Replies to This Discussion

Permalink Reply by Abby on November 30, 2009 at 17:02

If you find out, please let me know. I am in this section also. Seems they are drilling all around us doesn't it? I was not happen with my lease either - $200 per acre with no bonus money.

Permalink Reply by shawn on December 1, 2009 at 11:05

There is a law suit going on with some of section 24 and all of section 23 because they signed a letter of intent for 20,000 next day they resended and offered them 2,500 been going on for about a year so who knows how long it take.I got 20,000 a acre the others should have gone with a landman like I did the leaders a of the group were to greedy I did'nt like they handling so I pulled out thank god I did

Permalink Reply by Friend on December 2, 2009 at 13:06

Thanks for the info... i thot something like you described may be the concern. I remember another group or 2 that were negotiating. We were one of the last groups to see a high bonus / acre before the decline.

Permalink Reply by Friend on December 2, 2009 at 13:13

My lease was signed w/ Chesapeake on 9 Sep 2008. It is a 3 year lease with a 2 year option.
Now if they do not drill in Sec 24 by Sep 2011, is Chesapeake obliged to paying an additional $20K / acre @ that time or can they opt out entirely?

Permalink Reply by Skip Peel - Mineral Consultant on December 2, 2009 at 15:10

Friend. A standard 3/2 lease term provides for an initial term of three years with an option for the lessee to extend the term for an additional 2 years by paying an additional bonus rental specified in the lease. Yes, the lessee may chose to extend or opt out entirely at the end of the initial term.

Permalink Reply by Friend on December 2, 2009 at 18:26

Thank you Skip...
care to guess how CHK will play their open lease options in 2011?

...knowing a lot can change by then. Demand must grow for NG... and it will over time.
Too much gas on the market has prices depressed @ present and we still import lots of NG places like Qatar.

Boom bust cycle repeats itself... The US gov't needs to wake up and get behind NG as a bridge fuel.

regards,

Permalink Reply by Skip Peel - Mineral Consultant on December 3, 2009 at 3:22

Friend. CHK is in a unique situation considering their PXP carry. Depressed drilling and completion costs have also allowed many operators to continue to develop. A HA horizontal well cost $9 - $10M (if there were no problems) early in the Play and now costs ~$7.5M. Every major E&P in the HS Play has strong incentives to build contiguous lease blocks and supporting infrastructure. Their first unit well not only HBP's the unit but covers the capital costs for associated development. At the point that every unit has its initial well, I think drilling will become more deliberate and market driven. Until then even low nat gas prices will not deter those companies that have made the decision to focus their business strategy on shale gas.

Permalink Reply by Friend on December 2, 2009 at 18:30

the moral.... bulls and bears make money... pigs get slaughtered.
i.e. excessive greed can damage one's health... one can not ignore the market realities

Permalink Reply by Skip Peel - Mineral Consultant on December 3, 2009 at 3:34

I receive what I deem reliable reports of lease offers on a weekly basis. As much as the current market conditions would seem to be a drag on leasing acreage prospective for the HS, recent activity proves otherwise. Bonus offers continue a slow but steady rebound and surprisingly aggressive offers are being made by a number of companies in cases where they are building lease blocks. IMO there is no such thing as the "going rate" for bonus offers in a specific area unless the reference is to "opening offers" on acreage that will not be drilled in the foreseeable future. Greed is a subjective determination. One man's greed can be another man's wise business decision.

Permalink Reply by Henry on December 4, 2009 at 1:13

Skip,
Do you care to tell us the range of offers you are seeing? Can you share what you call a "surprisingly aggressive offer?"

Permalink Reply by Skip Peel - Mineral Consultant on December 4, 2009 at 2:56

Henry. What I refer to as "opening offers" remain in the $2500 to $5000/acre bonus range for tracts regardless of size. In sections where an operator has plans to drill in the near future, lots and tracts <10 acres may receive bonus offers of $6000 to $7500. Larger tracts upward to $8000 or $9000. Where competition exists between one or more of the major shale players, I know of quite recent offers in the low 5 digits. Offers vary widely and are very location specific. Members need to do their homework and know what operators are active in the immediate vicinity of their minerals. They need to know the sections under unit order and to which companies. Also where wells are permitted, drilling or completed. There is no such thing as "the going rate" unless the reference is to "opening offers" and I do not advise accepting them regardless of the size and location of the mineral estate.

Permalink Reply by Friend on December 4, 2009 at 3:08

Thanks much Skip for sharing your knowledge...
The very best to you.

As to my point on greed... of course all values are relative and markets go up and go down. No one can accurately predict the future with certainty... but education and experience will carry one a long way towards making sound decisions.
final point... unless one knows and fully understands the risks of any business decision... particularly oilfield leasing , it is best to rely on honest recognized "experts" that do... in making a decision for your family. sum total - Educate thyself.

Friend / Bruce