Fair Or Not Fair
I have kept up (somewhat) with the discussions on this board for a while now. I have seen constant complaints about contracts being unfair to the land owner. So I ask, what is fair?
If you own 100 acres of land and lease it to a farmer, would he be required to pay thousands of dollars per acre for the right to farm.
On that 100 acres of land the farmer is using, will he keep his crops down to only a few acres and allow you to use the rest?
Will the farmer give you one quarter of the value of his crop?
The fact of the matter is, these wells are extremely expensive to drill. Most companies (including HK & CPK) will require investors to get the job completed. In addition, not every well produces. Just because the wells to date have done well, doesn't mean they all will. It only means they drill the best prospects first, when they get down to the less favorable well planned, their success rate will go down.
Everybody is in this to make a profit. Profits on oil and gas (per barrell or per Mcf) are low, even when prices are high. The more you produce, the more you make, as in any industry. Thats the only reason Exxon/Mobil makes billions, not because they are screwing the public, but because they are producing billions.
And yes, I am a landman, I have been one for 15 years. I consider myself ethicle and honest, as do most working in NW Louisiana. You will have the usscrupulous landmen taking advantage of the uninformed land owner, but they are few and they don't usually work long in the industry, most never become seasoned landmen.
The simple fact is, I have seen more unscroupulous land owners and land owner representatives than landmen. I have seen countless contracts prepared by legal representation that are really just filler and no substance and for that the rep charges hundreds or thousands of dollars. Bottom line, you need to pay more attention to who is actually trying to take advantage of the unaware. The o&g companies aren't hiding anything, can you say that about your agent or representative.
My suggestion, if you need legal advice on a legal document, find an attorney that specializes in that area. If you are buying a house, ask an attorney familiar with real estate, if you have questions about an oil & gas lease, ask an oil & gas attorney. He will charge you, but he will not ask for a percentage of what you are making (always a warning sign). If you have dealt with a landman in the past, give him or her a call. Most landmen are happy to answer questions from landonwers. They will always preface their advice with "Now keep in mind that I am not an attorney", but they will probably help when they can.
I have rambled on long enough now, I am sure only the serious readers have actually gotten to this point, so I should probably say so long, not good by, because as a sesaoned landman, I know that I will be dealing with you, the landowner, for many years to come. That is one of the reasons I will try to be as fair and honest as I can be, I will be the one you call to yell at.
So in closing, have a good day, a merry christmas and a wonderful new year. And remember, don't take any wooden nickles from those bad landmen.
lando
P.S. Forgive the spelling, I am a landman, not a writer.
If you own 100 acres of land and lease it to a farmer, would he be required to pay thousands of dollars per acre for the right to farm.
On that 100 acres of land the farmer is using, will he keep his crops down to only a few acres and allow you to use the rest?
Will the farmer give you one quarter of the value of his crop?
The fact of the matter is, these wells are extremely expensive to drill. Most companies (including HK & CPK) will require investors to get the job completed. In addition, not every well produces. Just because the wells to date have done well, doesn't mean they all will. It only means they drill the best prospects first, when they get down to the less favorable well planned, their success rate will go down.
Everybody is in this to make a profit. Profits on oil and gas (per barrell or per Mcf) are low, even when prices are high. The more you produce, the more you make, as in any industry. Thats the only reason Exxon/Mobil makes billions, not because they are screwing the public, but because they are producing billions.
And yes, I am a landman, I have been one for 15 years. I consider myself ethicle and honest, as do most working in NW Louisiana. You will have the usscrupulous landmen taking advantage of the uninformed land owner, but they are few and they don't usually work long in the industry, most never become seasoned landmen.
The simple fact is, I have seen more unscroupulous land owners and land owner representatives than landmen. I have seen countless contracts prepared by legal representation that are really just filler and no substance and for that the rep charges hundreds or thousands of dollars. Bottom line, you need to pay more attention to who is actually trying to take advantage of the unaware. The o&g companies aren't hiding anything, can you say that about your agent or representative.
