Why should I sign for 25% royalties when I could get 100% royalties.

Tags: 100%, 25%, royalties

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Hello Rocker ,

Because I feel there is no such thing as 100% ,due to fee's and costs associated with drilling, it would be risky in my opinion, to go that route. I have been very vocal(typing wise) about forced pooling and the pro's and con's. We as landowners are still playing their game.We are far more informed then the unknowing unfortunate peasants that have fallen victim before us but make no mistake , Big O & G still have an advantage and always will. There are too many unknown's for the commoner to try to wade through.

With companies slowly but surely bringing offers up to a more acceptable level ,(still too low but better) going unsigned would not be at the top of my list.There may be some instances that would call for this action (unsigned) but they wouldn't be pleasant ones in my opinion. My main point has always been that I would go unsigned before I gave my rights away. I will continue to defend my position on this stance ,especially when some O & G guy try's to use this as a scare tactic.

Hope this helps some. You really need to think this through based on fact, not emotion. I sometimes get so caught up in the moment that I let something besides cold hard facts influence my decisions. Heroic maybe, but not necessarily smart! Good Luck in whatever you decide to do!
I think the only big question is how quick the wells pay for themselves. You are correct in that it isn't a true 100% because of fees and production costs. Just like it isn't a true 25% because of the same. If these wells pay for themselves in a year or less I would take being forced pooled all day long with a small piece of the pie.
I have two one acre tracts, non contiguous, in the same section. I am thinking about leasing one tract and forced pool on the other. It will be an experiment on "best approach". Heard that last week south bossier well paid out in 21 days.
Wow....21 DAYS? I had been given estimates of almost a year.
I wholeheartedly agree!
Excuse me, but why would anyone bear 100% of the cost to produce something and give you 100% of the profit. It ain't gonna happen and, if it did, that company's management should be fired on the spot and consigned to the loony bin. Of course, if you have a spare $10 mil or so and the knowledge and management expertise to contract with a competent driller and a competent geologist and a competent operating company, etc. etc. etc. You could certainly go it on your own. But then, of course, you'd have a name like Bridas or EOG and be in there scrapping with the big boys. Take your bonus, kick back and watch the royalties roll in. It's a lot easier than running a company in such a fast-paced, highly competitive and highly risk industry.
Vigo , Vigo , Vigo

The ink isn't even dry on my well thought out ,sensible,emotionally unattached explanation to someone who really has some questions about going unsignned. I am the one who usually slings snot and slobber and here you come foaming at the mouth like a rabid polecat.

First of all,the minerals are 100% mine, at least until they are nationalized!
Why should I pay a 75 % penalty for something that is mine in the first place.That is exactly what you are doing when you agree to a 25% royalty . They are not here to do any of us a favor ! I am glad they are here , for the time being , but I didn't call them. They ran full speed this direction. Nuclear war couldn't run these guy's away !

Where am I too find all of these competent drillers and geologists.Certainly not over at PXP. According to your rather dramatic illustration , those guy's are due for consignment at the looney bin. I read that those guy's actually are going to pay 50 % of the costs and risks, I might add,for only 20 % of the procedes. What were they thinking ! Hello looney bin! You aren't angry because you work for PXP are you ? HA! HA! Just kiddin'.

Please, whatever you do, try not to make me feel guilty about trying to get over on BIG O & G . When EXXON can make $9,000,000,000 clear profit in one quarter and stocks go down $2 a share.......Please. Thats almost as ridiculous as Exxon making $.09 per gallon for gas.

Everyone is entitled to their own opinion. By all means continue to give us your side of the play. Just don't expect us to swallow this crap hook line and sinker anymore.This is a new day. A day where knowledge isn't only for the insiders.Corporate America isn't what keeps this country afloat.They may feel and act like they are above the law,but they are not. The only thing I will ever owe Big O & G is a swift kick in the pants everytime I have to fill my truck up with gas. If the risk outways the reward , then leave it in the ground.
Good evening and thank you for your post.
Thank you snake for your advice. I really enjoy reading your replies. I figure even after paying fees and costs, It still should be better than signing for 25% but risky if no well is drilled or comes up dry. I'm near a pipeline and also in a sweet spot. Wish me luck.
O my, snakestewart. I was typing the same time as you and you beat me to the enter key. When I started, there were zero replies, so I didn't have benefit of your response.

