Twin cities no longer does group negotiations
Twin Cities confirms "no group negotiations" policy
Posted: Feb 24, 2009 11:11 PM CST
Updated: Feb 24, 2009 11:37 PM CST
KSLA News 12 Headlines More >>
SHREVEPORT, LA (KSLA) A major lease-broker in the Haynesville Shale confirms they will not be negotiating with groups anymore. It's not good news for many of the dozens of neighborhood organizations that have formed over the past several months in search of better lease terms.
Monday night KSLA News 12 reported that the East 80 Oil and Gas Leasing Coalition has run into a roadblock in their attempts to negotiate with Chesapeake Energy: they've been told the company's leasing broker, Twin Cities Development, will only deal with individuals.
We asked Twin Cities today about that, and the Director of Community Affairs Clay Baskin confirmed it. "It's our new policy for 2009, and what we are doing is, we're giving the individual lessor the opportunity to negotiate on their own behalf for their own oil & gas mineral lease." Baskin says the new policy is in response to problems they've encountered in dealing with large groups, "Past experience hasn't turned out to be as productive as we had hoped. And also whenever you have the spillover of the acreage that's not contiguous to the section that we're focusing on, then it's in effect at that particular time not acreage that we're interested in because, A, we don't have a drill site, B, there might not be pipeline access at that current moment."
As the market has slowed, Baskin says, the focus for leasing has turned from grabbing up as much leasehold to what he calls 'controlled development.' "We have the same manpower, it's just much more controlled and much more focused. So yeah, for individuals living in sections where we have drill sites and we have pipeline access, you're going to see that activity begin to pick up."
"So what we want to do is focus on section by section, and as I said before, 'controlled development,' and then move forward from one section to another as opposed to taking on maybe 4, 5, 6 or several different ranges as opposed to taking on whatever we can't develop all over, " Baskin explains. "What we have to do is we have to put them together and we have to turn them over so that Chesapeake can start drilling and see a return on their investment."
Chesapeake Energy Corporation (NYSE: CHK) currently claims 460,000 net acres of leasehold in the Haynesville Shale. About 110,000 of that is in a joint venture with Plains Exploration and Production Company (NYSE: PXP).
In addition to lower bonus offers, Baskin says Twin Cities' lease terms in recent offers are now longer. "The primary term (is) generally on a 5 plus 5 basis. And once again it has to do with the fact that if you take into account that the intricate parts of putting together an urban environment such as Shreveport and Bossier City, you need that extra time in order to fulfill your committment, not only to us to our operating parter Chesapeake, but also to the individual lessor. If you sign a lease with a lessor, you expect to have your minerals produced. But in effect, whenever we deal with so many people and so many landowners, it takes us longer over here in an urban environment to put that together. "
In other words, the longer lease terms give Chesapeake more time to develop all the acreage they've been leasing up. So what's in it for the landowner looking at signing a five year mineral lease? Who's to say natural gas prices - and therefore mineral acreage values - won't go up again in a few years? "That's exactly what it is," says Baskin, "Who knows?' And that's what we want to project to people is, first thing, we want to educate them. Second thing we want to do is give them the opportunity. What everybody has to understand is that they have the opportunity to wait. Or they have the opportunity to sign. "
Or be force-pooled. This happens when a majority of mineral owners in a unit (640 acres, or about one square mile) have agreed to lease their minerals. The operator can ask the Department of Natural Resources' Department of Conservation to "force pool" the remaining un-signed mineral owners so that the well can be drilled. Since they haven't signed a lease, force-pooled mineral owners do not receive a per-acre bonus and will get not get paid until the cost of the well has been recovered by the operator. For example, if you own 32 acres in a 640-acre unit, you would responsible for 5% of the well cost. These deep wells into the Haynesville Shale have typically cost anywhere from $5-8 million each to drill. After that, however, you would receive your full proportionate share of the revenues, ie., 100% royalty on your share of the unit. That could mean big returns - if the well is successful. The downside: if the well never breaks even, force-pooled mineral owners won't see a dime.
Baskin says forced pooling has to become economically feasible for the producing company to do so, but that decision is up to Chesapeake. "A lot of people ask me, 'When will you stop leasing?' Well, we won't stop leasing until there's 100% or until we effectively cannot lease anymore acreage and then if it is economical to go ahead and produce the well and go ahead with force pooling that's Chesapeake's call and they go forward with that process."
