Replies to This Discussion

Permalink Reply by Dion Warr, CPL on December 16, 2008 at 6:02

linda:

Talk about trying to heard cats into a bag! Truth is, at least according to Secretary of State records, Kouga did not 'change their name', as purported. Columbia Petroleum, LLC (not the Shreveport-based corporate entity, and not "Inc.") was qualified to do business in LA in June 2008: (link posted here)

http://www400.sos.louisiana.gov/cgibin?rqstyp=crpdtlC&rqsdta=36...

MS Oil and Gas Board (MS OGB) indeed shows 5 wells operated by Columbia, and at least two rigs running (perhaps 3, much of the scout data that is regularly submitted to LA DNR-OOC is actually communicated to field inspectors prior to the more substantial materials being submitted to MS OGB).

Also, Sebastian Greaves does have some roots in the MS oil and gas business, although it does not appear to be his only line of work. His wife also graduated in the same Jackson Prep school class as Trey Copeland, (Esquire), agent for Kouga in MS. (Start humming 'It's a Small World' now.) It's amazing what you can find out on the Internet.

Anyway, the address listed for LA SOS is off of Corporate Blvd. here in Baton Rouge is also a listing for C T Corporation System. So once again, you're dealing with a out-of-state Jackson, MS-based business entity with a certain level of mystery.

I would suggest the following:

(1) Tell them to have a nice day, and good-bye. Politely. Firmly.
(2) If you wish to speak of more than the above well-wishes, at least tell them to be straight with you, and to decide what entity they want to conduct business through this week.
(3) Continuing with (2) above, ask Mr. Greaves who the principals are in this transaction (and their background), and what their intended target is affecting your property. Advise them that continued obfuscation and intrigue will only result in a response similar to (1) outlined above, or at the very minimum, severe restraints being placed on their lease terms and provisions upon counteroffer. If this makes it not worth their time, it is certainly not worth yours.
(4) Based upon what they've fed you already, if you really wish to continue, insist that you will be leasing to an entity capable of developing your acreage as an operator, not to an "Pick a name out of the air" shell LLC, that they will submit an offer IN WRITING, along with a proposed lease form for your review and revision. Tell them that, based upon their prior conduct, any offer from them must include a no assignment without prior written consent clause, such consent at lessor's sole option (DO NOT accept the caveat 'such consent not to be unreasonably withheld' from these guys). Then tell them that you intend to let this property out to competitive bidding, so they should make an offer that would justify your continued consideration.

Can you tell that I would not be real crazy about this offer anyway?

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Permalink Reply by Skip Peel - Mineral Consultant on December 16, 2008 at 13:01

Dion. Are you sure you are one of those untrustworthy, industry insider landmen? You sure don't post like one. Good advise. And entertainingly presented. I had skimmed some of the Kouga discussions in the past. The name Columbia got my attention as I remember that they made a presentation to some folks at the Cowboy Church in Haughton a number of weeks back. I sense a flashing red light and warning tones going off in the background. Anyone reading this response who lives in the Haughton area should consider reposting it on the Bossier Group page.

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Permalink Reply by insomniacnla on December 16, 2008 at 6:18

I checked the Caddo Parish Courthouse records for you. There is only one lease that has been recorded for Kouga, recorded in November, 2008 for a little over 6 acres. Now you can tell him you did check the Caddo records.

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Permalink Reply by linda on December 16, 2008 at 12:45

Thanks insomniacnla. Appreciate all the info. Also Dion. I think this is just a small company trying to move into the Haynesville. Id like others to be aware of them in case they are approached.

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Permalink Reply by BirdDawg, plain ole' idiot on December 16, 2008 at 12:52

Linda,
I don't think they are actually trying to "move into the Haynesville". Not in the sense of being a viable player in the business. They are just trying to turn a quick buck at someone elses expense. People like them are always betting the farm on what they percieve to be someone elses ignornace.

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Permalink Reply by BirdDawg, plain ole' idiot on December 16, 2008 at 13:05

insomniacnla,
Those bad boys can cut up with that 6 acres. Hell I'm a bigger operation than they are. And that ain't saying much, for sure.