I really didn't mean to be slinging anything, but perception is reality, so regardless of my intent, that's how it came across, so that's what I must have done. To anyone I offended, especially rocker, my humble apologies.

I don't want to have anyone feel guilty either. I am trying really hard to do the same thing you are - get my fair share from big O&G, not be their apologist. But in doing so, I recognize that I, for one, need them in the picture. I grew up in the oil patch in Texas. (Dad was blue collar, but it paid the bills.) I can't claim to know much about the business, but I did come away with the impression that it took a lot of know how and fortitude to be successful. Going it alone would be way out of my league for sure. I do own 100% of it, but if I have no way to produce and sell it, what good is it?

I don't follow your PXP illustration, though. At an average cost of $1/mcf to bring the gas from HS into production (per Chesapeake, as I recall), and a market price of $8+ for the product, PXP could pick up 50% of the cost ($.50/mcf) in return for $1.60/mcf (80% of $8) and clear $1.10/mcf. That sounds like a pretty good investment to me. In the scenario I had in mind, which is what I understood rocker to mean, a PXP would bear 100% of the cost and give me 100% of the net (revenue - cost). In which case, it seems to me they would have zero return on their investment. Maybe it is overly dramatic to call that insanity, but you sure wouldn't stay in business very long.

I really do appreciate this web site and all of the posts on it. I only picked up on this thing last Friday when I was contacted by someone representing Encana (1500/acre). Were it not for this site and posts from people like you (yes, I have found your posts very informative and I thank you for that.) I'd be one of those poor folks getting a fraction of what they should get in this frenzied market.

So please don't write me off and out of the little community that has formed here. I'm rooting for all of us to get fat bonus money and enough royalty to keep our families financially secure for a long time.

Thank you for helping me understand how I was coming across.
You may find out in the end that being an un-leased interest is the way to go. In my experience it is not, and I personally don't want to be an un-leased interest. I can't afford to go consent, nor do I want to take the gamble. I don't want to wait even longer on non-consent, I suppose it is the "bird in the hand" argument.

Randy
vigo:

This site is (indeed) about what you have just stated.

The majority of us "Haynesville Shalers" over this direction try to walk some in one another's shoes, so to speak. We try not to deride others opines too much, and, in keeping our opines at a respectable level...away from harsh "personal" or "professional" punches, we get to learn more about the O&G business than any one individual would ever believe they needed to know in one lifetime.

That said, as the months go by, becoming better informed is going to lead to better leasing contracts for NWLa mineral owners. But the O&Gs are always going to have these contracts "weighted" overwhelmingly X overwhelmingly X overwhelmingly in their favor. I don't care what riders, addenda, clauses, etc. are added or deleted from these leases. It does not matter what bonus/royalty moneys mineral owners procure...the O&Gs will never, ever feel even a slight twinge of pain in their collective pocketbooks. The mineral owner will always be stretching to get a more equitable deal. And, held under production in the HSP will be a very, very long time...past my time on this earth. But that will be just how long (imho) the O&G companies will be enjoying the bounty from NWLa residents...and just how long NWLa residents will be looking at their signed leases...hoping they too will still be enjoying that bounty.

So, when we landowners/homeowners opine about being caught without the benefit of "today's" information and sites like "gohaynesvilleshale.com," try to walk a "shale" mile in our shoes.
It truly will help one's understanding of some of the disappointment and dismay at signing early leasing agreements that we all wished looked like today's contracts.

Have a Great 4th of July! Freedom Rings!

DrWAVeSport 7/3/2008
DrWAVeSport,
You Rock!!! Have a safe 4th of July. Freedom rings indeed. A special shout out to the troops that maintain our freedom.

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