Replies to This Discussion

Permalink Reply by Caiman on January 14, 2009 at 8:10

GoshDarn , That was a GoshDarn great post.Taking nothing from Jay but that post could have been easily addressed to many of the regular posters.I don't post often but follow regular and learn something every time I sign on.So for what its worth I for one appreciate all knowledgeable post from any profession.A lot of land owners would much rather hear what a professional land man,Geo,attorney or someone with multiple leasing experiance has to offer rather than someone like me with only first time bad experiances and personal opinions.I don't know anywhere else to go and get this value of information.Thanks to all of you

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Permalink Reply by Spring Branch,mineral owner on January 15, 2009 at 4:12

I second that emotion, Jay. You've been incredibly helpful to me. Infinitely more than some of the naysayers who are quick to be critical, but offer precious little useful information.

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Permalink Reply by Dorcheated A1 on January 14, 2009 at 9:20

Whoooaaaaaa,What's going on this site I feel like I'm walking into a hornets nest. If you fine people will allow me a few seconds of your time let me throw in my two cents worth. Dion and Jay you two have provided a wealth of knowledge and information for people on this site including me and I'm grateful for it. Please keep doing it. Earl and Snake you have also provided a world of information for this site and I hope ya'll keep doing it. I'm not going to try and step in the middle and play MR. Nice guy like I have done in the past with other threads. To be honest I think the debate that your having is great and I would like to see more of it. Jay ,if you and Dion didn't take up for your professions I don't know that anybody would. That means you guys have balls and everybody here can appreciate that. Your not afraid to confront or be confronted that in my opinion is good. If you don't stand for your principles you stand for nothing.
On the other hand Earl and Snake have had some bad dealings with people in the business and have reason to be reserved. These are good Ole Boys who are gonna make sure that people in the business don't drop some crap on the little man and get away it. That you can be assured of. I think as long as the nature of the post aren't personal in anyway. You should call each other out on what you believe is correct or not correct. Then this site can see in terms of both sides of the issues what will be confronting the Haynesville Shale for a long time. Now it's time for me to go back to my bowling site thanks for listening.

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Permalink Reply by Snake Stewart on January 14, 2009 at 11:42

Jay,
You are a Geologist. Yes that would technically make you an industry insider person. But when referring to the O&G's in a questionable tone, it certainly wouldnt include you as one of those insiders with an ulterior motive. Unless of course you have been cooking those E-Logs ! (wink,wink)

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Permalink Reply by Taylor on January 14, 2009 at 14:16

Jay, Your perspective is soooo much needed and appreciated. I have been on the fence about being forced pulled for a while now, but I have considered what you have said about dealing with the paperwork and the amount of stress it takes on a person. So, if and when we get to make that decision, your help on here makes my decision easier.

Thanks!
Taylor

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Permalink Reply by Snake Stewart on January 14, 2009 at 12:34

Permalink Reply by Dion Warr
Didn't you read the same Mineral Code that I read? There is NO fair market value to mineral rights; there is no right of rescission for lesion beyond moiety.

Very good point Mr. Warr. I have read the section you are referring to. I believe KB forced me to read the code to qualify for future discussions with her. I had to keep talking to that chick so.........

My question is, why then do they even attempt to lease people ? If I have no options open to me, I should just lay down and let the O&G train "TOOT,TOOT" run right over me.

As to the decreased bonuses comment about that having nothing to do with value..... Your opinion is conjecture at best. This Huge Bonus thing hasnt happened before , in my limited knowledge . Not to this extent anyway.But neither has the opportunity to make as much at such a crucial time in history either for the O&G's.

These guys arent EXOM. They have been cranking out a good living for a long time but not anywhere near what their lease holds have in store for them. Heck, the only reason these companies are even still in existance is because there wasnt enough worth to make the big boys leave the Middle East long enough to even consider little ole U.S. drilling.Now that they are in the position they "WERE" in, it was more about building their credit worth/ stock value to increase their aquisitions. Even sell out at the high point if the right offer was raised. Now they are hanging on for dear life.Unfortunately they have seemed to have lain beside me on those railroad tracks now because they are evn more attractive for a takeover and they are a lot cheaper to buy. Upside is they still own a lot of this very valuable(rubbing hands together) acreage called the Haynesville Shale.

As far as the landowners that were in the "not so great area". Thats just terrible. Nobody said this wasn't a crap shoot. But if I live on the Haynesville Shale, Tier I, there isnt a better place in the world for me to be right now.

You can call it stuborness and to a great extent you are exactly right. But if I dont roll those dice and I was wrong about that, what do I do then ? Nothing. Its too late.I spend the rest of my life wishing I would have taken that shot.
Those people that you were talking about that Client X walked away from....... What did they lose ? Nothing! Because they had nothing to begin with. Of course they could have gotten that huge bonus that you were offering but at the end of the day, they had nothing so they lost nothing. I dont want to trick anyone into paying me anything my land isnt worth. Thats why I am waiting and watching those well numbers. But neither do I wish to be tricked (at this point in the game) into settleing for beans at a steak dinner. If I miss the boat, I miss it ! All that needs to happen is for me to be proven wrong.
Have a good one Mr. Warr

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Permalink Reply by Dion Warr, CPL on January 15, 2009 at 3:50

KB:

My point as to the 'fair market value' of the right to capture the minerals is that it is precisely what the market will bear. IRS - they operate under their own rules anyway. E&P valuations are generally on 'minerals in place', or proven and unproven reserves, which is more or less just an educated guess which can become more accurate as the asset is produced; even so, lenders only extend credit as to a percentage of fair market value, as opposed to a mortgage on a home, where fair market value is more or less fixed by appraisal, and you can borrow a much higher percentage.

I would more likely describe its value as this: if there was a value to your right to capture minerals, the state and parishes would have figured out a way to tax you on it. To this date, they have not. You are taxed on your land value, not mineral value.

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Permalink Reply by The_Baron on January 15, 2009 at 5:55

You are thinking to hard about this KB. The FMV is somwhere between what a landowner will accept and a operator is willing to pay.

Permalink Reply by Cathaus on January 15, 2009 at 6:06

Fair Market Value is like a pair of thongs....stuck in the middle and hard to reach!!!

Permalink Reply by Dion Warr, CPL on January 15, 2009 at 8:39

KB:

Honestly, the short answer is more in line with what Baron states, although that is not a satisfactory answer for most mineral owners.

As a general rule of thumb, lease bonus is usually 5-10% of the actual well cost, but can vary according to the value level of recoverable resources. Broker acquisition costs being variable depending on the area, number of tracts, etc., but is more or less equal to the bonus paid plus or minus 50% on the low side, and plus or minus up to double on the high side. (So, generally 5-10% of the well cost, but could be anywhere from 3% - 20%). That figure encompasses title search, lessor contact and negotiation.

Obviously, when competition-induced runups in bonus occur, that equation goes out the window. It then becomes more about who wants it most, and who can stomach the most for the longest time in the short-term. The idea is kind of like the megastore strategy that sells as low as possible in order to shed off the Mom-and-Pop competition, just to raise their prices later after the competition has been run out of the area.

Permalink Reply by sesport on January 17, 2009 at 4:12

Dion - Once again thank you ... you've explained it so that it is digestable.

Permalink Reply by Dion Warr, CPL on January 17, 2009 at 4:20

KB:

That is usually measured in terms of the first well drilled, as subsequent wells would be drilled into a unit that is already HBP.

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