$2,000,000 lost because he wanted $2,400,000 in Sabine

So I'm in the Desoto courthouse today and a young guy (I guess about 24) sitting in the hallway on a folding table working on his laptop gets a cell phone call. It's like talking in a library, you can hear conversations no matter how low somebody tries to talk. He goes on to tell his friend on the phone about how he was working on a 200 Acre tract of land in Sabine. He offered $10,000 an acre on behalf of Chesapeak. The land owner said he wanted $12,000 so the guy says he would take that offer back to Chesapeak. I didn't catch in his story how long this process took but after he called in the counter offer his boss told him that they weren't taking any new contracts in Sabine. If there wasn't already a signed leased they weren't making new offers. The land owner called him and said "so what about my $12,000 an acre?" He told him they couldn't do that, so the land owner said "ok, I'll take the $10,000". He says "no, you don't understand, we aren't even offering that now". In telling the story to his friend on the cell phone he was taking great joy in the fact that the entire $2,000,000 was now off the table. I got the feeling he is tired of working all the back and forth negotiations.

Don't ask me any details because I do not know anything more than what he was saying on his end of the conversation. I would guess the land owner will get another offer from somebody at some point. It was just very interesting to hear such numbers. That guy was going to bed one night thinking he's got at least $2,000,000 in the bank and then the next day he's got nothing. I'll be looking in the newspaper to see if some wife killed her husband because you know he was saying to her "don't worry, I know what I'm doing."

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Permalink Reply by Don Howard on August 17, 2008 at 15:12
How much acreage do you have and where?? Might be interested if you have a drillable tract and don't want a zillion dollars for it. Don
Permalink Reply by John on August 14, 2008 at 3:11
Can you explain then, why lease bonuses for the CV have remained around $200 per acre and the O & G companies have known about and produced the gas in place for a long, long time. If I have read my history books correctly, anytime there is a huge discovery there is always a huge land grab that will soon follow. Eventually the grab ends, wells get drilled, the "hype" is over, and hold out land owners grow envious of there cousins in neighboring towns who are receiving royalty and end up leasing for the normal $200 to $300 per acre years later.

In my opinion, the high bonus payments that we are seeing today for the Haynesville Shale formation is just as bad as someone walking into a casino and winning $1million dollars on their first pull of a slot machine. That same person is going to think that they can do it again each time they go back to the casino. These bonus payments will not last.
Permalink Reply by Snake Stewart on August 14, 2008 at 6:12
Hello Mr. John , Has there ever been a CV formation well that would do 16.8 Mmcf a day ?

You may be right about the envious neighbor thing but I don't know any of them that wouldn't swap places with me right now if they signed 6 weeks ago or longer !

If you believe this is just hype then you know nothing of this shale play.
Permalink Reply by Keith Mauck (Site Publisher) on August 14, 2008 at 3:39
"Don't ask me any details because I do not know anything more than what he was saying on his end of the conversation."

This sounds like something I tell my wife!
Permalink Reply by Grice on August 14, 2008 at 3:45
This is just an uneducated speculation, but the trend of reduced leases, directly ties into recent fluctuations of the stock market. While the dollar steady increases, energy slowly is falling at an equal rate. The market is in a quandary right now, as conventional trading no longer seems rational. This can be noted by the recent pipeline explosion, which reduced oil flow substantially, yet the price of oil continues to decline. With Oil and Gas stock mirroring one another, the decline of energy stocks may be a leading contributor for the recent withdrawal from this area.

Like I stated, this is just an uneducated speculation. But I believe the drop in new acquisitions has little to do with the rising demand for higher bonuses by landowners.
Permalink Reply by Jack B2 on August 14, 2008 at 4:10
In my view, the answer to this is greed. The big o&g's ran the price up to scare out the small independents from leasing at 100 to 200 dollars per acre and drilling conventional wells and frac them to produce enough and hold by production then shut them in before they stop producing. They in turn would have to be bought out or taken in as working interest. Way cheaper to pay the leases. They are just playing the land owners in the middle now they have independents frightened out of the picture. I think it is unfair and wrong to call the land owners greedy, greed lies where the money is and lets be honest we ALL know where that is. To amass the wealth that big o&g has, someone and that's a lot of someone's have to loose.
Permalink Reply by Dorcheated A1 on August 14, 2008 at 4:27
Gas prices are down so the O&G"S don't wanna play ball. Everything in the world indicates natural gas is the energy of the future. When the price goes up, and it will go up again the process will start all over.
Permalink Reply by SharonB T18N R15W S8 on August 14, 2008 at 4:46
Here's my take, and I'm surprised no one has stated it. The landmen have moved out, most likely because most of the marjority of the section is under lease and has been turned over to the legal department to prepare the legal notices of forced pooling. It is my understanding that the final offer will come from the company not via a landman. Can anyone clarify the sequence of events once a section is being prepared for forced pooling.
Permalink Reply by Grice on August 14, 2008 at 7:09
If forced pooling is to take place, a notice is to be sent to all mineral owners of the property to be included in the pool. The notice state that a request has been made to pool your mineral rights, and that a public hearing is to be held before the request can be accepted. After the hearing, another notice will be sent to all mineral owners, providing critical data about the well that is to be drilled. The mineral owner will have 30 days to respond to the notice. The mineral owner can elect to participate as joint owner of the well. As joint owner of the well, each participant will be responsible for their equal share of the cost for the well. If you fail to respond within the 30 day time frame, you will automatically be deemed a non-participant in the well. If you agree to participate, and fail to pay your invoice (the O&G Company will provide a detailed invoice to all participants) within 60 days, the O&G Company can claim your share of the well to recover any unpaid expenses of drilling the well.

I am still working through the legal "mumbo jumbo" , but this is what I have gathered so far. I will add more, once I am finished.
Permalink Reply by Iris on August 14, 2008 at 6:18
Sounds like an "acting" sham to me...
Permalink Reply by kmfioc on August 14, 2008 at 6:47
Because you have to pay your part of production. When you lease the 25% royalty is free.
Permalink Reply by ETOilman on August 14, 2008 at 6:52
It is possible that they are taking a break and concentrating on "filling in" the acreage position that they already have. I do not think that it was a contrived thing by the landman in the courthouse with the intent to be overheard.

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