advice needed on lease offer in S. Caddo offered by Clark Energy

We have long waited for any thing positive to come from

our 125 acres in Section 33  16n-13w in S. Caddo Elm Grove, home to the failed

Debroeck well.  We were recently offered a lease which would

pay 300 dollars an acre and Royalties at 1/5 of any

producing minerals.  The drillers state that the lease will only cover

minerals produced from "the surface of the earth to the top of the

Haynesville formation",  What might that mean that they are

drilling for?and is 300 with a 1/5th royalty a fair deal?. Any advice would be

appreciated.

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I'm guessing it is Cotton Valley and associated liquids.

 

John,

The two law firms that have been recommended in this thread are both excellent choices. For the size of your tract of land hiring an attorney of the caliber you would find at either firm would be well worth it.

You should give their advice far greater weight than what you see on this thread, not because the opinions expressed here aren't valid, but because they will appreciate your particular situation better than anyone else. 

As for what they are probably looking for, it would almost certainly be natural gas or associated liquids, not oil, and the Cotton Valley formation would be a good bet.

What if they agreed to 500 an acre and 1/4

It is your property, good luck.

ShaleGeo,

VERY GOOD ANSWER. WELL SAID. YOU ARE TO BE COMMENDED

Aubrey

Jay, the point was that an offer can be negotiated and should be. Anyone going to the table with the mindset of "I'm not going to get more than $250.00 an acre" is only hurting themselves by not atleast trying. You have absolutely no idea what the company will pay.

As far as being an expert in Elm Grove, Louisiana....you are correct, I am not. I do know that when I was in the field and buying leases years ago in the Bakken that the going rate at the time was $1,000-$1,500 per acre and my company would pay up to $2,250 to get our foot in the door. I also know that a lot of people closer to Louisiana got burned by holding out during the Haynesville grab.....so if this guy thinks whatever the current offer is may be good for him (even possibly more so with a little bit of skilled negotiating) then why tell him to throw it in the bin when he could have absolutely nothing on the table for the next 3 years? It's just simply bad advice and makes me cringe to even read such responses. It's easy for someone to say the offer is trash when they have no interest in the property.

"What if" is correct......but I can guarantee he's only hurting himself by taking any other advice from this thread besides contacting a professional for advice.

And just FYI - I was only attempting to talk some common sense on negotiating....I'm sorry that because of differing opinion and overall level of optimism, you feel I have no idea what I'm talking about. I randomly logged in a couple of days ago and happen to see this thread and, in my opinion, ignorant advice being given which made me want to jump in to encourage the guy to seek a level of help a bit higher than what you'll find from people with the time to post over and over again on a message board. 

In my own defense and for your information, I am a CPL and in-house with big oil in Denver, where I have been for 7 years. I joined this site not too long ago when I was looking for informaton on the TMS players while I was negotiating a lease for a family friend as my company has no interest in the Haynesville or TMS. I realized real quick that 5% of the postings were of any help, much like this thread, but I assure that I have an idea of what's going on in the industry overall (not specific to Elm Grove, LA) and certainly how to negotiate a lease.

Back to real work.

Jay,

Seems to me you are  exactly on target. Keep telling it like it is.

BTW, I am also geologist and landowner in NS-Rock Field for 50 plus years.

Also, I have given and negotiate leases for free to get Hill sd. well drilled

Aubrey

As a trained negotiator who's haggled with a variety of landmen over numerous lease offers from maybe a dozen operators (over the decades) in the Elm Grove field (long before the HA ever came a callin') . . . I also would toss that offer in the trash.

In other words, the simple act of not accepting it -- to me -- is a valid negotiating approach since it should serve to get the landman's attention, which means the ball's in his court to make a more reasonable offer.

Yep, that's exactly what I'd do.  Toss it.

Plus, being as some of us on GHS are sorta jaded -- we know to only deal with well-respected operators and avoid inking leases with flippers (or, as some folks call 'em, "investors") . . . i.e., some of us know to avoid such middlemen.

  

 

I am grateful for all of the advice and from all

given suggestions. I guess the overall opinion is for

me to find out who the operator is and make sure

that 1/4th is paid, regardless of the bonus.  My only

concern is that this unit will produce modest results

similar to the first Debroeck well which posted 268mcf

in 2008.  Also, how do I find out who the operator is.

The lease I received made no mention of who would be drilling.

John:

Clark Energy may not have a deal with an operator as of yet.  In other words, they could simply be leasing up tracts of land, and then once they have enough leases, they could begin shopping their leases to the highest bidder.

Or, it is possible that they already have an operator that doesn't want to be known.

Ergo, short of asking the landman you're dealing with or short of hearing intel from others, it may not be easy to find out the name of the operator (if there is one).

That stated, if Clark is serious about making you a better offer, then you'll eventually hear back from them (possibly).  Or maybe another landman will come along and make you a better offer from another operator.  It can and does happen. 

Nevertheless, you need to realize that it's also possible that you may not get another/better offer anytime soon.  Yet with 125 acres -- which is a decent amount of land to give you some leverage -- if there's O&G geology underneath it that looks to be productive . . . then more than likely you should be able to get a better offer at some point in the future.

Yet there are no guarantees, of course.  But waiting to see how the dust settles might be wise (at least in the short term).

Never easy.

Good luck.

Asking the landman directly who the operator will be and what the target formation(s) will be are valid questions to ask. However, be prepared for the landman to tell you that he either doesn't know or can't say, both of which may very well be true.

There is a provision in the lease that states "This lease shall remain in full force and effect

during the primary term, without any additional payment and without leasee being.required

to conduct any operations on the land (either before or after the discovery of minerals),,

except to drill such wells that might be necessary to protect the land from drainage, as

hereinafter provided".   How should I Interpret that?   The offer is for a 3 year lease.

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