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Permalink Reply by HBP on December 17, 2008 at 6:45

I don't think they are "what KCS is to Petrohawk" because that was a merger or acquisition. I think Columbia/Kouga is just buying for someone. I agree that the flip market isn't there to attract someone from Columbia, MS to Shreveport - but I've seen stranger things.

Columbia does have many leases filed from early on for many small acre tracts. It appears they had a focussed area and bought - whether for them or someone else.

A flipper or blockbuster will buy wherever they can flip - in contrast, it appears these guys are being directed.

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Permalink Reply by Skip Peel - Mineral Consultant on December 17, 2008 at 6:55

HBP. I am not sure about them being directed. Their leases are small residential tracts for the most part with 1/5 royalty. I think it likely that they hope to assign them for a 1/4. Their focused area is in the core.

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Permalink Reply by ELLIS HUGH on December 17, 2008 at 7:42

What happens if they do not assign the leases they buy? Do they have to pay the mineral owners share of the royalties out of their 'non operating working interest"?

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Permalink Reply by HBP on December 17, 2008 at 10:37

I agree Skip. I now see the 1/5, so that may be the angle

Jim Krow is right, the play was so fast that there are holes all over it. The problem is that the price of poker is still high since expectations are still pretty high by landowners - so most cannot come in and sweep up too much. They will always find some here and there, but this is not the $200/acre buy in anymore.

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Permalink Reply by kevin mcclure on December 19, 2008 at 20:02

Remember you must have a minimum of 321 acres to hold a section. columbia is trying to gather acreage for free leases ,with no capital investment .It makes it easy to flip. Drilling companies have used companies like these when money is tight or they are frightened of trying to release after the cat is out of the bag . (New idea) I personally believe that this would be a better deal because of the shape of the econmy now and for the next 4 years. Example: lease with 12 month drilling commitment , 3000.00 dollar penalty per acre if not completed in that time frame , after the first year of gas sales, lease bouns would be paid to landowners. Minimum of 30% royalty per acre to be paid at the beginning of the first year. This allows them to recoup lease bouns money instead of borrow or trying to find investors.I also personally believe that most acreage leased in south west caddo for the next 3 years will be flipped to the biggest player in most cases . The question all need to ask them selfs do we lease now or do we wait for the economy to get better ,some times a bird in the hand is worth two in the bush. Because of the term of some of these leases time is on there side. They may leave and then come back ,they have so much to drill .They are drilling the the cheap leases that where taken early in this play to maximize profit,its called cost dollar averaging. The key is to get drilled. They are here! calculate if you have access to a royalty calculator buy waiting 3 to 4 years or leasing now . In most cases in the first year of reciving a 30% royalty you could recoup your lease bouns plus. Would you rather be first or last like those in shreveport, why? No pipeline infurstructure in town , takes longer to put in place in town because of utilities, not to mention drill sites. And there are now larger wells being found and being drilled north of I-20 as we speak. Bigger wells and cheaper leases. There will be over 20 new drilling rigs here after jan 15 2009 in most cases 50 days to complete a well . Do the the math.

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Permalink Reply by Skip Peel - Mineral Consultant on December 20, 2008 at 1:10

Kevin. You make good points. I have sat in on several brain storming sessions where new business models for leasing have been floated and debated. If the new models provide significant benefits for both mineral owner and producer, I think many of the current financial difficulties slowing development may be overcome. I would appreciate some feed back from O&G professionals amongst the members. Under such a scenario, do you think that a 30% royalty would be acceptable? Would a $3,000/acre drilling commitment penalty be acceptable? Would mineral owners and producers enter into leasing agreements that compensated the lessor based on the production of their wells? Effectively sharing some of the risk. If the economy is crippled for 2 to 3 years and producers are unable to finance levels of development that would otherwise make good business sense, would mineral owners be willing to enter into new forms of leasing that allow development to go forward? kevin mcclure, this debate is one that a majority of the members on both sides of the equation should be involve in. I suggest that you post this as a discussion topic on the Main Page. Please think of a catchy title that will draw the attention of the members. If posted at a time when there is heavy traffic on the site, I suspect you may find a significant amount of interest. And comment from both sides of the equation.

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