Ashland Lease: Approached to lease by a CHK Representative.

My husband and I have been approached by a Chesapeake rep regarding a lease on our property.  Does anyone have an idea what the going rate is for per/acre lease and royalty amount in that area?

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Permalink Reply by Mac Davis on September 22, 2010 at 5:43
Welcome to the site, Mary.

How about section, township, range,(s-t-r) and acreage?

If you don't know STR, how about a road intersection, Google maps link, or something else we can find on a map?
Permalink Reply by Mac Davis on September 22, 2010 at 6:39
There are some pretty good wells that have been drilled near Martin.

There's one well being drilled right now just north of Ashland off of LA 155. As of 8/13, it's down to 9000 feet deep, going to 12,800 feet and then going horizontal for about a mile. It might well have been finished by now and just isn't into SONRIS, the Louisiana government site, yet. The data is over a month old.

http://sonlite.dnr.state.la.us/sundown/cart_prod/cart_con_wellinfo2...

The well's being drilled by Chesapeake.

It's possible that Chesapeake has figured out this is going to be a great well, and is trying to lease up all the minerals in the area cheaply before the landowners figure it out. Or it could just be normal leasing activity.

Either way, take your time, don't be in any hurry to lease. Spend a lot of time figuring out what terms to insist on in the lease. Figure out terms like no surface rights, cost free royalties, no automatic lease extension, etc. There are some pages on this web site that have some info on this. The standard contract you're offered will have a lot of terms in it that are designed to scam you.

Is this where you live, or investment property?

What terms did they offer you? $ per acre and royalty percent?
Permalink Reply by Mary Kathryn Kenzel on September 22, 2010 at 8:56
Thanks for the response, Mac. Our property is only 27 acres located in Section 4, Twnshp 13, Range 7.
We have been offered 1/5 royalty and $1500.00/acre. And, of course, a letter that states they want an answer 20 days from the date of the letter. We were suckered about two years before Haynesville became big news and I guess they want to try again. This time we'll be prepared.
Permalink Reply by Skip Peel - Mineral Consultant on September 22, 2010 at 9:43
The last state auction tracts in Bienville to receive bids were in the July auction and they are not that close to 13N - 7W. They are in 16N & 15N - 9W. However they are for similar size mineral tracts. QEP is Questar E & P. Classic Petroleum bids on behalf of others. Usually Chesapeake.

BIENVILLE

T16N R9W 30.000 20386 QEP ENERGY COMPANY 30.000 $357,790.80 $11,926.36 $178,895.40 0.2500000

T16N R9W 30.000 CLASSIC PETROLEUM, INC. 30.000 $226,410.00 $7,547.00 $113,205.00 0.2500000

33 T16N R9W 11.600 20387 QEP ENERGY COMPANY 11.600 $138,345.78 $11,926.36 $69,172.89 0.2500000

T16N R9W 11.600 CLASSIC PETROLEUM, INC. 11.600 $87,545.20 $7,547.00 $43,772.60 0.2500000

2, 35 T15N, T16N R9W 84.140 20388 QEP ENERGY COMPANY 84.140 $774,011.43 $9,199.09 $387,005.72 0.2500000

2, 35 T15N, T16N R9W 84.140 CLASSIC PETROLEUM, INC. 84.140 $635,004.58 $7,547.00 $317,502.29 0.2500000
Permalink Reply by Mac Davis on September 22, 2010 at 10:32
What does "T16N R9W 30.000 20386 QEP ENERGY COMPANY 30.000 $357,790.80 $11,926.36 $178,895.40 0.2500000" mean?

I'm guessing .25 is 25% royalty.

30 Acres? What are the 3 different dollar amounts?
Permalink Reply by The_Baron on September 22, 2010 at 10:47
Skip is posting stright from the lease sale results report.

you can view the info on SONRIS
Permalink Reply by The_Baron on September 22, 2010 at 10:47
The three dollar amounts are

Cash Payment - Bonus perAcre - Annual Rental
Permalink Reply by Skip Peel - Mineral Consultant on September 22, 2010 at 10:51
$11,926.36 is the bonus bid. $357,790.80 is the bonus bid times the bid tract acres, 30. State leases are for a one year term. In order to extend the lease if not drilled in the 12 month lease period, the lessee must pay 1/2 the original bid amount which is $178,895.40 for the second year. I don't deal with state leases so I may have it backward. The Baron does deal in state leases and I'll invite him to correct me if I have misstated the process.
Permalink Reply by Mac Davis on September 22, 2010 at 11:13
Baron, Skip, thanks for the info.

So they're getting roughly $12,000 per acre for a 1 year lease. They can extend for $6,000 per year. Correct?

Mary, don't get too excited. That's in an area that's much more proven and certain to produce gas. It's up near Ringgold, 17 or so miles away, which is a long distance in terms of oil and gas production. However, a small dance around the kitchen table and a yeehaw! or two might be in order.

I wonder if it's easy to get a copy of the lease? It would be interesting to see the terms on a lease that the state is willing to sign.
Permalink Reply by Skip Peel - Mineral Consultant on September 22, 2010 at 11:23
Mac, we have posted, explained and discussed state leases off and on for two and a half years. My approach from my first GHS post has been to discount rumors and rely on verifiable data sources wherever possible. That's why I emphasize SONRIS Lite and Classic, parish clerk of court filings and state mineral board auctions. You and anyone else who cares to review state leases will find them available online. The same with the SONRIS databases. As The Baron mentions they are not a perfect barometer of value as a snapshot in time but they are factual and far superior to 95% of the rumors that get posted to this website.
Permalink Reply by Mac Davis on September 22, 2010 at 10:52
Laugh at them. I wouldn't even answer the letter. Give them a double laugh about 1/5 royalty.

I think you're in a good "sit and wait" situation.

"27 acres" is not an "only." That's potentially worth enough to get yourself some good professional advice. If it's a good section, prices are good, etc., you could get well over a million dollars worth of royalties over the next 10 to 20 years. Get a good oil and gas lawyer and figure out the terms in the lease to protect yourself.

Don't spend the money yet, though. O&G is a boom and bust cycle. You can also somehow turn out to be in the section that doesn't have any gas, or there's some sort of problem that prevents drilling, or there's something from the 1930's that means you don't own the minerals, etc. The Feds may decide they own all the natural gas in the country, etc.

One other comment. The well they're drilling is listed as "Cotton Valley" formation, not "Haynesville Shale." That doesn't necessarily mean anything to you or the driller. It might not even be "true" in some sense. Don't worry about it, it could produce as much gas as an official

By the way, the well I mentioned is actually south of downtown Ashville on LA 155.

If you do elect to wait, you do run the risk that the well turns out bad and there's never much gas developed in your area. I'd take that risk. I'd definitely go for the 1/4 royalty vs. 1/5. Remember, that even if you don't sign, if they drill, you still get money, you just have to work harder for it.
Permalink Reply by Skip Peel - Mineral Consultant on September 22, 2010 at 11:09
Mac the only thing you left out was your qualifications and experience with interpreting well logs. Otherwise you cover all the bases with that post. LOL!

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