BONUS PAYMENTS DEPEND ON MANY FACTORS-SHREVEPORTTIMES.COM ARTICLE -12-22-08
shreveporttimes.com
December 22, 2008
Bonus payments depend on many factors
By Bobbie J. Clark
bobbieclark@gannett.com
All land is not created equal.
Just ask a landman or someone who is negotiating a mineral lease.
Bonus payments for leases have varied, with reports of people getting more than $15,000 per acre, while others have gotten offers of around $5,500 per acre.
Allan Seabaugh, a local oil and gas attorney, drafted clauses for a lease with Petrohawk Energy Corporation worth $16,550 an acre for neighborhoods around Ellerbe, Norris Ferry and Wallace Lake roads.
Competition was the primary reason they got so much, Seabaugh said.
They were able to pit Petrohawk and Chesapeake Energy against each other, driving the price higher and higher. "They bid hard for it," he said. "We were pretty fortunate."
There are several factors that go into lease bonuses, including accessibility to a drill site and pipelines and contiguous acreage, Seabaugh said. Rural communities will probably get the higher prices because there are fewer people with more acreage, he added.
Clay Baskin, director of public relations for Twin Cities Development, said it is easier — and cheaper — for them to deal with one person who has 300 acres, instead of hundreds of people who have a tenth of an acre each.
Twin Cities handles lease acquisition for Chesapeake, which has the most land under lease at about 550,000 acres.
"There's a lot less legwork," he said. "It cuts down on our overhead costs."
Twin Cities' initial offer for landowners is $5,500 per acre, but that number is not set in stone.
For example, The Times has reported the Dogwood Homeowners Association recently made a recommendation to accept Twin Cities Development's offer of $8,750 per acre, if 90 percent of the Dogwood community signs leases.
The Greenacres Place neighborhood in Bossier City has gotten Twin Cities' standard offer of $5,500 per acre, if 90 percent of the neighborhood signs, according to the latest offer sheet.
Baskin said people who live in more urban areas have a better chance to sign a lease if they come to them with a large tract of land.
That's exactly what the ShreveCentre Coalition is trying to do.
Currently, it is made up of 16 neighborhood associations in Shreveport.
Larry Farley, one of the group's organizers, said few neighborhoods in Shreveport have gotten — much less signed — a mineral lease.
"We're still getting organized," he said. "One of the neighborhoods now in the coalition ... previously put a package together and went to Chesapeake. They told them to get with some other (neighborhoods) and come back."
That's easier said than done. Many don't know who to contact or where to get started.
Ora Hart, president of the Cedar Grove Neighborhood Association, said her community has yet to receive any lease offers.
"I went to a meeting, but they couldn't tell me who was working in Cedar Grove," she said. "We should be getting something. Cedar Grove is such a large area."
The South West Shreveport Home Owners Coalition is another group of neighborhoods that has banded together to negotiate mineral leases.
Jerry Merrill, an oil and gas professional, has helped several neighborhoods in the coalition negotiate leases.
The latest lease bonus he negotiated netted $10,750 an acre. However, he has heard of much higher numbers. Without being specific, he said a church off Kingston Road got $17,500 an acre.
He also has heard of someone getting $25,000 an acre for 12.5 acres.
"They are paying insane money for these properties," he said. "This whole area is blessed."
Tom Dark, chief administrative officer for the city of Shreveport, advised that people will be best served by joining one of the two neighborhood coalitions in town.
"If not, then people can go door to door to see if they can find some neighbors to join them," he said.
The more neighborhoods that come together, the better the price will be when negotiations come around, he added.
Dark said there was a time when the highest bonus numbers were hovering around $10,000 an acre. Now, the big ones are at $20,000.
"It's clear the market is still interesting," he said. "There is a limit. We just don't know where it is. We were told sometime ago that it might be the upper teens or low 20s."
Additional Facts
RELATED LINKS
Petrohawk Energy Corporation: http://www.petrohawk.com/home/
Chesapeake Energy: http://www.chk.com/
December 22, 2008
Bonus payments depend on many factors
By Bobbie J. Clark
bobbieclark@gannett.com
All land is not created equal.
Just ask a landman or someone who is negotiating a mineral lease.
Bonus payments for leases have varied, with reports of people getting more than $15,000 per acre, while others have gotten offers of around $5,500 per acre.
Allan Seabaugh, a local oil and gas attorney, drafted clauses for a lease with Petrohawk Energy Corporation worth $16,550 an acre for neighborhoods around Ellerbe, Norris Ferry and Wallace Lake roads.
