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: 149
Replies to This Discussion
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Permalink Reply by P.G. on -
Perhaps someone should ask you why you believe it's good practice to offer one landowner $200 an acre and his neighbor $5000 or more without any knowledge, that is, of what's under their land that would make one worth more than the other?
I'm sure you'd rather offer both that $200 but one land owner may have more knowledge about what his minerals are worth than the other. I take it that you do not believe it would be taking advantage of anyone if they weren't aware of the value of what they had and you did, huh?
Like it's totally not your fault if they were stupid enough to believe you, right?
Kind of like, "Hey, if you were stupid enough to take peanuts, you should only blame yourself" (while you go laughing all the way to the bank)
When I was a teenager, I used to trap muskrats to make extra spending money. Once I went to the fur buyer to sell some muskrats (which the buyer was paying $2 for each or so). I saw a young boy, maybe 10 years old come in with one muskrat. It was a nice size one too. The buyer told him is wasn't a good one and offered him a quarter for it. The boy, non the wiser, accepted the quarter.
Now do you believe the buyer took advantage of the boy, because of his lack of knowledge, or was he being fair with the boy.
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Permalink Reply by Snake Stewart on
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Hello Mr. Shane,
I agree with you for the most part about watching out for everyone, when dealing with so much at stake.But the farmer scenario is something else altogether. 1) The farmer isnt taking anything away from the land that a bag or two of fertilizer wont fix. 2) If he's growing corn, I will use it for a corn maze whether he likes it or not come Halloween!.... :0) 3) If that farmer has the potential of growing over $1,000,000 worth of veggies per acre, he wont be farming my place next year, I will! And finally, yes.....Exxon/Mobile types have been screwing the public ever since they figured out they could get away with it. Thats how the system works. I am not crying about it anymore because I know I cant change it. He who has , makes the rules. Guess what, I has the Haynesville and if they want my Haynesville , its gonna cost more then a couple of bushels of corn. Because they are producing Billions out of it.
8 months worth of fussing by enlightened landowners doesnt make up for the couple of hundred years this O&G powerhouse has been chewing up the landscape. You say we shouldnt beach about unfair practises by the O&G's. Fair enough. As long as the O&G's quit beaching about the landowners that arent going to roll over, shut up and play dead. Now that we understand more of how this works , the less sympathy you and your industry will get.When the CHPK's role right around those agreements (that are already loaded in their favor) and do whatever they want to do dispite those agreements, they are heaping coals on top of their own heads, not me. If their actions werent true and now coming to light, what would I have to beach about in the first place ? This internet thing has been a killer for the O&G's.
Sorry mine was lengthy as well. But then again most all of mine are. If I could type with more then 2 fingers I could use up all of "H"s bandwidth in one session and be banned from the site.(LOL)
Have a good one Mr. Shane. While we arent on the same page on all of this stuff, I do appreciate your candor and respect you for it.
Snake
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Permalink Reply by Les Bamburg on
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SS, sorry to disagree with one of your statements. ExxonMobil does not "screw" the public. Most of their production originates from federal or international leases which entails agreements with national goverments.
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Permalink Reply by BirdDawg, plain ole' idiot on
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Les,
maybe Snake was referring to the possible "screwing" being what some of these companies have charged us for gasoline recently. Just wondering.
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Permalink Reply by Les Bamburg on
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BirdDawg, the price of wholesale gasoline is essentially a function of oil prices which are set by the international market (supply & demand). The mark-up to retail gasoline prices (profit) is established by the service stations which are generally not owned by the oil companies.
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Les,
I know you are much more knowledgeable about the business, and I always enjoy your posts. But on this one instance I have to disagree. If the recent high gasoline prices were the result of high oil prices, then what the reason for the record setting profits for big O & G lately? And most of the time the operator of the service stations have no control of their gasoline prices.
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Permalink Reply by Les Bamburg on
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BirdDawg, the service station owner controls the amount of the price mark-up. That is the reason you see two different stations selling the same brand with different prices. Most of the price is related to oil price (example $60/Bbl ~ $1.43 per gallon). The remainder is the cost of refining, transportation, distribution and taxes. Many retailers make little or nothing on a per gallon basis but rather make their profit on other services (repairs, bread, beer, cigarettes, lottery tickets, etc).
