Twin Cities confirms "no group negotiations" policy

Posted: Feb 24, 2009 11:11 PM CST

Updated: Feb 24, 2009 11:37 PM CST


KSLA News 12 Headlines More >>



SHREVEPORT, LA (KSLA) A major lease-broker in the Haynesville Shale confirms they will not be negotiating with groups anymore. It's not good news for many of the dozens of neighborhood organizations that have formed over the past several months in search of better lease terms.

Monday night KSLA News 12 reported that the East 80 Oil and Gas Leasing Coalition has run into a roadblock in their attempts to negotiate with Chesapeake Energy: they've been told the company's leasing broker, Twin Cities Development, will only deal with individuals.

We asked Twin Cities today about that, and the Director of Community Affairs Clay Baskin confirmed it. "It's our new policy for 2009, and what we are doing is, we're giving the individual lessor the opportunity to negotiate on their own behalf for their own oil & gas mineral lease." Baskin says the new policy is in response to problems they've encountered in dealing with large groups, "Past experience hasn't turned out to be as productive as we had hoped. And also whenever you have the spillover of the acreage that's not contiguous to the section that we're focusing on, then it's in effect at that particular time not acreage that we're interested in because, A, we don't have a drill site, B, there might not be pipeline access at that current moment."

As the market has slowed, Baskin says, the focus for leasing has turned from grabbing up as much leasehold to what he calls 'controlled development.' "We have the same manpower, it's just much more controlled and much more focused. So yeah, for individuals living in sections where we have drill sites and we have pipeline access, you're going to see that activity begin to pick up."

"So what we want to do is focus on section by section, and as I said before, 'controlled development,' and then move forward from one section to another as opposed to taking on maybe 4, 5, 6 or several different ranges as opposed to taking on whatever we can't develop all over, " Baskin explains. "What we have to do is we have to put them together and we have to turn them over so that Chesapeake can start drilling and see a return on their investment."

Chesapeake Energy Corporation (NYSE: CHK) currently claims 460,000 net acres of leasehold in the Haynesville Shale. About 110,000 of that is in a joint venture with Plains Exploration and Production Company (NYSE: PXP).

In addition to lower bonus offers, Baskin says Twin Cities' lease terms in recent offers are now longer. "The primary term (is) generally on a 5 plus 5 basis. And once again it has to do with the fact that if you take into account that the intricate parts of putting together an urban environment such as Shreveport and Bossier City, you need that extra time in order to fulfill your committment, not only to us to our operating parter Chesapeake, but also to the individual lessor. If you sign a lease with a lessor, you expect to have your minerals produced. But in effect, whenever we deal with so many people and so many landowners, it takes us longer over here in an urban environment to put that together. "

In other words, the longer lease terms give Chesapeake more time to develop all the acreage they've been leasing up. So what's in it for the landowner looking at signing a five year mineral lease? Who's to say natural gas prices - and therefore mineral acreage values - won't go up again in a few years? "That's exactly what it is," says Baskin, "Who knows?' And that's what we want to project to people is, first thing, we want to educate them. Second thing we want to do is give them the opportunity. What everybody has to understand is that they have the opportunity to wait. Or they have the opportunity to sign. "

Or be force-pooled. This happens when a majority of mineral owners in a unit (640 acres, or about one square mile) have agreed to lease their minerals. The operator can ask the Department of Natural Resources' Department of Conservation to "force pool" the remaining un-signed mineral owners so that the well can be drilled. Since they haven't signed a lease, force-pooled mineral owners do not receive a per-acre bonus and will get not get paid until the cost of the well has been recovered by the operator. For example, if you own 32 acres in a 640-acre unit, you would responsible for 5% of the well cost. These deep wells into the Haynesville Shale have typically cost anywhere from $5-8 million each to drill. After that, however, you would receive your full proportionate share of the revenues, ie., 100% royalty on your share of the unit. That could mean big returns - if the well is successful. The downside: if the well never breaks even, force-pooled mineral owners won't see a dime.

Baskin says forced pooling has to become economically feasible for the producing company to do so, but that decision is up to Chesapeake. "A lot of people ask me, 'When will you stop leasing?' Well, we won't stop leasing until there's 100% or until we effectively cannot lease anymore acreage and then if it is economical to go ahead and produce the well and go ahead with force pooling that's Chesapeake's call and they go forward with that process."

