BONUS PAYMENTS DEPEND ON MANY FACTORS-SHREVEPORTTIMES.COM ARTICLE -12-22-08
shreveporttimes.com
December 22, 2008
Bonus payments depend on many factors
By Bobbie J. Clark
bobbieclark@gannett.com
All land is not created equal.
Just ask a landman or someone who is negotiating a mineral lease.
Bonus payments for leases have varied, with reports of people getting more than $15,000 per acre, while others have gotten offers of around $5,500 per acre.
Allan Seabaugh, a local oil and gas attorney, drafted clauses for a lease with Petrohawk Energy Corporation worth $16,550 an acre for neighborhoods around Ellerbe, Norris Ferry and Wallace Lake roads.
Competition was the primary reason they got so much, Seabaugh said.
They were able to pit Petrohawk and Chesapeake Energy against each other, driving the price higher and higher. "They bid hard for it," he said. "We were pretty fortunate."
There are several factors that go into lease bonuses, including accessibility to a drill site and pipelines and contiguous acreage, Seabaugh said. Rural communities will probably get the higher prices because there are fewer people with more acreage, he added.
Clay Baskin, director of public relations for Twin Cities Development, said it is easier — and cheaper — for them to deal with one person who has 300 acres, instead of hundreds of people who have a tenth of an acre each.
Twin Cities handles lease acquisition for Chesapeake, which has the most land under lease at about 550,000 acres.
"There's a lot less legwork," he said. "It cuts down on our overhead costs."
Twin Cities' initial offer for landowners is $5,500 per acre, but that number is not set in stone.
For example, The Times has reported the Dogwood Homeowners Association recently made a recommendation to accept Twin Cities Development's offer of $8,750 per acre, if 90 percent of the Dogwood community signs leases.
The Greenacres Place neighborhood in Bossier City has gotten Twin Cities' standard offer of $5,500 per acre, if 90 percent of the neighborhood signs, according to the latest offer sheet.
Baskin said people who live in more urban areas have a better chance to sign a lease if they come to them with a large tract of land.
That's exactly what the ShreveCentre Coalition is trying to do.
Currently, it is made up of 16 neighborhood associations in Shreveport.
Larry Farley, one of the group's organizers, said few neighborhoods in Shreveport have gotten — much less signed — a mineral lease.
"We're still getting organized," he said. "One of the neighborhoods now in the coalition ... previously put a package together and went to Chesapeake. They told them to get with some other (neighborhoods) and come back."
That's easier said than done. Many don't know who to contact or where to get started.
Ora Hart, president of the Cedar Grove Neighborhood Association, said her community has yet to receive any lease offers.
"I went to a meeting, but they couldn't tell me who was working in Cedar Grove," she said. "We should be getting something. Cedar Grove is such a large area."
The South West Shreveport Home Owners Coalition is another group of neighborhoods that has banded together to negotiate mineral leases.
Jerry Merrill, an oil and gas professional, has helped several neighborhoods in the coalition negotiate leases.
The latest lease bonus he negotiated netted $10,750 an acre. However, he has heard of much higher numbers. Without being specific, he said a church off Kingston Road got $17,500 an acre.
He also has heard of someone getting $25,000 an acre for 12.5 acres.
"They are paying insane money for these properties," he said. "This whole area is blessed."
Tom Dark, chief administrative officer for the city of Shreveport, advised that people will be best served by joining one of the two neighborhood coalitions in town.
"If not, then people can go door to door to see if they can find some neighbors to join them," he said.
The more neighborhoods that come together, the better the price will be when negotiations come around, he added.
Dark said there was a time when the highest bonus numbers were hovering around $10,000 an acre. Now, the big ones are at $20,000.
"It's clear the market is still interesting," he said. "There is a limit. We just don't know where it is. We were told sometime ago that it might be the upper teens or low 20s."
Additional Facts
RELATED LINKS
Petrohawk Energy Corporation: http://www.petrohawk.com/home/
Chesapeake Energy: http://www.chk.com/
December 22, 2008
Bonus payments depend on many factors
By Bobbie J. Clark
bobbieclark@gannett.com
All land is not created equal.
Just ask a landman or someone who is negotiating a mineral lease.
Bonus payments for leases have varied, with reports of people getting more than $15,000 per acre, while others have gotten offers of around $5,500 per acre.
