Replies to This Discussion

Permalink Reply by DJG on February 1, 2010 at 5:03

Solid advice, as always Skip.

I think that any land/mineral owners who do not do their homework can end up hurting themselves in two very different ways:

1) By not knowing/learning what is going on in the area and accepting the very first low-ball offer presented at terrible terms.

or

2) Like you said, by getting consumed by the hype with expectations and then perhaps end up holding out for that perfect pie in the sky offer that never may be realized.

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Permalink Reply by Skip Peel - Mineral Consultant on February 1, 2010 at 5:16

Thanks, David. We all understand and accept that it is human nature to want the best deal we can get and to expect at least equal to what the next guy received in beneficial lease terms. However that second part is where mistakes are made. All mineral estates are not alike. And those who post or support posts that they feel or hope represent an accurate valuation without discussion of those details should have their assertions taken with a grain, or two, of salt.

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Permalink Reply by Henry on February 1, 2010 at 6:52

Skip,
Nothing wrong with what you just said, but.... Those who held out and did not get leased the first time around are finding that prices are inching back up all over. Patience, patience, patience. Those who succumbed to panic in late 2009, and ran out and leased, got low prices. Those who could afford to be patient and wait, and not give it away, will be rewarded.

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Permalink Reply by Skip Peel - Mineral Consultant on February 1, 2010 at 8:22

Maybe, Maybe not. Henry, no one has a crystal ball but here is a scenario that I think you will recognize as a possibility. New shale plays continue to be discovered for the next 10 or fifteen years, not only in the U.S. but around the world. Each one goes through a phase of heavy leasing in areas with no production to hold leases without new wells. Operators must drill to hold leases. The natural gas supply remains historically high and keeps the price depressed. One of the overlooked elements of the 2008 leasing was the run up to $13/mcf. IMO, we will never see any price remotely close as we are living in a new era of tremendous shale gas reserves. Yes, offers are inching up with inching being the optimal word. Holding out for the highest offer is like trying to time the stock market. Only those mineral estates possessing unusual characteristics that make them especially valuable to operators will get bonus offers of 5 digits. And posting opinions that support the best offers as something everyone should expect and receive is misleading at best and potentially detrimental to GHS members at the worst. The Haynesville Shale Play is no longer THE shale play. Companies can spend their lease dollars elsewhere. Lease offers don't always go up, they sometime come down and the shale does not go on forever.

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Permalink Reply by Carter on February 1, 2010 at 17:05

Good points and valuable contribution, Skip. Your post should be put up on a sticky.

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Permalink Reply by Cheerleader on February 1, 2010 at 9:42

Henry,
Good point. I have never been intimidated when it comes to patiently waiting.

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Permalink Reply by Cheerleader on February 1, 2010 at 9:32

J. Garrett,
Good point !! One more item to add to the growing list of "Issues to negotiate".

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Permalink Reply by j garrett on February 1, 2010 at 9:33

I've found that it is easier to work with operators on their terms. BIAPO (Back In After Payout) Agreements have been around for decades, as has the concept of leasing specific zones and/or excluding specific zones. Yes, it is difficult to trust they are doing the right thing on the expense column (to determine when the well has paid for itself), but a good O & G Atty can craft the lease provision with some specific criteria to try to avoid this problem, perhaps making it production based as you suggested.

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Permalink Reply by jerry smith on February 2, 2010 at 7:08

yall don't get me started because i will tell the truth about operators. I put to this way keep a full time lawyer to help you and then keep a eye on him. When it it comes to money i don't trust no body

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Permalink Reply by Miles on February 2, 2010 at 5:46

I think your greedy...

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Permalink Reply by Clo V. Hunt on February 2, 2010 at 7:14

It is your property. You decide what it is worth. Most of these so called landmen is working for brokers. They will
get you to sign a lease and sell it to the oil companies. My siblings fell into this trap. Your lease should be worth as much as Northwestern University's over across the sabine River in Louisiana. You are still a part of the same shale. Northwestern were paid 4.4 million dollars for 366 acres. You do the math. These oil companies have gone
into San Augustine and had people to sign these leases for little or nothing and expect everybody to follow suit.

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Permalink Reply by Lerret on February 2, 2010 at 8:05

I think with Exxon buying XTO, the offer is probably as good as you may get until Nat Gas prices rise above $7, but what do i know. Been wrong before. Frankly, I expect to see XTO disappear and Exxon quietly sell off their assets... They bought them with stock (no cash) and will study their horizontal drilling technology, possibly for a project they have in Europe, and then they will sell off all but the best properties that XTO has...and most of them are pretty marginal by the standards that Exxon has.

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