Replies to This Discussion

Permalink Reply by Lisa K. Sale on March 20, 2012 at 13:16

Another question: Even though it appears Samson has taken out a lease in the section we own, does that mean they are the only company we can ever expect a lease offer? Please forgive my ignorance, I'm on the front end of this long learning curve.

Permalink Reply by Skip Peel - Mineral Consultant on March 20, 2012 at 13:31

Ever is a long time, Lisa.  And things change.  No one can tell you what the future may bring mineral-wise.  Do your homework and understand the implications of entering into an O&G lease.  If the lessee makes a well you will live with the terms of that lease, possibly for a long time.  Multiple generations.  If the lessee doesn't drill or does and doesn't make a well the lease expires and you wait for the next offer.

Permalink Reply by GoshDarn on March 20, 2012 at 20:26

Lisa, nice dog.  Looks like a golden retriever (maybe).  Very sweet personalities, those.  Smart.  The best.

Anyway, I'm a leased landowner in Bossier P., um, a good bit south of you.  My family goes way back with land/wells -- back to the first oil boom in the early 1900's.

Anyway, I've dealt with Samson (one time) and Mark's company (on yet another lease deal).

Now, you may not understand what I'm tipping you to . . . but you might be surprised by my advice.

In my opinion, you could be better off not leasing to Samson or even dealing with Mark's company.

Why?

First, because I would never ever sign a lease for 1/8th royalty.  Me, I'd rather go un-leased than sign that lease.  So, to me, that's an insult right off the bat.  Bad, bad.  Not good faith.

And like Skip said, with that acreage, you need to do some serious negotiating and not rush into anything.  Take your time.

Note:  Please ignore my advice if you really need the money.  If you absolutely need some cash, then that's somewhat different.

Also, since someone posted info on Samson changing their mind on certain leasing per the co. buyout situation -- that's a complexity, too.

Anyway, I just know Samson -- many years ago -- offered me a raw deal that I refused, and I have no regrets (and this was maybe four or five years before the Haynesville cat came out of the bag).  So, as it turned out, our land was Haynesville Shale, and we ended up nailing a super lease -- I don't know, could be a hundred times better per that raw Samson deal (as a rough off the top of my head guess). 

Yet, like I said, our family land is in S. Bossier P., so your location isn't really considered to be that desirable (kinda, i.e., as far as the buzz goes right now, although drilling can change things) and that's why you're partly being offered such a low-end peanut lease.

In regards to Mark's landmen -- well, I better not say too much.  To be polite -- I can say there's the good, the bad, and the ugly.  Some have flat out lied to me.  Again, bad business.

Good luck.

Permalink Reply by Lisa K. Sale on March 21, 2012 at 3:29

GoshDarn: Yes, she's a Golden named Ginger, or Gingi. Sweetest dog in the world, and smarter than some people I know ;>)

Thank you for your candid advice. There is so much we don't know...I mean, we literally just found out about the location of these mineral rights. Four siblings inherited these from my mother in law who passed away in 2010. We knew she had owned mineral rights, but she never discussed them or gave any indication of location, acreage, etc.  So imagine our surprise when we received a letter from O'Neal on behalf of Samson (or KKR now). What they sent was basically a form letter lease, so it's pretty vague except for the 1/8th royalty.

I don't know what to think about the Samson buyout situation and how this will affect us. You were very fortunate to have held out and waited for what sounds like a killer deal.

Thank you, again, for this sound advice.

Permalink Reply by GoshDarn on March 21, 2012 at 8:18

Lisa:

Okay, some quick advice.  Even though a few family members inherited the mineral rights -- i.e., even though it's an undivided family track -- each person can make their own decision and decide to sign or not sign.  That's okay.  You don't all have to all agree, although it is better for the whole family, in a way, to keep the clout of that many acres in agreement on signing a lease, since the more acres controlled, the more clout people have at the negotiating table.  Haggling.

Again, since it's the first offer and since it's so bad (because if the royalty is an 1/8th, then I would assume the bonus money per acre might only be a couple of hundred or so).