Competition was the primary reason they got so much, Seabaugh said.
They were able to pit Petrohawk and Chesapeake Energy against each other, driving the price higher and higher. "They bid hard for it," he said. "We were pretty fortunate."
There are several factors that go into lease bonuses, including accessibility to a drill site and pipelines and contiguous acreage, Seabaugh said. Rural communities will probably get the higher prices because there are fewer people with more acreage, he added.
Clay Baskin, director of public relations for Twin Cities Development, said it is easier — and cheaper — for them to deal with one person who has 300 acres, instead of hundreds of people who have a tenth of an acre each.
Twin Cities handles lease acquisition for Chesapeake, which has the most land under lease at about 550,000 acres.
"There's a lot less legwork," he said. "It cuts down on our overhead costs."
Twin Cities' initial offer for landowners is $5,500 per acre, but that number is not set in stone.
For example, The Times has reported the Dogwood Homeowners Association recently made a recommendation to accept Twin Cities Development's offer of $8,750 per acre, if 90 percent of the Dogwood community signs leases.
The Greenacres Place neighborhood in Bossier City has gotten Twin Cities' standard offer of $5,500 per acre, if 90 percent of the neighborhood signs, according to the latest offer sheet.
Baskin said people who live in more urban areas have a better chance to sign a lease if they come to them with a large tract of land.
That's exactly what the ShreveCentre Coalition is trying to do.
Currently, it is made up of 16 neighborhood associations in Shreveport.
Larry Farley, one of the group's organizers, said few neighborhoods in Shreveport have gotten — much less signed — a mineral lease.
"We're still getting organized," he said. "One of the neighborhoods now in the coalition ... previously put a package together and went to Chesapeake. They told them to get with some other (neighborhoods) and come back."
That's easier said than done. Many don't know who to contact or where to get started.
Ora Hart, president of the Cedar Grove Neighborhood Association, said her community has yet to receive any lease offers.
"I went to a meeting, but they couldn't tell me who was working in Cedar Grove," she said. "We should be getting something. Cedar Grove is such a large area."
The South West Shreveport Home Owners Coalition is another group of neighborhoods that has banded together to negotiate mineral leases.
Jerry Merrill, an oil and gas professional, has helped several neighborhoods in the coalition negotiate leases.
The latest lease bonus he negotiated netted $10,750 an acre. However, he has heard of much higher numbers. Without being specific, he said a church off Kingston Road got $17,500 an acre.
He also has heard of someone getting $25,000 an acre for 12.5 acres.
"They are paying insane money for these properties," he said. "This whole area is blessed."
Tom Dark, chief administrative officer for the city of Shreveport, advised that people will be best served by joining one of the two neighborhood coalitions in town.
"If not, then people can go door to door to see if they can find some neighbors to join them," he said.
The more neighborhoods that come together, the better the price will be when negotiations come around, he added.
Dark said there was a time when the highest bonus numbers were hovering around $10,000 an acre. Now, the big ones are at $20,000.
"It's clear the market is still interesting," he said. "There is a limit. We just don't know where it is. We were told sometime ago that it might be the upper teens or low 20s."
Additional Facts
RELATED LINKS
Petrohawk Energy Corporation: http://www.petrohawk.com/home/
Chesapeake Energy: http://www.chk.com/
Views: 153
Replies to This Discussion
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Permalink Reply by Caiman on -
Mr Warr, Exactly what do you mean when you said (outside the current "restricted" areas of interest)? Thanks for your time
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Permalink Reply by Dion Warr, CPL on
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Caiman:
Many of the major players that drew down their lease acquisition accounts earlier in the year, and have now found them difficult to replenish, have found themselves in a situation of being overextended as far as drillable units (too much to try and drill before the leases expire), and large amounts of leasehold in areas where there isn't enough lease saturation (i.e., lots of unleased property) to make it worthwhile to drill. As a result, many of the big players have circled the wagons, looking to lease up in areas where they have a decent existing presence, and have dropped their offers way down if not pulled them entirely in outlying areas. They have thus restricted their buy areas and offers to those units 'ready to drill' or similar, while they are forced to live in their means. That's all I meant. Sorry if my comments were cryptic or confusing.
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Permalink Reply by Skip Peel - Mineral Consultant on
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Yes, I agree with your characterization, Dion. There is interest (by current HS operators) in the outer edges of the play, as it is currently defined, but the slow down caused by frozen credit and the inability to sell stock in an uncertain securities market has negatively affected the speed with which the area of the play is expanding. Now most companies have to focus on developing what they currently hold, translate their huge investments into cash flow and hope like heck the credit market improves.
