3:19

Hopeful, many mineral owners receiving an unsolicited offer to buy royalty or mineral rights tend to wonder if "the company knows something that others don't".  It's a good question to ask and should lead to a search for information that could confirm that there is interest/activity in the area of their minerals.  GHS is a good resource to use in that regard.  Mineral owners should also learn how to access state O&G databases and perform simple records searches at their parish/county courthouse. 

The answer to the question of what the company knows is more often than not - very little.  In other words they do not have inside information.  They don't employ experts to research and evaluate the geology of the mineral interest.  They don't even have a comprehensive knowledge of unitization and well locations in the area of the minerals.  What they do have is the knowledge that one or more land companies are recording leases in a general geographic area.  They can gather that information from instruments recorded in the public record and available online.  Their letters are simply designed to reveal motivated sellers with whom they can negotiate.

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Permalink Reply by 1kw6x71km1v37 on November 17, 2013 at 7:13

<their letters are simply designed to reveal motivated sellers>>>

Translation: They are looking for the suckers.

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Permalink Reply by Katie Waterson on November 17, 2013 at 13:49

Thanks, all.  The discussion is very helpful.  The offer was more than a throw away letter.  It's an offer I've negotiated back and forth with the interested party. It's a one-time payment for all or any portion of the minerals rights we're willing to sell.  

The company's offer is about 400X our last check amount (about $1,000) so you do the math.  One time payment, they basically "take our spot" for Chesapeake.  And if the HS is over and done with, I think that's a decent offer and is certainly more than we'll make between now and then next 33 years unless we're willing to wait and bet that the HS will come back, or gas prices will substantially increase.  

I'm considering about selling 40%, keeping 60% just in case, and negotiating as far as their "fit curve" will allow.  They do employ both financial analysts and geologists, and seem to think the HS "is a sexy play':  they want to continue to add it to their investment portfolio as well as shales all across the US.  

Am I a sucker?  Maybe.  But our well is at super low volume compared to where we were in 2009/2010 so I'm not sure what I'd be holding on for.

Thanks for the info!

Katie 

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Permalink Reply by Skip Peel - Mineral Consultant on November 17, 2013 at 14:03

Katie, have you checked to see if CHK has applied for alternate unit wells?  The value is in those alternate unit wells and the perception of when they might be drilled.

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Permalink Reply by Katie Waterson on November 17, 2013 at 14:14

Right, I have.  And I just can't get any info from Chesapeake on additional wells. And again, doesn't the value only apply to me if those wells are added to my property? I have no knowledge of any additional wells being planned for my 80 acres.  Would I benefit from additional wells drilled in the total unit?  I don't think so.  But this where I'm confused.

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Permalink Reply by Henry on November 17, 2013 at 14:23

If you are confused, you should hold off on selling.  Don't sell, unless you fully understand your situation.  And I believe that any well that drains your section will benefit you.  It does not have to have its surface location on your 80 acres.

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