Note:  The bad old leases way, way back were always for an 1/8th (or really, really, really bad, 1/16th) to the unsophisticated hicks (like my grandpa).  Then 30 or so years ago -- people wised up and started negotiating -- and the next move up was 3/16.   That's actually 50% better if you do the math against the 1/8th, and that adds up each month on wells.

So the easy way is just to "say no" to that first ultra low, very bad offer of an 1/8th.  Just say "NO."  Also, you need to speak to the landman yourself.  And when you do, you tell the person that you (and or your family) will think about leasing if whomever comes up with a fair and reasonable lease offer.  But that offer isn't fair.  If he asks what you want to lease for, tell him your open to a new offer, but you will not lease for 1/8th and you want more bonus money.  Tell him to call you back when he has a better offer. 

As an example, I know for a fact that Mark's landmen were leasing another location in another parish a few years back -- and the smart landowners said "no" to the first, second, and third offers.  It's call leasing rounds.  Negotiating.  Just say "no."  The landmen will come back with better offers.  Of course, the situation was a bit different since this was a motivated area, i.e., drilling for the Haynesville Shale.

Anyway, the lesson here is -- if a company is serious about drilling a block of land, the first offer is just a way for the company to get it on the cheap and save money.  A poker game.  And the money keeps going up as the game continues (in most legit locations).

Most.

Yet one has to also know by saying "no" to the first few rounds of lowball offers -- landowners/mineral owners are doing a bit of gambling, in that they might not get a lease or make any money at all.

But what I say is, if the minerals are in the ground (which will be the only way someone is ever going to be paid the actual royalty, in that it has to come from oil or natgas production anyway on the royalty and it has to be drilled) -- so if the minerals are there, the lease offers will eventually go up to a fairer value.

Never easy.

Oh, the standard royalty for the Haynesville ended up at 1/4th royalty -- which is 100% more than an 1/8th.  A 1/4 is 25% and an 1/8th is 12.5%.  Some folks even got better than a 1/4.

And the lease bonus got up very high, as I'm sure you heard.  Some folks got $20,000 an acre bonus.  But probably those days are gone, now. 

Yet -- as late as last year, I know folks still getting offers in other parishes for 1/4 and $2500 an acre and then they had to hire a lawyer -- such as Summers in Shreveport -- to make sure they got the good lease clauses.  That law firm is Davidson, Jones, & Summers.  Randall Davidson is probably the top lawyer for the landowners' side of the fence in La.

The first phone call is free.   Once your family decides what they want to do -- before you ever sign anything, you need to call Summers and at least talk to him in Shreveport.  Even if the family wants to sign the lease and you do not, his advice to you per that first free call will be worth the effort (I suspect).

Me, I'd wait on it all until the 2nd or 3rd round of leasing.  Wait until the offer goes up to 3/16 or 1/4 and the bonus goes up (by you just saying "no") -- and let the family think about it -- then if this scenario does happen, make sure you use a lawyer to protect yourself on the lease clauses.  That's darn important.

Also, all of this leasing value recalculates over time per the price of natgas and oil.  These things run in cycles and go up and down.  Some in DeSoto P. -- last year -- might have been getting $3k or $4k on the bonus per acre in the right location.  Now, with the price of natgas so low -- it's a guess as to what a fair value is.  Me, I think a fair value is 1/4 on the royalty, good clauses, and a haggle on the bonus money.

Yep, Goldens are angels.  There's no doubt about it.

Permalink Reply by Just want mine on June 7, 2012 at 18:20

GoshDarn, I was reading up on the % of the royalties offered and am interested in any help you can offer.  I was contacted by JB Land about leasing minerals.  After reading over the lease, noticed they're offering 1/8th royalty.  Everyone around my property has signed w/JBL w/the $300. and acre for 3 yrs.  Not sure about the royalty % they were offered, but I don't want to be taken advantage of because this is my first time dealing with leasing or anything other than paying my taxes each year.  Any light you can shine on this would be great.  Thank you!!

