$500.00 check from Audubon Oil & Gas for drilling on the section next to mine?

Jack's 20 acres of HS land is in a section corner. (section 21  T10N   R11W)

A man from Audobon Oil & Gas called Jack Blake today and wants to give Jack a check for $500.  He says it is because they (SWEPI) are drilling a well on the section next to me and the wellbore will go under our land at some point, but it will be perforated in the section next to me.

SWEPI already drilled a well in my section and the guy from Audubon said they got the bordering land owners to our section to sign these agreements for $500.00 each.  He says it doesn't matter how much land you have they pay only $500.00 for this.

He said they do this to get the maximum production from each unit.

He kept saying signing and accepting the $500.00 is the "neighborly" thing to do. 

Jack asked the guy if Jack would be offered more if he waited and the Audobon guy said if you don't sign, they just kind of redesign the well bore to not go under your land.

 

The guy wants to get Jack to sign within the next several days.

 

What should Jack do?

 

Thanks,

Jack Blake

 

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Replies to This Discussion

Permalink Reply by Skip Peel - Mineral Consultant on October 11, 2010 at 11:42
You're welcome.
Permalink Reply by Linda Whatley on October 11, 2010 at 15:43
Very iformative video..........thanks Skip.
Permalink Reply by Skip Peel - Mineral Consultant on October 12, 2010 at 2:39
You're welcome, Linda. This may be a good point to remind the members that there are good reference tools and visuals that help to explain the Play contained in the "Media" section of the site under "All Photos". Maps, grids, land description tutorials, etc. Don't be put off by all the non-shale related pics, just review them all and pick out the ones of particular interest. There are good videos also. Many members get stuck on the Main Page. There is a wealth of additional information available for those willing to explore other areas of the site.
Permalink Reply by Inquirer on October 12, 2010 at 3:00
Skip, Thanks for the video link. It's great! ~Ann W.
Permalink Reply by Skip Peel - Mineral Consultant on October 12, 2010 at 3:06
You're welcome, Ann. It really should be required viewing for all newbies as it explains so much that is difficult to convey in words. Once a member has seen a visual representation of horizontal drilling and multi-stage fracture stimulation it helps make since of a lot of the comments in discussion threads.
Permalink Reply by Inquirer on October 12, 2010 at 3:14
Funny that I almost added that this should be required for all GHS members, especially those of us who are still learning the basics. I'm sending the link to a lot of my friends who will appreciate it also. Thanks
Permalink Reply by Mac Davis on October 11, 2010 at 10:32
It's only $500. Hardly seems worth the effort to do something that might have some effect on your land later. Not worth hiring an attorney to check on it. Is the agreement you're looking at short and simply worded?

The fact that they're in a hurry sounds suspicious.

"They only pay $500 no matter how much land you have" sounds like more BS.

"The neighborly thing to do" bit really makes me think he's a scam artist. Have your neighbors offered to share part of the proceeds from their royalties in the next section because you're such a good neighbor? It's "neighborly" to agree, but if you don't agree, they just adjust around you. So it hurts the neighbors if you don't agree, but the operating company isn't hurt if you don't. Yeah, sure. And the adjustment only costs the operating company $500 or so.

How easy will it be for them to steer a lateral around your land? What's the dimensions of your land? The east-west dimension would seem to be the most important in terms of "blocking" a well. Do you mean your land is in the corner of the section? Which corner it's in would give you a clue as to which section they're talking about, permits issued, etc.

Some friends I have near Cross Lake got a much higher offer for a similar deal. However that was shortly after the boom/crash, there's weirdness with the land ownership up there, and I'm not sure the deal ever completely worked out. They're also right up against the lake, so the bore HAD to go under someone's land outside the unit. I'm thinking they got tens of thousands of dollars in their offer. (Foggy recollection, second hand info, etc.) Also remember, a "bore" deal is a one time payment, not a "pays off over the years deal like a lease.

If you let them run the bore under your land, that makes it more likely that the surface well will be near your land.

I smell a rat, and the money doesn't sound worth the risks of any kind of O&G agreement. Of course, I tend to smell a rat in any O&G deal. However, there usually IS a whole nest of rats in any O&G deal.
Permalink Reply by Skip Peel - Mineral Consultant on October 11, 2010 at 10:45
It is possible that a well bore easement is worth $10,000. Or more. But it is unlikely that Jack or 99% of lessors would know that short of professional counsel. Such as an O&G attorney who has negotiated well bore easements previously.
Permalink Reply by Mac Davis on October 11, 2010 at 14:26
So Jack might just sit on it and act uninterested and see if the offer gets high enough that it's worth hiring an attorney or they steer the lateral around him. Losing $500 doesn't seem like a big risk vs. possible larger payoffs or whatever downsides there might be about agreeing to have the well bore under Jack's land.

If Mac were in this situation, Mac would turn down the $500, even if Mac knew they'd go around Mac's land.
Permalink Reply by Parkdota on October 11, 2010 at 10:45
"Neighborly", huh? Maybe Audobon Oil & Gas along with others could've been more "neighborly" than signing up many land owners at cheap a#% leases only to flip them for millions. They aren't looking out for you and don't fall for the psychology. Do what you want to do.
Permalink Reply by ken hatcher on October 11, 2010 at 12:00
It is so!
Permalink Reply by lars bly on October 11, 2010 at 14:33
Who the heck is Jack Blake,and who cares what he has to say in his distended 3rd person theatrics.?

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