Yes, O&G companies profits have increased but this is required by investors (stockholders) and to generate the large cash levels required for development of the multi-billion dollar projects. This was the primary reason for the mergers that happened a few years ago as project costs were exceeding risk capability of individual companies. Almost all of the profits are plowed back into the industry as investments. Also, the traditional international O&G companies (ExxonMobil, Chevron, Shell & BP) now have to compete against large national O&G companies (StatoilHydro, ENI, QPC, Aramco, Gazprom, etc).
Very little of the profits come from gasoline but rather from the production of oil and natural gas. Because oil supply is difficult to increase, consumers are effectly setting the oil price through demand. So, the most effective method for getting lower gasoline prices is for the public to consume less.
I realize I will not change anyone's opinion but feel the need to at least share my view.
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Permalink Reply by Les Bamburg on
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BirdDawg, heh it is not being argumentatitve just a reasonable discussion.
Hill Oil would be the independent distributor of gasoline. Does Hill Oil own the service stations? If not, I would have to know more about their contract with the stations. My main point was it is not Chevron that necessarily sets the final retail gasoline price at Chevron stations but rather the result of various contracts in the supply chain. It is likely the wholesale gasoline blend stock does not even originate from a Chevron refinery.
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Les,
I just noticed that I stated "I certainly do want to be argumentative".
I meant to say "I certainly do NOT want to be argumentative".
Sorry about that. I deleted that, it was not what I meant to say. -
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Permalink Reply by Les Bamburg on
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BirdDawg, I actually read it the way you meant to say it rather the way you wrote it.
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Thanks KB & BirdDawg, those were two pretty good examples. What exactly did the Feds do to earn the lands that you refer too Les ? The Government lives off the checkbooks of its citizens. It doesnt do anything to earn money, just spend the crap out of it. If the Feds had gotten good leases, from the lands that we pay for, they may not have to charge the $.44 per gallon of fuel in taxes.
The Government was trying to get out of leases that had been renewed several months ago (off shore I believe) to no avail. They even talked about fines for these companies until they bowed out of the contracts. Hasnt happened yet! They screwed the Government! Since that isnt physically possible, due to the fact that the Government doesnt generate money, we the taxpayer took it for the Government and didnt even get a kiss on the cheek.
Last but not least...... Who owns most of the inovative and truely viable patents on alternative fuel sources that were developed in the last 10 to 20 years ? You guessed it. Lets not leave out the redheaded step child of O&G, the automobile industry.15 or so years ago the Chevy Nova was reintroduced. It could travel around 50 miles on 1 gallon of fuel. What happened to that vehicle ? 1 year of production or so and gone. What about the Echo.A friend has one that gets around 42 miles a gallon. What happened to that vehicle ? Same thing. He has been contacted numerous times from the "company" begging for him to trade it in at a more than fair trade in price. Neither of these cars were hybrids.
Why are we moving backwards on fuel efficiency ? Why do we need a hybrid that gets worse mileage then some cars did 10 years ago ? To the best of my knowledge, fuel economy is the only technology in this country that hasnt advanced in the last decade, at least on the consumers end anyway. Why is that ? Big O&G are the only dancing partners available, they see to that. Have a good one.
P.S. Sorry I vented so much. Been Christmas shopping for 12 hours today. Minus 2 hours at the gunshow. Dont get me started on those clowns. Sellers at the shows are happier then Michelle about B.O. getting elected. Between the O&G's & Gunshow sellers , we may have a R.I.C.O. Act case on our hands. I'll have to check with KB to see.
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Permalink Reply by Les Bamburg on
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SS, sorry but you still have not showed me a single incident of ExxonMobil "screwing" anyone.
There is no relationship between auto makers and O&G companies. Auto makers only provide what the public has requested. This is the reason the US market is supplied with giant low MPG SUV's and mini-vans while the European and Asian markets receive the small high MPG vehicles.
Tax payers did not have to pay anything for the federal offshore leases which have generated significant benefits to tax payers and provided an excellent supply of energy.
ExxonMobil has not been involved in any offshore lease renewals or fines.
Some of the major O&G companies have spent millions (or billions) on research and development of innovative renewable and alternative fuels including biodiesel, gas-to-liquids and coal-to-liquids. The production of these fuels are being scaled up and brought to the public to reduce oil imports and improve the quality of the environment. This is the reason California can consider implementing its Low Carbon Fuel Standard and that will serve as a model for the rest of the country.
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