My suggestion, if you need legal advice on a legal document, find an attorney that specializes in that area. If you are buying a house, ask an attorney familiar with real estate, if you have questions about an oil & gas lease, ask an oil & gas attorney. He will charge you, but he will not ask for a percentage of what you are making (always a warning sign). If you have dealt with a landman in the past, give him or her a call. Most landmen are happy to answer questions from landonwers. They will always preface their advice with "Now keep in mind that I am not an attorney", but they will probably help when they can.
I have rambled on long enough now, I am sure only the serious readers have actually gotten to this point, so I should probably say so long, not good by, because as a sesaoned landman, I know that I will be dealing with you, the landowner, for many years to come. That is one of the reasons I will try to be as fair and honest as I can be, I will be the one you call to yell at.
So in closing, have a good day, a merry christmas and a wonderful new year. And remember, don't take any wooden nickles from those bad landmen.
lando
P.S. Forgive the spelling, I am a landman, not a writer.
Views: 138
Replies to This Discussion
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Permalink Reply by Skip Peel - Mineral Consultant on
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Snake. Would you agree that the source of your discontent and distrust is founded in the actions of Chesapeake? When you speak out against them, I tend to understand, though I would not agree with the full extent of your protests and characterizations. However, when you specifically extend those negative opinions to the industry as a whole, I think you paint with too broad a brush. When you refer to the posts of the "pro's" among the better known members and regular participants of GHS, you appear to give us some credibility. And I hope that your reference to friends might include myself and others participating in this thread. With all due respect, your characterization of the industry is too extreme, IMHO. My personal opinion is that Dion, Jay, Mmmarrkk, Les B, The Baron, and others understand and sympathize with the plight of land/mineral owners caught up in this emotional and complicated HS Play but feel an obligation to provide prospective based on their industry experience. If the true worth of the site is measured by a diversity of opinion that tends to give an accurate picture of the dynamics of the HS play then invective only tends to detract from that worth. The regulars tend to conduct discussions as if we were the only ones "in the room". As GHS continues to grow, I think that we should recognize that much of what we say may have some influence on those who observe but do not openly participate. Not everyone is comfortable in a room full of strong personalities. Much less a band of pirates.
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Permalink Reply by Snake Stewart on
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I certainly consider you a friend. Even tho we do not know each other any more then the posts that we make and the feelings that we may show on occassion that may or may not be true. After all, unless you know someone personally , do you really know who you are talking to ?
Skip, you are a landman. I dont expect you to agree with what I am saying in regards to this mess.
And no, CHPK isnt the only company I have a problem with. Actually they havent done anything in my area as far as I know. But they are the biggest dog on the block right now so we aint buddies either!
I will consider agreeing to useing a wide brush while painting the industry if you could consede that the pros dont use one wide enough at times.
My task has been and will always be , to warn the mineral owners of this area and any area that may be listening , to the deadly cash consequences of the early dealings of the O&G's. Until those happenings can be fully erased (which is impossible) , I will continue to stand up for what I feel is right.
I hope that it doesnt do harm to the people that I consider friends or even just respect. But at the end of the day, I still have to answer for what I do. If it offends someone that may be in the room that I dont know about, I am sorry. If I feel that someone is taking a shot across the bow (for someone that isnt a regular) I will return fire. Not in anger, just a body check into the glass.
If after its all said and done, I feel that I have given a thought that I shouldnt have or not given someone the benefit of the doubt, I will have to live with that. I am not looking forward to that. But neither would I be willing to live with not leaving it all on the field either.
I know what you do for a living yet I have never said anything cross to you have I ?
2Dogs is another Pro that I have been conversing with for nearly 10 months. To the best of my knowledge we have never had a cross word. Why is that ? Because neither of you have ever tried to be or say anything different then what you are and what you believe.