Allan Seabaugh, a local oil and gas attorney, drafted clauses for a lease with Petrohawk Energy Corporation worth $16,550 an acre for neighborhoods around Ellerbe, Norris Ferry and Wallace Lake roads.
Competition was the primary reason they got so much, Seabaugh said.
They were able to pit Petrohawk and Chesapeake Energy against each other, driving the price higher and higher. "They bid hard for it," he said. "We were pretty fortunate."
There are several factors that go into lease bonuses, including accessibility to a drill site and pipelines and contiguous acreage, Seabaugh said. Rural communities will probably get the higher prices because there are fewer people with more acreage, he added.
Clay Baskin, director of public relations for Twin Cities Development, said it is easier — and cheaper — for them to deal with one person who has 300 acres, instead of hundreds of people who have a tenth of an acre each.
Twin Cities handles lease acquisition for Chesapeake, which has the most land under lease at about 550,000 acres.
"There's a lot less legwork," he said. "It cuts down on our overhead costs."
Twin Cities' initial offer for landowners is $5,500 per acre, but that number is not set in stone.
For example, The Times has reported the Dogwood Homeowners Association recently made a recommendation to accept Twin Cities Development's offer of $8,750 per acre, if 90 percent of the Dogwood community signs leases.
The Greenacres Place neighborhood in Bossier City has gotten Twin Cities' standard offer of $5,500 per acre, if 90 percent of the neighborhood signs, according to the latest offer sheet.
Baskin said people who live in more urban areas have a better chance to sign a lease if they come to them with a large tract of land.
That's exactly what the ShreveCentre Coalition is trying to do.
Currently, it is made up of 16 neighborhood associations in Shreveport.
Larry Farley, one of the group's organizers, said few neighborhoods in Shreveport have gotten — much less signed — a mineral lease.
"We're still getting organized," he said. "One of the neighborhoods now in the coalition ... previously put a package together and went to Chesapeake. They told them to get with some other (neighborhoods) and come back."
That's easier said than done. Many don't know who to contact or where to get started.
Ora Hart, president of the Cedar Grove Neighborhood Association, said her community has yet to receive any lease offers.
"I went to a meeting, but they couldn't tell me who was working in Cedar Grove," she said. "We should be getting something. Cedar Grove is such a large area."
The South West Shreveport Home Owners Coalition is another group of neighborhoods that has banded together to negotiate mineral leases.
Jerry Merrill, an oil and gas professional, has helped several neighborhoods in the coalition negotiate leases.
The latest lease bonus he negotiated netted $10,750 an acre. However, he has heard of much higher numbers. Without being specific, he said a church off Kingston Road got $17,500 an acre.
He also has heard of someone getting $25,000 an acre for 12.5 acres.
"They are paying insane money for these properties," he said. "This whole area is blessed."
Tom Dark, chief administrative officer for the city of Shreveport, advised that people will be best served by joining one of the two neighborhood coalitions in town.
"If not, then people can go door to door to see if they can find some neighbors to join them," he said.
The more neighborhoods that come together, the better the price will be when negotiations come around, he added.
Dark said there was a time when the highest bonus numbers were hovering around $10,000 an acre. Now, the big ones are at $20,000.
"It's clear the market is still interesting," he said. "There is a limit. We just don't know where it is. We were told sometime ago that it might be the upper teens or low 20s."
Additional Facts
RELATED LINKS
Petrohawk Energy Corporation: http://www.petrohawk.com/home/
Chesapeake Energy: http://www.chk.com/
Views: 161
Replies to This Discussion
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Permalink Reply by Spring Branch,mineral owner on -
To lease the remaining 140 acres @ your requested $22,500 per acre will cost them $3.15 million. The pad cost maybe $ 1/2 million. The pipeline can transport other gas in the area possibly. If there remains 140 unleased acres in the section, and you refuse to agree to terms CHK probably deems more reasonable, I suspect they do nothing and go spend their money in some other section or sections. If it gets to the point where they are about to lose meaningful acreage in your section, though I don't think they'd care to do it, it's possible they might drill a vertical Haynesville in your section, which produces enough gas to keep it HBP'd but not enough to make you happy, then wait you out. It would be interesting to see who gave first.
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Permalink Reply by Bill Murphy on
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I'm happy just the way things are now. I can wait for the rest of my life.
It's all up to Chesapeake.
