Replies to This Discussion

Permalink Reply by RAY on April 23, 2009 at 2:32

T 18 R 15 S 24....
was offered $1500 / 25% or $2000 / 22 1/2%.......counter offered

$2500 / 25%........

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Permalink Reply by Skip Peel - Mineral Consultant on April 23, 2009 at 2:40

Ray. What company made the offer? Have you looked lately at the activity in your area?

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Permalink Reply by RAY on April 23, 2009 at 2:45

Twin Cities........ I talked to some of the people in that section and its seems as though they were told that they were holding up the drilling and costing their neighbors royalties...... and most of them took the $1500 /25%..

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Permalink Reply by Skip Peel - Mineral Consultant on April 23, 2009 at 2:55

Ray. Chesapeake has no HA drilling and production units or applications in sections in that area. If Chesapeake was serious about drilling your section they would have applied for a unit order and you would see signs of early development. Any well sites staked in your area? Any landmen looking to acquire right of way? If Chesapeake was really ready to drill, they wouldn't be offering $1,500/25% and $2,000/221/2%. I suggest that you just sit tight. When you see some activity in your area it will be time to entertain offers. Do you know your neighbors? Are many of them leased to CHK as the Twin Cities landman says? Do a little research while you're waiting for an operator to get serious about the development of your section. I despise the old "you're holding up drilling and costing your neighbors money" line. Don't fall for it. Good Luck.

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Permalink Reply by The_Baron on April 23, 2009 at 3:09

What size tract?

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Permalink Reply by RAY on April 23, 2009 at 3:49

only 2 acres...... he came back with "in 10 days, the offer will drop to $1500 / 22 1/2% or $1000 / 25%... because the shale in our neck of the woods not as good as in other areas.

my response "in that case, I need to be getting 100 % & no bonus.
his response..." it will take forever to recoup the cost of drilling.....
my response.... my heirs will be around forever....just take me off your leasing list.....we will be in this together....let me know when WE start drilling.

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Permalink Reply by Catfish on April 23, 2009 at 6:11

I bet those TC landmen hate this web site and us informed shalers! You go Ray! I hope thay come back begging for you to sign for alots more than that .

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Permalink Reply by The_Baron on April 24, 2009 at 5:14

More than likely they will just not worry any more about ray and his 2 acres. They'll make up for it by charging ray for cost and supervision for the rest of his life while burying him under paperwork.

Have fun Ray.

Permalink Reply by Skip Peel - Mineral Consultant on April 23, 2009 at 6:20

Chesapeake/Twin Cities often seeks to lease a small acreage position in a section that they have no intention of developing. They want to be a minor working interest so that they have access to the well data. Unless CHK has a substantial leasehold in your section, this could be what they are attempting. They only need one or two landowners to accept the offer.

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Permalink Reply by Skip Peel - Mineral Consultant on April 24, 2009 at 7:38

Whenever a lessor is approached by a lessee for an extension of the lease term, IMO the first order of business is to have the lease reviewed by an O&G attorney as this is a chance to improve the terms. Any extension offer should include a royalty increase to 25% if the original was for less. Then the bonus should be negotiated as to length of term with a longer term providing a larger bonus. IMO, the most a lesser should grant an extension for is two years. These suggestions are just that and of a general nature. Every minerals interest is different.

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Permalink Reply by Martin on April 24, 2009 at 8:26

Skip Peel ---
Sounds like good advice to me.

Neighbor said that at a recent public O&G meeting in Mansfield that one of the O&G representatives said, when asked when the leasing bonuses would go up, that the leases bonus tracks pretty well with the commodity price of NG. Did anyone on the forum go to that meeting that can confirm this? Seems reasonable to me, but I have zero experience in this area.

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Permalink Reply by Skip Peel - Mineral Consultant on April 24, 2009 at 8:43

Martin. Operators, and those that represent them, would like very much for landowners to believe a correlation between natural gas spot prices and lease bonus offers. Particularly as most predictions are for low prices to continue for some months, if not years. Once again, my opinion. I believe that the better correlation to be: bonus value is greater the closer a tract is to actual development. And also, sometime in the not too distant future, the production of the closest HS horizontal wells drilled by capable operators. Now waiting to lease has potential risks and advantages that are different depending on the particular locale of the mineral estate. The risks just aren't that great at bonus offers of several thousand dollars an acre for those with small tracts.

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