Replies to This Discussion

Permalink Reply by LWC on September 10, 2010 at 7:37

Baron,
When you say the companies want to fill in their blocks and drill, are you implying even though the economy is at a low those that have unleased acreage in a majority leased unit might still be able to get a decent lease?

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Permalink Reply by The_Baron on September 10, 2010 at 8:12

Depends on your defintion of "decent lease"

You may be able to get the terms you want. You may even get the bonus you want. It seems that 1/4 royalty is becoming standard now... say goodbye to the old hosston and cotton valley plays, but I digress....

It wil all depend on the operator, how much of a unit is unleased (and more importantly, how much the operator controls) and how easily the two parties can come to terms.

If you go and say " I want 15k an acre" They will likely say, thanks but no thanks.

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Permalink Reply by Skip Peel - Mineral Consultant on September 10, 2010 at 8:49

One of the hardest lease terms to find solid evidence of is lease bonuses. They are not included in leases filed in the public record. The best source for current bonuses is the monthly state mineral auction where the bonus bid is of public record. That's why I periodically post the auction results.

http://www.gohaynesvilleshale.com/forum/topics/september-state-mine...

Permalink Reply by LWC on September 13, 2010 at 5:03

Baron and Skip Peel,
I appreciate the response. My version of a decent lease would be to have the same amount of bonus as was paid to the other MOs in the unit (no more) with 1/4 royalty and all the protective clauses. If things haven't changed all but 65 acres have been leased in the unit by the same operator. This occurred in 2008 with the land grab. Most signed for 6000 bonus, 1/4, 3 years w 2 year option. We were not approached until late and were offered 12000, accepted it but the offer was pulled before the pen could be laid to paper. Application letters went out this summer and a hearing was to be held in August, however, we haven't heard anything further. Not sure whether the operator will just leave us unleased because its only 10 acres?

Permalink Reply by Mac Davis on September 10, 2010 at 5:28

Catfish we prefer to use the more polite term "urinary olympics."

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Permalink Reply by Catfish on September 13, 2010 at 2:07

Mac my bad I was just using the words of one of our pros, Skip.

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Permalink Reply by Anita Goodson on September 10, 2010 at 5:51

All of those who tried to shaft the biggies ought to have had old leases like the one I had with Samson. I got extended for a pittance on ten acres and had to live with it while others in my section got big bucks. Then they just got out of the play.

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Permalink Reply by Eric S. Clarke on September 12, 2010 at 16:56

I challenge anyone to explain the high bonus prices paid out in Barrnett Shale prior 2008 with Gas Prices per thousand cubic feet in relation to the charted information on this link. The high bonus vs the well head price and why landmen want people to believe that is why the bonuses are not being paid now due to the gas prices. The two just dont go together.

http://tonto.eia.doe.gov/dnav/ng/hist/n9190us3m.htm

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Permalink Reply by Skip Peel - Mineral Consultant on September 13, 2010 at 2:00

The price of natural gas did not drive the lease offers in the Barnett Play nor in the Haynesville Play in 2008 or in 2010 for that matter. And I see no one in this thread attempting to make that case, Mr. Clark.

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Permalink Reply by The_Baron on September 13, 2010 at 3:03

As I said before...

It is my opinion that the influx of capitol from Wallstreet, which fell in love with the concept of the resource play, was the primary driver of lease prices in the barnett, as well as the primary cause of the HA land rush. Also, the rise in the oil and gas futures were also driven by the runaway markets of the time.

In the eary days of the HA, there really weren't that many wells, the play was very undefined. The land rush occured because companies wanted to be able to brag to the street about how many acres they had under lease, and how big their unproven reserves were.

What ended this was not the drop of gas prices, but the fall of the market.

Furthermore, now that reality has set in, gas prices and the desire to HBP will transition to be the primary drivers in this play.

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Permalink Reply by Mac Davis on September 13, 2010 at 8:27

Boom and bust. Market bubbles. Call it what you will. The song remains the same.

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Permalink Reply by Dion Warr, CPL on September 16, 2010 at 10:04

Baron:

Most wholeheartedly agree. "We're on the ground floor of the next big thing" helped hype up prices.

As to the Barnett, some of the extreme elevation of prices, besides the gas price spike, was due to the upturn in "infill drilling" which was moving into suburban and greatly subdivided acreage. The acreage had been more or less proven by past performance in all directions; the challenge was locking up enough leasehold and (a) viable drilling location(s) - these factors also helped to spike prices. In the Metroplex, that has not changed.

In the Haynesville, other than the central / southern Shreveport-Bossier metro area, there is not as much urban and suburban development located within the play to be concerned about from a company E&P perspective. Without viable drilling locations (and high-density area leasehold surrounding them) being at as much of a premium, compared to the latter stages of the Barnett E&P, moderate and long term natrual gas price trends are more of a pure driver of development. And, as Baron also mentioned, the drive to assemble discrete lease blocks (units) to maximize operator revenue in well(s) will also play an important role over the next 1-3 years. In the primary phase of a new successful play (and even moreso in the HS core areas), the rule is: Don't pay for the same dirt twice If you can help it. Thus, drill, drill, drill, and HBP as much as you can has become the company norm at this stage.

As there is not that much activity (E&P, leasing or otherwise) in the East 80 area at this time, whether what East 80 is, or was, did or didn't do isn't so much good or bad, it's just not relevant at the moment. One would hope that its past, present, or future leadership will have learned from past experience that what matters most in assembling effective mineral owner coalitions are as follows:

1) Members with similar circumstances
2) Members within (a) contiguous area(s)
3) Members which represent a controlling interest in such (a) contiguous area(s)
4) Members represented by cohesive, experienced leadership
5) Leadership that presents itself as an effective, good-faith representative actively working to get something done (e.g., a deal), or at least move forward
6) Leadership that can deliver the leasehold that is purported to be represented once a deal has been made and a binding agreement is imminent

(Credit to Skip for making many of these points, if not in a bulletpoint format)

From the company side, it becomes counterproductive to negotiate with a coalition that is either (or several of these) loosely formed, loosely organized, highly factionable, diffuse in nature, inadequately represented, uneven or wavering in their negotiations, or unable to deliver as promised. The situation breeds much uncertainty on the company side of the table, compared to a well-run coalition, or represented small group, or even motivated, sophisticated individual or corporate landowners. Thus, companies went elsewhere rather than spinning their tires.

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