Replies to This Discussion

Permalink Reply by Skip Peel - Mineral Consultant on February 24, 2010 at 10:15

Shalee, Spring Branch is correct. The areas covered by these state leases will be developed at some time in the future when the wells will be economic. In other words when nat gas prices get high enough to make the operator a profit.

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Permalink Reply by Skip Peel - Mineral Consultant on February 24, 2010 at 15:04

Good point, Electo. The question remains, will landowners accept the lease terms required to make those plays economic?

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Permalink Reply by ledlights on March 6, 2010 at 10:34

Skip and Electro,

This is exactly what we have done with some of our shallow rights recently (accept typical shallow terms and reserve the deep rights). But I also have gotten the impression that some of the shallow operators have been trying to stick with low ball offers for deeper rights with plans to pocket the difference when they resell to or JV with a deeper operator. I don't mind them trying, I just don't care for them pretending that we're trying to gouge them when we insist on terms that are completely in line with the going deep rights for a specific area.

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Permalink Reply by Skip Peel - Mineral Consultant on March 6, 2010 at 11:32

Absolutely correct. A lot of small independents have made big bucks because their existing leases were "all depths". In other words, they would hold the lease in force with any production even if it was quite shallow. NO ONE should accept an "all depths" lease NOW. And I don't mean now that we know about the HS. Mineral owners with the foresight to get professional help have been using "Pugh" clauses, vertical and horizontal, for 35 YEARS! They have preserved and maximized the value of their mineral estates in this manner. If you don't have hundreds or thousands of acres, a standard vertical "Pugh" is really all a lessor needs. And as much as I wish for small independents to find opportunities to drill and produce (and provide jobs for our families, friends and neighbors) and for mineral owners to receive royalties, the days of the "all depth" lease is over for those in the know.

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