I dont have a problem with anyone that has ever tried to be up front , honest and respectful of others. Most of the time when I have a falling out with someone is when they are just being flat out ugly and disrespecful to others on this site. 3 of the 4 serious altercations that I have been involved in on this site were defending Pro's. Go back and look. Anyone that doesnt believe, its in the pages. Well the ones that havent had to be deleted anyway (chuckle,chuckle).
That being said, the brush used to paint my 'tude towards the industy seems mighty wide when you consider my true feelings and actions toward the good O&G's on this site doesnt it.
P.S. Please dont think that you, 2dogs or any of the other O&G's that I havent gotten into it with, are getting a free pass. A pirate is a pirate and I was a Snake when you met me. (LOL)
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Permalink Reply by Dion Warr, CPL on
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Snake:
Somewhere in the middle of there you substituted the term educated people for educated landowner. I would submit by definition (at least mine) that an educated landowner (or mineral owner, since that's really what is at point here) makes it a point to understand what they have, what they know, and what they don't know, and what will work in the context of an oil and gas negotiation. Educated people do not necessarily make educated landowners (or again, mineral owners).
Snake, you have many fine qualities, and a good sense of humor about all of this, and you don't have to trust anything that I am about to tell you, but here goes, frank and earnest: (deep breath)
You suffer under the delusion that in the end, the oil company has to deal with you, you will name your price, and they just have to give it to you. They do not. They may have to acknowledge your existence, and your resistance, and unlike other states, in LA they cannot cut you out, force lease you (which amounts to a taking of your lease rights at 'fair market value'), or charge you a non-consent penalty, but they do not have to deal with you. It is simply not enough that you wish to be leased, but at your terms. You must be able to complete the trade with a lessee on terms with which you can mutually agree, in order to be leased.
The best thing that can happen for you in your current mindset is that you hold out, on your terms, and virtually everyone else signs up. Then, your ultimatum can be made, accepted or rejected, and the O&G company drills either way. God help you if you have more than 50 - 100 acres in a unit, or if the sum total of the holdouts meets or exceeds that number, because then O&G won't drill your well. You'll have your principles, but with no bonus and no royalty.
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OK, that being said -- based upon estimates, this play, if fully realized, could take decades to drill out. There will be plenty of time and plenty of area to spread out in until O&G has to come back to you if your terms prove to be too onerous, or your tract participation percentage too high as an UMI owner. Landowners sell. Landowners die. Landowners pass their properties on to people that may wish to lease instead of being a holdout. Perhaps the worst thing for a hard-trading landowner (or mineral owner) about owning interest in a resource play like this one is that the very thing that drew industry interest to it (besides economic feasibility) is that inside the broad HS fairway, the source rock is everywhere, and is estimated to be relatively uniform over a broad area. A large player could easily have hundreds of prospects to drill, ranked in front of yours based on the various factors that they use to put together their drilling program. If they run into a intractable l/o, or block of them, they just go up the road (and maybe not even too far, given the size of this regional play).
In closing, as far as your quip about 'the attorney [that I] keep telling [you, or l/o's] that [you] need', and thinking back to your possibly lumping yourself in with the 'smart enough to know what's going on' category (sorry Snake, based upon your numerous posts that I have had the privilege of reading, you don't fit the part of uneducated dunce very well, smart@#$!, maybe), I would say this: you should be smart enough to know that there are, or will be, things that you don't know, or don't know to ask for, or that just will not be told to you by the lessee. That's what the professional advice is for. Finally, as far as trust: all deals are put together on trust. If you don't trust your lessee to deal with you fairly and perform in good faith, then you're right not to sign. Reagan trusted the Soviets to do right by the infamous treaty that he signed with them, but famously, he also said, "Trust, but verify." Dig, research, get a good personal landman (did I mention Skip Peel, site sponsor?) and/or a good attorney, watch your @#$!, and make the best deal you can.
