Replies to This Discussion

Permalink Reply by Donna Taylor-Kilfoyle on May 6, 2010 at 5:54

I have mineral rights in the shelbyville area. it's the Thomas Mhoon survey. It's 100.0 acres off f.m. 2694. I don't know the exact location, but wondering how much leases are going for. Was offered $500. per acres from one company, and another called yesterday and i said i wanted $2000 per acre. They have agreed, but I don't know if that's a fair price. Plus they seem to be rushing me a bit to sign. I know Ellora has a well about a mile away, called the Ellington Ellora well. Said it is huge, from what i heard. Thank you for any help

Permalink Reply by adubu on May 8, 2010 at 8:13

Donna Taylor-- if your terms are good with 25% royalty and the company you are leases can drill a H Shale well I would take the $2000 /acre because the big money is in the ground i.e. production. With this amount of bonus you can afford to have oil & gas attorney redline and write the lease to protect you. Don't let them rush you, patients until it is review by your attorney. What company is offering you $2000/acre?

Permalink Reply by DJG on May 8, 2010 at 10:07

Adubu's question regarding who is offering the higher bonus is important - as you want to be sure that the company that you lease with is, ultimately, one who is capable of actually getting profitable horizontal completions on your acreage and is not just one of the smaller operator's looking to get acreage held by production with smaller vertical wells.

Do not accept any less than 25% royalty. The company may tell you that they will only go to 20% or 22.5% or whatever, but the truth is that if you go to the Shelby County Clerk's office you will find many recent contracts filed where each of the opperators have accepted 25% royalty terms.

Also, do plan to spend a reasonable amount now to have the contract looked over by a capable Oil and Gas attorney prior to signing. Spending a modest amount now on the lawyer can literally save you tens of thousands, or more, in the long-run once your acreage ends up getting drilled and into production.

Permalink Reply by Donna Taylor-Kilfoyle on May 8, 2010 at 12:21

really do not have the money for a lawer!

Permalink Reply by Donna Taylor-Kilfoyle on May 8, 2010 at 14:48

they have agreed to 1/5 above the shale and 1/4 in the shale. he told me that Devon's well they were drilling in the shale zone collapsed. so they are going to be drilling slower to prevent collapsing the area they are drilling in.

Permalink Reply by Donna Taylor-Kilfoyle on May 8, 2010 at 14:58

my mother-in-law works for an oil & gas company here in Longview. She and her husband & husbands brother own about 30 acres out at Lake cherokee. they signed a lease without a lawyer, but she made changes on her contract herself and initialed them. just drew a line threw what she wanted taken out. the brother on the other hand did hire a lawyer, but copied the exact contract she had. she has been helping me figure out what to do and is going to meet with me and the landman next week, and act as my consultant. she has worked for the oil and gas company for many years. she knows the business pretty well. a lot more than i do. we'll probably go over the lease tomorrow.

the land is a total of around 100.0 acres, split between about 15+ relatives. i don;t even know many of them. i believe they are all cousins. my great-grandmother sold the land and kept the mineral rights to pass on to her children. sold it to send then to A&M, back in the 20's i think.

i only have 6.5 acres which is $13,000. THe other 6.5 of the 13acres is my brother's half. then all the other land is split among relatives. and i do not have money up frontfor a lawyer, but i do have a mother-in-law in the business!

Permalink Reply by Donna Taylor-Kilfoyle on May 8, 2010 at 15:08

by the way thaks for the help D. Gaar. i'll talk with my mother-in-law aka my consultant tomorrow!

Permalink Reply by Donna Taylor-Kilfoyle on May 8, 2010 at 12:19

Ellora agreed to $2000. per acre.

Permalink Reply by DJG on May 8, 2010 at 12:48

Here's the thing, many folks think that they can't afford to have a lawyer look over the lease paperwork but I guarantee you they are shooting themselves in the foot 100+ times over for that decision.

There will be many items in the O&G companies standard contract that you will want to have reworded, otherwise their normal clauses will be 100% in their favor and will end up costing you thousands upon thousands of dollars in deductions and other items during the 30-50+ years that your acreage could potentially be in production.

Most any rebutable attorney will only charge you by the hour and it shouldn't take more than an hour or two for them to be able to give you the proper wording changes and contract addendum items to be asking for from your Lessor.

Additionally, most rebutable attorneys would also likely be willing to work with you to not need any payment in advance and will likely agree with you if you ask that you not be billed until after you recieve your bonus $$$ from the leasing company.

All told you might spend $500-$1500 tops, depending upon how much needs to be cleaned up in your document.

Considering that the money spent now on the front end of the deal will, depending upon how many mineral acres you are holding, end up saving you tens of thousands (or even vastly more if it's large acreage) over the long term so you'd be well advised to rethink your decision to sign without having a lawyer look at the document.

That said, the real question is not whether you can afford an attorney but, more correctly, whether you can afford to NOT have an attorney.

Permalink Reply by DJG on May 8, 2010 at 13:14

The good news is that Ellora has been operating in Shelby County for some time and have had some solid success with non-Haynesville/Bossier completions.

The negative side, is that they have been primarily drilling shallower formations James Lime, Huxley, Fredricksburg, etc.

7 wells permitted in 2009/2010 all of them for target depths in the 6,000 - 8,000' range and none of them Haynesville or Bossier wells.

You might be well advised to get in touch with EOG, XTO, Devon and see what their thoughts are regarding your acreage.

Perhaps they might agree to match or exceed the Ellora offer.

Other companies to chat with would be Southwestern, Chesapeake and maybe Cabot.

Even if one of these doesn't agree to match the $2K on the table with Ellora, you still might be better off in the long run taking less on the front side bonus - if it ultimately means that you end up working with a company that will be drilling Haynesville/Bossier horizontals and not one that might get you tied up indefinately with your land HBP (held by production) with one shallow formation non-HA/BO well.

Permalink Reply by Donna Taylor-Kilfoyle on May 8, 2010 at 15:10

and no i have not signed anything yet. still waiting on a call from paloma!

Permalink Reply by adubu on May 8, 2010 at 15:11

Donna-I missed a zero at 2000 a X 100 = $200,000 bonus--you can afford a lawyer

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