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Permalink Reply by hoover182 on
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Did the Shreveport Times publish an article today that was originally written in July? Yikes, hold off on that Pulitizer prize if that's so.
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Permalink Reply by Skip Peel - Mineral Consultant on
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LOL!, hoover. It was on Shreveporttimes.com. I decline to speculate on what award would be appropriate for our "local" paper.
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Permalink Reply by RAY on
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my personal take on Lease Bonuses::
2007.........$100 - $300 / acre leases..................way too low
2008.........$20,000 & up / acre leases...............evidently too high
2009.........$2500 - $10,000 / acre leases ........seems about right
Share
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Permalink Reply by Skip Peel - Mineral Consultant on
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Ray. I consider your projections well within the ball park. I guessing just a little higher based on some firm offers I have some knowledge of. Much will be known 2 weeks into the new year.
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Permalink Reply by keb on
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Skip do you suggest (unofficially) that maybe it would be a good idea to hold off to lease until 3-6 mos. into 2009? We're in Section 5, T13 R15W and heard CHK is about to put a well on our neighbor's land? we don't have a lease yet,good or bad for us? would forced pooled be bad?
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Permalink Reply by Skip Peel - Mineral Consultant on
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keb. Officially or unofficially, here is the current situation of drilling units under applicaton or approved in your township & range. Section 5 (your section) is unitized to Indigo. Sections 17-20 and 27-34 are unitized to BEUSA (Bridas Energy) and Sections11,14,22,24 are unitized to El Paso. Sections 25, 26 to XTO. By my count that is 21 out of 36 sections applied for drilling units. A good sign that development will continue in your township. Without the specifics of your tract, I can not give you specific projections (and do not care to know them, keep certain info close to your vest). My suggestions follow in their order of importance. 1. Set your basic lease terms. 2. A 1/4 royalty is standard now, do not accept less. 3. What is left is the bonus offer. What your neighbors have received or been offered is NOT NECESSARILY AN ACCURATE MEASURE OF WHAT YOU SHOULD EXPECT. Every tract is different. In more ways than I can go into here without surpassing Haynesville's character limitations. The time has come for landowners to realize that not every tract has equal value in the eyes of the operator. If you do not understand what they are looking for and what they place value on, you will not be able to value your property accurately nor negotiate the best lease for yourself. I think there is no need to wait 3-6 months. Decide what you desire in the way of lease terms and royalty. And then be open to and willing to negotiate the lease bonus. Do not set an unrealistic value based on hear say and wishful thinking. I think that you will be pleasantly surprised that offers in your township will be reasonably high when compared to the recent lows. Anyone waiting on a bonus offer of $30,000/acre or $20,000/acre will be waiting a long time. In your section and township, depending on the specifics of your property, I would suggest that anywhere from $7,500 to $15,000 acres would be in the ballpark. Do your homework. Good Luck, Skip
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Permalink Reply by Skip Peel - Mineral Consultant on
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GD. I'm headed out the door right now. KB, we missed you last night. I will have to defer answers to your questions. Sorry, the time needed for a comprehensive reply requires that we defer. Maybe next week. And I think we should make it a new discussion topic. Please remind me. I would like to shoot for next week as I believe that many of the members can figure out the answers to the questions with just a little help and the timing is now right to see the patterns. This will be my last post for a while as I am now officially AWOL.
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Permalink Reply by HBP on
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Skip, Where do you get the range of 7,500 to 15,000/acre? I know you are "ballparking", but what gives you that range?
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Permalink Reply by Bill Murphy on
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The section I live in has approx. 500 acres already leased. The remaining acreage is not leased.
Chesapeake is preparing a super site for 4 wells in this section, plus an adjoining super site in
the adjoining section to the south, also two more super sites are being prepared in the two sections
west of these. That is the possibility of 16 wells being put in the 4 sections. In addition a pipeline is
being built in these sections.
I have decided not to sign any lease that does not meet my expections. Several of my known neighbors have expressed the same view.
Does anyone expect Chesapeake to balk at paying the sought after signing bonus of $22,500.00 per acre plus 30 percent royalty.
Or do you think they will proceed and pay 100 percent royalites to those who hold out for the amount requested.
I can't see them abandoning the well sites that are being prepared, or the pipline under construction.
Bill
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