Buck
Posted: Feb 24, 2009 11:11 PM CST
Updated: Feb 24, 2009 11:37 PM CST
KSLA News 12 Headlines More >>
SHREVEPORT, LA (KSLA) A major lease-broker in the Haynesville Shale confirms they will not be negotiating with groups anymore. It's not good news for many of the dozens of neighborhood organizations that have formed over the past several months in search of better lease terms.
Monday night KSLA News 12 reported that the East 80 Oil and Gas Leasing Coalition has run into a roadblock in their attempts to negotiate with Chesapeake Energy: they've been told the company's leasing broker, Twin Cities Development, will only deal with individuals.
We asked Twin Cities today about that, and the Director of Community Affairs Clay Baskin confirmed it. "It's our new policy for 2009, and what we are doing is, we're giving the individual lessor the opportunity to negotiate on their own behalf for their own oil & gas mineral lease." Baskin says the new policy is in response to problems they've encountered in dealing with large groups, "Past experience hasn't turned out to be as productive as we had hoped. And also whenever you have the spillover of the acreage that's not contiguous to the section that we're focusing on, then it's in effect at that particular time not acreage that we're interested in because, A, we don't have a drill site, B, there might not be pipeline access at that current moment."
As the market has slowed, Baskin says, the focus for leasing has turned from grabbing up as much leasehold to what he calls 'controlled development.' "We have the same manpower, it's just much more controlled and much more focused. So yeah, for individuals living in sections where we have drill sites and we have pipeline access, you're going to see that activity begin to pick up."
"So what we want to do is focus on section by section, and as I said before, 'controlled development,' and then move forward from one section to another as opposed to taking on maybe 4, 5, 6 or several different ranges as opposed to taking on whatever we can't develop all over, " Baskin explains. "What we have to do is we have to put them together and we have to turn them over so that Chesapeake can start drilling and see a return on their investment."
Chesapeake Energy Corporation (NYSE: CHK) currently claims 460,000 net acres of leasehold in the Haynesville Shale. About 110,000 of that is in a joint venture with Plains Exploration and Production Company (NYSE: PXP).
In addition to lower bonus offers, Baskin says Twin Cities' lease terms in recent offers are now longer. "The primary term (is) generally on a 5 plus 5 basis. And once again it has to do with the fact that if you take into account that the intricate parts of putting together an urban environment such as Shreveport and Bossier City, you need that extra time in order to fulfill your committment, not only to us to our operating parter Chesapeake, but also to the individual lessor. If you sign a lease with a lessor, you expect to have your minerals produced. But in effect, whenever we deal with so many people and so many landowners, it takes us longer over here in an urban environment to put that together. "
In other words, the longer lease terms give Chesapeake more time to develop all the acreage they've been leasing up. So what's in it for the landowner looking at signing a five year mineral lease? Who's to say natural gas prices - and therefore mineral acreage values - won't go up again in a few years? "That's exactly what it is," says Baskin, "Who knows?' And that's what we want to project to people is, first thing, we want to educate them. Second thing we want to do is give them the opportunity. What everybody has to understand is that they have the opportunity to wait. Or they have the opportunity to sign. "
Or be force-pooled. This happens when a majority of mineral owners in a unit (640 acres, or about one square mile) have agreed to lease their minerals. The operator can ask the Department of Natural Resources' Department of Conservation to "force pool" the remaining un-signed mineral owners so that the well can be drilled. Since they haven't signed a lease, force-pooled mineral owners do not receive a per-acre bonus and will get not get paid until the cost of the well has been recovered by the operator. For example, if you own 32 acres in a 640-acre unit, you would responsible for 5% of the well cost. These deep wells into the Haynesville Shale have typically cost anywhere from $5-8 million each to drill. After that, however, you would receive your full proportionate share of the revenues, ie., 100% royalty on your share of the unit. That could mean big returns - if the well is successful. The downside: if the well never breaks even, force-pooled mineral owners won't see a dime.