Buck

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I hope so, but he needs to quit calling me. The 5000 is gone, might be able to get him 2000 but im not wasting my time with him anymore.
Well thank you bob This was all great. now that I have printed this all out it will go well with the letters I have sent the State Representatives and Senators about invoking regulations on landsmen, just as is the bill that is on the table in the Legislative floor in Texas. Thanks Guy, You were great . You are the reason we are doing what we are doing. Keep it up you are helping our situation and cause more and more everytime you type.
Sincerely,
Eric East 80 Coalition
Glad to have helped Eric. Just what this country needs, more regulations on business. But instead of just patting yourself on the back for being so proactive, I wish you would specify what parts of anything I have written caught your attention. Several of the other people that were part of this thread, even gave me some suggestions on how I may actually approach this guy to get a deal done. several others even complimented that i seemed to be a straight shooter. Most of my points were made in the hope of reinforcing that it is a 2 way street in this situation. good luck with the legislature.
Bob,

Also as new information comes out this guy is just in a better position. What ever decision he makes is made as an informed decision.

When prices for NG increase (hopefully soon - with Boone's help) and EUR's increase and drilling cost decrease lease values are apt to climb over time. IT GETS HARD TO HIDE FACTS. And don't forget now we are hearing a little more about testing the Bossier so EUR's will hopefully increase farther.

With such information rolling in, I think your guy is safe in the long run.

I would rather make a bad choice with all of the information than make an ill informed choice.

I hope that y'all can eventually come to an agreement that is mutually acceptable.

As I said, SOME THINGS ARE WORTH WAITING FOR AND SOME THINGS ARE WORTH WORKING FOR.

Take care.
Imagine if President Obama said, "I'll only negotiate with Pickens Plan members individually", imagine what a laugh that would be.

You are nearly 10,000 strong Shalers, stand tough.

They want your land for leasing, it's not you that took your land to them, it's them that are in your back yard.

They MUST lease your land in order to survive as a company.
Pat,

I think things will be better further on down the road. We can only be strong if we educate ourselves.

I would have loved to have a $20,000 an acre lease, but the education I received instead is priceless. I'm thankful that I have unleased property.
Well, I guess ill go back to just reading here. My integrity has been questioned, my ethics have been called into question, and I guess someone feels I have provided him fodder to get landmen regulated. I had one intention by posting and that was to give a landmans perspective on the current situation. I do not and will not lie to landowners. but they are not my employers, my energy company is. it is my job within reason to get them the best terms possible. I do that, but know ultimately it is up to the landownerto take an offer or leave one. Wish all of you the best in benefiting from this play.
Bob:

There are folks that are regular contributors to this site that aren't really interested in our (I am an oilman/ landman) contributions here. Don't be discouraged. There are those too that just read and don't post. I can understand your frustration, I hope you will continue to contribute for the silent ones.

Eric, who wants to regulate "landsmen" seems angry..... and not too bright.

Best,

Jay
By all means Bob, keep contributing in the same manner that you began in. Look at ole Jay. He has only been here 2 weeks and has already developed quite a rapport with those whom he wishes to have future business dealings with.

Your very first entry set the tone for the rest. Your Cavalier attitude simply puts you in line with how, many in your industry are percieved, at least on this site. Your attempt to "enlighten us" is duly noted. You just happen to be number 512 that have chastened us greedy l/m owners and told us how we missed the boat. Sorry that it still doesnt have the same desired effect on us as it once did. Kinda like after watching Freddie Krueger for the 50th time. Just isnt near as scarey now.

P.S. While your industry(as well as the rest of the country) is suffering and N/G prices are down, the value of my minerals havent lost one red cent. While I am "missing out" on lower prices, those great lowball bonus offers and of course those wonderful lease agreements (minus any B.S. terms of course ,as you state) I will be forced to sit here and lick my wounds waiting an eternity for my minerals to again be of some value.........But wait!

As long as oil supply continues to decline and refining costs stay on the rise, It may not be all over but the cryin'. Unless that windfarm/solar stuff kicks in real fast. Energy demand is rising faster then the chances of inflation. Thats pretty freakin fast. And I do live atop, possibly the worlds largest N/G field........Tell you what Bob. Nothing personal but you might need to take the mail mans calls 'cause I dont know many that will but it sure wont be me calling anytime soon.
Have a good one.

P.S.S. Now just log back in as your almost normal self and we will try and put this whole thing behind us. :-)
KB:

Everything you said is exactly right. Allow me to add that some operators - who know EXACTLY what they are doing - might choose to force an unleashed mineral owner to spend sums (perhaps large sums) of money (even after payout) before they get their first run check.

I have seen this done. The law is on the side of the UMI, he/she will eventually win, but as we have discussed, these things can get expensive.

Jay
That reminds me of a song. The rest of the lines remind me of this crazy leasing thing. I may be wrong, I may be crazy, but it just might be a lunatic your'e looking for. Turn out the lights, don't try to save me. I may be wrong but for all I know, I may be right. I may be wrong but I may be right.
You guys should be glad that we don't have sound!!!
and now I have that stupid song stuck in my head!

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