Permalink Reply by GoshDarn on June 7, 2012 at 18:41

Just want mine:

Listen, I'd never ever sign any lease with a 1/8 royalty.

No way.

Yeah, because my family has been leasing for so very long and because we go way, way back -- I mean, I'm already stuck via hbp (i.e., held by production) on some really bad old leases that were inked at dang awful low royalties (decades ago).

And when I've told folks that I've been fightin' hard for 1/4 royalty for close to 20 years or more -- some don't even believe me (thinking only 6 or so years back, no one could get 1/4.  But I did.)

Yep, it's the honest-to-goodness truth.  So, y'know, now that 1/4 royalty has sorta become the norm in certain La. areas, my negotiating tactic looks to be nothing exceptional these days since now it's so common to ink 1/4.

Note also, just want mine, that "first offers" are just that.  In other words, there's never any rush with this leasing stuff.  The minerals in the ground ain't goin' nowhere.  Indeed, since signing a lease might be the most important document that some folks ever sign, per the mineral-estate issues which could effect generations of a family (as what had happened with my dad and grandfather who signed a number of leases ages ago) -- I always preach that folks need to take their time and realize such an important negotiation can, in fact, take many months.

My last negotiation with CHK dragged on for years, and no one in the whole family ever signed.

Thank goodness.

Whereas another (much more honest and honorable) operator made me a fair and reasonable offer of some other family land a few years back at 1/4 with a frothy bonus and good protective clauses -- and the deal was done faster than a placekicker nailing a field goal in Tiger Stadium.   

Good luck.

 

 

 

 

 

 

 

Permalink Reply by Lisa K. Sale on March 22, 2012 at 2:35

Pro Hobbs: Are you part of the Bilbray estates, Tract #357? There was a lot of acreage divided back in the 1950's. Seems we are right next door to each other!

Permalink Reply by Pro Hobbs on March 22, 2012 at 3:51

McDonald estate.

Permalink Reply by Pro Hobbs on March 22, 2012 at 3:56

Lisa,  How long ago did your family acquire the mineral rights?  You know that there is a 10 year prescription before it goes back to the surface owners.  I don't believe there has been production on any of that acreage that would have held the minerals.  Of course, since you have been approached about leasing, they have already run the records and know who has the mineral rights.

Permalink Reply by Lisa K. Sale on March 22, 2012 at 12:44

I have a copy of a court document dated Sept 6, 1950 regarding the Bilbray estates. It was divided up by 8 people/families from how I read the document. I haven't a clue if there was a well drilled or not. The information on the mineral rights is just now unfolding. We haven't heard anything from the O'Neal group or anyone else, so the the information you were told might be accurate. It's just odd how I've read about all the activity over the border and then nothing. Let me know if you hear any rumblings. Thx!

Permalink Reply by Pro Hobbs on March 22, 2012 at 15:15

Lisa,  It's easy to run the records at the court house in Benton and find out who owns the property and who owns the mineral rights.  You can take the description of the property (section, township, and range) and go up to the 3d floor to the clerk of court and they will help you find out what you need to know and even make copies for you. I think the name of the lady that helped us  so much was Jenny.  We were just over there a few days ago checking records on some property that we were considering purchasing. We had a chance to buy 48 acres that is adjacent to our property out there.  The minerals were sold in January 2003 to Atlanta Exploration Co. , so according to the Louisiana Mineral code, they should come back to the surface owners in January 2013.  Do you know who owns the property that you believe you have the minerals on?  Sometimes the landman or the company that is leasing will get it wrong until they check the records themselves.  I know just recently my wife's Aunt was contacted by a senior landman with Mark Oneal's group to lease her minerals.  She told them that they had sold the minerals about 10 years ago and didn't know if she could lease or not.  After he checked the records, he called her back and told her that it would be January 2013 before she got them back.  If you live close enough you really should go to Benton and check it out.  If you don't live around here, maybe you could get some friend or relative to go and check it out for you.

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