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Permalink Reply by Spring Branch,mineral owner on
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Unless you have all 140 acres, other unleased acres in your section might not feel the same way. My point is, having some unleased acreage in a section is probably not a roadblock for most O & G companies. Having 22 % of a section being unleased could very well be a roadblock to drilling a $8 million horizontal Haynesville. The 30 % royalty demand @ $5.50 gas is probably a killer by itself. Depending on how old you are, corporations have unlimited life, people don't.
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Permalink Reply by Spring Branch,mineral owner on
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You're right KB, they can't hold his unleased acreage, but they can keep from losing the leased acreage in the section by drilling a vertical Haynesville which makes, say, 200 mcf a day for the next 20 years, ensuring that the 140 acres who hold out are not very handsomely rewarded. In the meantime they go spend their money elsewhere drilling sections which have a greater financial reward to them. If Bill and the others do, in fact, lease to CHK, I feel sure they would be happy to agree not to drill a vertical well. To the best of my knowlege, CHK has drilled one (1) vertical Haynesville, the SRLT 29, which was the first and only vertical Haynesville that I am aware that they have drilled.
Remember, I am not CHK. Bill asked a question and I'm just trying to play devil's advocate.
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Permalink Reply by Spring Branch,mineral owner on
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I would bet that if CHK resorted to the drilling of a vertical to HBP the leased acreage, they would set a 7+inch intermediate string which would allow them at some future date to possibly turn it into a horizontal. It would assume that Bill and the rest of the holdouts were able to negotiate a suitable lease which were agreeable to both CHK and the holdouts. The operative word is negotiate which means that neither side gets everything they want , but they are able to find some happy middle ground. As a royalty owner, I like the sound of 20 million a day a whole lot more than 200 thousand a day. My wife does too!
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Permalink Reply by BirdDawg, plain ole' idiot on
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Doesn't make much sense does it. If I made up the nomenclature, TCF would be "thousand cubic feet" and MCF would be "million cubic feet".
But I didn't and it doesn't. -
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Permalink Reply by Spring Branch,mineral owner on
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KB, I was referring to 20 million cubic ft of gas in a good horizontal Haynesville versus possibly 200,000 cubic ft of gas in a vertical Haynesville. Translated into $$$$, it'd be $110,000 day versus $1,100 day @ $5.50 gas. I was just saying that I certainly do not want to provide CHK or any other company any incentive to drill a vertical rather than a horizontal. "m" simply means thousand....."mm" means million. "B" is billion and "T" is trillion.
I like "T" the best! -
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Permalink Reply by sesport on
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Here it is, courtesy of UNM.
Conversion factors
Natural gas data in million cubic meters can be converted to million cubic feet (mcf) by
multiplying by 35.315
1 cubic meter (m3) of natural gas = 35.315 cubic feet -
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Permalink Reply by Spring Branch,mineral owner on
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But Jay will back me up in a second. It was not CHK that did it. If it was up to CHK there'd be a horizontal in Jay's section!i
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Permalink Reply by Spring Branch,mineral owner on
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KB, I believe I'll take that as a compliment! Whether you meant it that way or not.
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Permalink Reply by Spring Branch,mineral owner on
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There are some who think that with gas @ $5.50 per mcf (thousand, KB), demanding $22,500 per acre and 30% royalty might be treating the O & G company unfairly. You know, continuing in my role as Devil's advocate, and assuming you're not looking for legal work, there are many , I think, who would consider $5 - 10 thousand per acre and 25 % royalty in order to get an $8 million horizontal Haynesville well capable of producing 20 mmcf/d (million, KB) as a highly attractive proposition. It all comes back to the word "negotiate". Remember, it entails that neither side gets exactly what it wants, but that both sides are able to find a middle ground for mutual benefit.
Merry Christmas, KB, and anyone else who might be reading this.
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Permalink Reply by Spring Branch,mineral owner on
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graysands, unless you have tomorrow's Wall Street Journal today, you can't see into the future any better than I can, I'm guessing. To compare a reasonable person who is willing to take the best lease he can get today, to a crackhead, is a little over the top by my way of thinking. If the comparison is accurate, there are hundreds of crackheads running around Northwest Louisiana and East Texas. I think it is highly reasonable to strike the best deal I can find today rather than hold out for some arbitrary terms such as $22,500 an acre and 30% royalty which may or may not ever happen again. You think differently.....I can live with that, but I hope you're not in my section, because I want my section drilled.
I'm not sure what 140 million years has to do with anything. Man wasn't even alive for most of those years. I sure hope you don't have to wait that long.
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