Here's hoping you prove me all wrong, and that you tell O&G to Kiss Your Smackover all the way to the bank. I don't think that I'm wrong though.
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Permalink Reply by Dion Warr 1 hour ago
You suffer under the delusion that in the end, the oil company has to deal with you, you will name your price, and they just have to give it to you. They do not.
Nor do I have to deal with them.
I am sorry Mr. Warr, but you have confussed me with someone else.I am delusional in no sense of the word.Just because I dont swallow every word that oozes from an O&G doesnt mean that I have some kind of hangup either. Heck, just as soon as we all understand that you guy's arent the local cubscout troup I really wont have to post anymore.
I really dont care if I ever sign a lease or not. That baffles the minds of many a greedy leasehound but that is simply the way It is . It makes, what I consider to be my non-paying job, much easier in the long run.
You delivered such a beautiful speech, yet only professional hog wash in the end.Unless you are a psychiatrist as well. You attempt to lay me on the couch and psychoanalyze someone that you dont even understand. Yet if spoken eloquently enough , it just has to be believable , right ? Wrong.
I am not now , nor have I ever been driven by this play. If someone feels like they could lose something, they may hold back. If someone has nothing to lose...............Different story.
Just as soon as I start getting 10 complaints a day from people ,other then Landmen, I will begin to wonder if I have drifted off course. Until then I will just have to continue trying to educate myself and everyone else that is a part of my community where I live and this community as well.
If you agreed with my opinion then I feel that your conscience wouldnt allow you to do what you do. It is only natural for people on the opposite side to be.... on the opposite side. I can live with that, I hope that you can too. As long as I dont smell BS, I wont shout BS. But if you continue to justify ignorance that has been and is being shown from people in your industry (like this post) , we will continue to be at odds.
2 years ago, the numbers that came this summer on this play, would have been scoffed at by every pro that has ever been involved in this field.If you werent involved with the Barnett, then 10 months ago may have been far enough back to cover your bet. You were dead wrong.Why should I believe you got it right now ? Please dont try and convince me that everything was a fluke and that you can explain away what happened and of course that it will never happen again.
The dynamics of this has changed everything. You can try and drag your feet while kicking and screaming if you want to,( I guess that would be your job wouldnt it ) but in the end it doesnt change the fact that the old days are gone for good. At least on the Haynesville Shale. Whether for better or worse. And besides, you may end up better off onboard with me because after all , you are 0 for 1 with the summer lease prices. I havent even come up to bat yet but my average is better. I havent been proven wrong.
P.S. I cant continue to reply to this dialogue for fear of things getting out of hand. I only hope and pray that we will be able to find some ground somewhere that can be more neutral. This is your realm after all.
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Permalink Reply by Dion Warr, CPL on
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Snake:
All I can do is refer to history. This is not the first time that this has happened. No, it's not a fluke. Based on these pieces of evidence (Barnett price implosion roughly at the same time as Haynesville HS, Austin Chalk run and dying on the vine ten years ago, Tuscaloosa Trend boom and implosion 1978-83 (believe it or not, adjusted for inflation, the highest lease bonuses in the Trend ran higher than what has happened in HS). Bubbles can burst for the most trivial of circumstances, but these all share the same thing in common: a retreat in oil and/or natural gas prices broke the boom cycle, cut off their credit lines backed by booked reserves and estimated cash flows, and everyone woke up with a sobering case of reality and a terrible hangover. And then the O&G players left standing reenter the arena, with a cautionary tale still throbbing in their heads, and a smaller checkbook with which to buy leases.
It is obvious that you and I look at this differently. You look at me (and all people in my line of work) as an adversary (if not a thieving f%$@#! enemy), which is unfortunate, but probably warranted from your perspective and what some Shalers have experienced over the last year. Heck, I'm not even working your area, much less trying to talk you into an oil and gas lease. You see the current climate with regard to lease bonus as only a short-term pullback from the summer I never saw coming. I see it as "the bubble burst", as I stated elsewhere on this site a couple of months back could very well happen.
