Replies to This Discussion

Permalink Reply by DJG on February 19, 2010 at 11:18

These were actually new leases with 3 year terms - but did include the additional 2 year option for that $2K additional bonus.

Nonetheless, yes, they would not be actively leasing if they did not believe that the area was commercial.

Permalink Reply by adubu on February 19, 2010 at 15:31

D. Gaar--did you see any new leasing in the Joel White Survey just to the NE of S. Strickland Survey. I have minerals leased up by hwy 7 in the Joel White. Leased two years ago just before news broke so missed the big $ leased at $325 acre but hope CHK or Unit Petroleum will drill a well and my minerals get producted.

Permalink Reply by DJG on February 19, 2010 at 16:34

Just did a quick search and I do see that CHK has had some recent activity in the Josiah White survey. That's right below the Joel White isn't it?

FYI - Shelby County really has one of the better online search systems around. Pretty well updated from 1983 - current.

http://cc.co.shelby.tx.us/

Click on the "Party List" link and then plug in what you are looking for in the appropriate field.

Permalink Reply by adubu on February 20, 2010 at 5:04

Thanks D. Gaar

Permalink Reply by DJG on February 19, 2010 at 11:38

FYI, also came across an interesting Cabot lease for a small amount of acreage in the Rusk County School Land Survey a bit further South that was leased at over $6K/acre.

A few interesting points on that lease:

1) The deal was cut with Cabot in mid-July 2009 at the same time that all the O&G's were using the argument that NG was under $3mcf in order to justify their overall low lease prices at that time.

2) All other recent Cabot contracts are all filed as Memorandums so no public info on the terms is available through County Records searches. This one, however, was a contract between Cabot and The State of Texas General Land Office so it was filed with full public disclosure - including the full terms of the deal.


At the time of the deal it seems that this lease was likely to have been one of the last remaining hold-out parcels in that survey and there was quite a bit of competition between Cabot, XTO, Devon and others for land in that survey and adjacent areas.

Those circumstance, no doubt, would factor greatly in the good terms of this particular lease.

It is interesting nonetheless, to see hard documentation of a $6K/acre lease filed at the same time that many other leases in the area were getting snatched up at $500/acre and less....

Permalink Reply by RBH on February 19, 2010 at 11:41

THANKS D. GAAR FOR INFO

Permalink Reply by DJG on February 19, 2010 at 16:01

I found this while searching through the documents via the Shelby County Clerk's online search.

Book and Volume are not listed for this lease on the Clerk's office website, but it does come up if you plug in the instrument number in the appropriate field.

Instrument#: 2009006499
Recorded: 8/3/2009
Party 1: General Land Office / State of Texas
Party 2: Cabot Oil & Gas Corp

Permalink Reply by ledlights on February 21, 2010 at 20:17

I have seen it stated elsewhere on GHS that lease and option bonuses tend to align and it surprises me. It has been abundantly repeated here that lease extension options are not a great idea. I agree, but I have accepted some offers that included options that were described as "necessary" to proceed when I was offered an option bonus which was considerably more than the original bonus. Since it is a free-bee for the lessee, why not at least negotiate a higher bonus for allowing such a potential long-term property tie-up? It costs the lessee nothing, and presumably they could easily have greater knowledge at the end of the primary lease term for choosing whether to exercise the option or not.

Permalink Reply by Skip Peel - Mineral Consultant on February 22, 2010 at 3:34

Extensions are beneficial in two regards: Obtaining improved lease terms potentially including the extension bonus and Delaying drilling (if the lessor anticipates improved future nat gas prices). For those with no near term desire for a well, an extension offer can be quite attractive. For those who already have acceptable terms and a desire for development within the existing term, do not extend. Every circumstance is unique. The one suggestion I would make is a study of the active operators in proximity to the mineral acres. And their lease positions if you don't mind spending a little time in the Clerk of Court's office. Is it possible that some other operator might value your minerals also? Competition is one of the keys to getting your best deal. If you commit to an extension with considerable time remaining on your lease term, you may miss out on some top lease offers.

Permalink Reply by ledlights on February 22, 2010 at 14:54

Well stated Skip. I should add that the extensions I have accepted occurred when I could not stir up adequate interest from competitors. In your experience are extension bonuses usually the same as primary bonuses?

Permalink Reply by Skip Peel - Mineral Consultant on February 22, 2010 at 14:57

I do not see any significant relationship.

Permalink Reply by Adam on February 23, 2010 at 12:50

I agree.

Correlation between original bonus and option bonus is hard to judge. Companies do it different. We for one make the option bonus quite a bit higher than the lease bonus.

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