Baskin says forced pooling has to become economically feasible for the producing company to do so, but that decision is up to Chesapeake. "A lot of people ask me, 'When will you stop leasing?' Well, we won't stop leasing until there's 100% or until we effectively cannot lease anymore acreage and then if it is economical to go ahead and produce the well and go ahead with force pooling that's Chesapeake's call and they go forward with that process."
Buck
Views: 263
Replies to This Discussion
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Permalink Reply by Bob on
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Comes down to this. The big money is gone for a long time. many of you should have signed and didnt. As for now. Sign or dont sign. do you think it really matters to Chesepeake or any of the other big operators? 8 months ago I had a landowner turn me down at 5000 dollars an acre. Umm, I guess he died. I gave him 2 weeks, he said Ill die before i sign for anything less than 20 grand. This was for 40 acres. We shut him down. He keeps calling wanting to take 5000 now some months later. We dont want it anymore. Maybe if he keeps calling I should put him on notice for harassment. 2 way street. These big homeowner associations need to buy a rig, hire their own land men, file the needed paperwork, cure the title, hire a crew, and then hope they can survive a dry hole after spending 14 million dollars. Never happen? Nope. So after all the talk, smartest thing is to quit fooling yourselves and realize who really is controlling the strings here. Wait it out if you want to, it doesnt matter.
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Good for you. glad it worked out for you. Dont know what went around to hassle a 80 year old relative means. What does that have to do with your offer or deal? And lowball? This guy and many others would not call 5000 dollars lowball for now or for the forseeable future. My answer: Timing, timing timing. And his last "ethical" conversation with me was him bragging about having 2 other companies ready to lease for more. hmm, I knew there wasnt, so was it "ethical" for him to tell me this? Or is ethics a one way street? BTW, are you in a unit yet?
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Permalink Reply by Bobi Carr ("parker") on -
Bob,
When those big tract leases start to expire, Twin Cities and others are going to be crying.
It's all a game for y'all, but us little hicks have started to learn the rules.
It's not so much fun playing for y'all now is it?
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Permalink Reply by Bobi Carr ("parker") on
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Also EUR's have INCREASED and cost to drill have DECREASED. The price of gas is but only one factor in the TOTAL equation.
And the guy that you spoke about maybe he was just holding out to deal with someone he could trust.
I wonder if he didn't just have issues with you.
Most of us mineral owners are out to have a win/win situation.
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Not really. I liked the guy. Retired postal worker. I tried telling him the big money was going to dry up. I gave him 2 weeks, if he had these other deal on tha table, why is he calling me still?
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Permalink Reply by Dtown on -
I'd like to see an example of just how much finding costs have decreased, as you say they have. Any example you could provide? Drill bits, pipe, compression, drilling rigs, have they dropped with everything else in the market yet?
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No, actually its a lot better now. Its simple, ill lease your land if you want to, if you dont ok, if you want to shop it around good luck. ill cut a check, not a draft within a week of signing. Decent clauses, but no b,s, from the other side either. U got a better deal, take it, btw I used to be hick, never was proud of it like some, got educated and never looked back.
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Permalink Reply by Randy on
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Hell Parker, I'm ready for all this stuff to start expiring. You know how long it will take us to lease it again?!? hehe
Work for years :)
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Well, some of that was borderline insulting, but ill try to keep mine professional. I never heard it called officially the bell cow, but, if I had a family tell me Goshdarn the bell cow is in charge. then thats usually no problem. But, you must admit in some cases the bell cow doesnt have any other claim to knowledge except he read a lease once. That his grandfather signed on a low flow oil well 40 years ago, and maybe not the case with you, but some of them sold their families down the river. Ive known some of these "leaders" to even try to cut better deals for themselves at the expense of their family. As far as your other holdings, mmmm good for you. That is also a good reason for you to hold out. You dont care, and shouldnt care as much as a retired postal worker. I wasnt trying to be snide about asking about whether you were in a unit, just conversational. And, now ill act like a man. Bellcow, i dont need landman 101, I probably took those leases from your granny.
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Well, actually I joined this forum right after it opened. its been a great tool for keeping track of rumours etc, and to get a feel for how the landowners percieve things. As far a true hickdom. I guesss Ill just say I placed my first trapline with my dad when I was seven. Made my own trap map using a map and compass. Beaver, muskrat. best time of my life doing that with him. Shot and dressed my first buck not to long after that.
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