With that in mind, I got the opportunity to advise a few folks in this play this year from their side of the table. Call it 'thief vs. thief', Snake. (You want to know if I ever believed that the runup would have happened this year? Nope; I wouldn't believe anyone who did, unless they were sitting in on a CHK or HK in-house meeting. ) We took the slower approach, and certainly did not take 'the initial offer'. Talked to the brokers in the office, not the 'newbies' in the field. Put together lease provisions that made sense. All the while, the bonus terms went up (except for one area out in the fringe). While the $$$ went up, we waited. We asked about other provisions (since some of these folks seemed ready to grant anything). When we had what we wanted, and the increases in bonus monies began to stall out, I recommended that they sign. (My reasoning: the bonus payments were far in excess of anything that reasonable conditions would warrant, and the lease terms are good; get your money before it runs off the table. Take your deal, any be happy.) One didn't; the rest did. One of those deals will probably never get drilled before the lease expires; so they ended up a few dollars richer, for not much other than sitting around.
With that, I take my leave of you all. It's time to go to bed. Snake, I hope I have not contributed anymore to this conversation to help get you 'out of hand' about the matter, or anyone else. I am a landman, and a professional, and everything I have said comes from my professional experience (12 years full time, a few years here and there before that), my familial experience (mother and stepfather, 19 years, and 28 years as a lead broker; and the hearing of a few anecdotes from a great-uncle who was a drilling owner/contractor during the 50s, 60s, and 70s). Whether you sign a lease or not does not affect me in the slightest. Probably the reason that I feel I can speak so freely on these matters is that I have no dogs in this hunt. If I did, and anything I would say could possibly cause a conflict with people or clients that I represent, I would probably say nothing other than offering some general constructive advice. If I have offended you in some way, please accept my apology.
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No apology needed Mr. Warr. And the circumstances surrounding my short circuits have much more to do with my passion and feeling backed into a corner then anything that you have said. I respect you and your opinion too much to want to see anything negative come about while talking with me. Thats all. I would rather say good day and catch you on the next go round.
I still take issue with your thinking I am narrow minded enough to have a problem with " all people in your line of work". That certainly isnt the case. I thought that my record would speak for itself but maybe not.
P.S. I have never sat down and even discused a lease with an O&G so I certainly dont fit into that should have "taken your deal and been happy group".
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Permalink Reply by P.G. on -
One thing the big O&Gs had done is pretty much put unleased landowners on hold until they are ready for some more drilling acreage. No small outfits can afford to lease at the expected prices m/o's anticipate for their bonuses, right?
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I just dont think they can do both right now effectively.
If they dont do a bunch of pokein' they are going to have to pay more in the 2 year options on some of these leases,then they want to pay the unleased right now. But , the longer it takes to get to the unleased, the more stable that the market is going to be and prices will be up again.
If prices stay low on N/G and fuel, all the other things that were tied to high fuel costs that have been going up should head back down. Unless it was BS in the first place. If all these things stay low, the mineral owner wont need the lease as much as he/she would under more economic pressure.
They are still trying to lease in some areas. The big boys call it cleaning up a section. Problem is that there arent many sections that dont have some leased. So do they have to clean it all up now or lose acreage ? I say they lose acreage (flipping), until they can get a better handle on their economics and these darned greedy m/o's.
Things that make you go huuuummmmmmmm!
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Permalink Reply by Skip Peel - Mineral Consultant on
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KB. I do not doubt your post but must say that the operator you quote is paying a good bit more than any I have spoken with lately. If you feel they are serious, I have some mineral clients who may be interested in receiving a courtesy call.
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Permalink Reply by Skip Peel - Mineral Consultant on
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KB. Just to be specific, the operator you mention is willing to accept depth restrictions excluding the HS?
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Permalink Reply by Skip Peel - Mineral Consultant on
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And the Hosston?
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