Replies to This Discussion

Permalink Reply by Allen67 on March 25, 2010 at 0:21

Go to your courthouse . Its all public information. It will show you what has been filed and will give you a good indication as to what to ask for!

Permalink Reply by Chip Sanches on March 25, 2010 at 4:08

Don't know if this is verifiable thru a different source.... An acquaintance who is very knowledgable and connected in the SW Ark. area informed me this week that a very substantial mineral rights owner had signed ALL of his Columbia Cty acreage to someone/some company for $500/20%/5 yr. paid up (no additional option period). We have interest in T 17S R19W just a little east of Sec. 17 and have had no offers or feelers in that area. Have had some interest in acreage well to the west (near the Walker Creek field in particular), but the offers were a bit low and/or disappeared prior to serious negotiations. Signed a lease last fall on a tract on the SE edge of Magnolia (well has been drilled) for much less $ but the lease severely limited the depth (less than 6,000 ft.). Be patient..... Don't "sell out" too cheaply.

Permalink Reply by Aubrey C. Sanders, Jr. on March 25, 2010 at 18:20

Chip,

Sounds like good advice to me. Sounds like Co. who leased your Magnolia land is looking at Petit Lime?

Permalink Reply by Chip Sanches on March 26, 2010 at 2:21

Yes, the lease did restrict exploration to the Petit formation. I understand initial production is 23 - 28 barrels a day. For a Petit well apparently that's a pretty reasonable production number. I understand the company is encouraged enough that they're going to drill another well in the area.

Permalink Reply by Allen67 on March 28, 2010 at 10:22

I do agree Electro! I sure think its hard on average people who dont have time to research a lease to get a descent understanding of whats involved. I have done alot of homework and I think I have just scratched the surface of understanding all of this. I personally believe there should be a minimum percentage on royalty. Its sad to see oil companies deliberately taking advantage of people all over . Dont know the answer as to how to fix it , just pondering it. I think its high time that the oil companies have a set of standards as to go by, instead of cheat all you can and pay the rest!

Permalink Reply by Dan Arnold on April 1, 2010 at 7:18

What you will often see is that a company might be willing to make concessions to a land/mineral owner who can bring alot of acreage to the table. The person with a few hundred acres will not get the deal that the person with 3,500 hundred acres might get. This is just economics. Remember, the company has hired a broker to lease the land and it might be costing them thousands of dollars per day to have a crew out leasing. It could take months to lease 3,500 acres made up of dozens of smaller tracts, the smaller the tracts are the longer it takes and the more it costs the company. People who have only a small mineral interest or small acreage are not in a position of strength when it comes to negotiating.
Additionally, there are usually areas that are more promising or otherwise desirable than others. A company will probably have to lease tens of thousands of acres of "milk" just to get a few thousand acres of "cream". If you have "milk" you are not really in a strong negotiating position. Once the company gets the "cream" they are done with leasing. Once they spend what they budgeted for acquisition, they are done with leasing. If they can't get enough leases, fast enough, they might be done with leasing in your area and will just move on to another area. If you are in a position to negotiate from strength, do that.

Permalink Reply by The_Baron on April 7, 2010 at 4:04

Well said Dan,
The oil buisness is like gambling. Somtimes we go into a risky propect, only becuase of the potential payoff. If there is a high risk, we will want to pay lower bonus/rentals and have a lower NRI.

Permalink Reply by Allen67 on April 7, 2010 at 8:44

I think you might of misunderstood my concerns. O r maybe I didnt make myself clear. I believe that , for instance, a contract between a oil company and a individual ought to be on the up and up. In no way should any oil company try to put clauses in the contract that is intentional to steal, take advantage of or is in any shape or form, dishonest. I have had contracts handed me to sign that have been done solely to try and get me to sign something that solely benefits the company, and dont even let me get started on the dishonest land-men . Not all of them! just the car-salesman types.

Permalink Reply by Dan Arnold on April 8, 2010 at 10:14

It is a perfectly legitimate concern. Stealing involves taking something from someone with no permission or compensation. Leasing involves a contract. The terms are clearly stated. Yes, there are contracts that are more beneficial to the company leasing the minerals than they are to the mineral owner. If the mineral owner was willing to bear part of the cost of running a "big" oil company, deal with the regulatory agencies, and pay 1/2 the cost of leasing all the land, building a well site,, drilling the well, establishing production, etc., then, if there was a well paying in sufficient quantity to provide a profit the company would split the profits 50/50.
Actually, the company bears all the risk, all the up front cost, and all the overhead. It costs the mineral owner nothing.

No lease "solely benefits the company". The mineral owner gets the lease bonus money even if no well is ever drilled. That is money for a signature and the right to attempt to harvest the minerals for a period of time. The period of time is because it takes a very long time (years) to lease all the land, analyze the leases, determine the best exploration plan, get permits, determine well locations, arrange surveying and landowner issues, and.....eventually drill a well.
If there is a good well drilled and if it produces a profit after expenses, then the company pays the mineral owner a portion of the profits. This is called the royalty.
Don't hate the oil companies or think that they are all crooks. You own the minerals. You do not have to do business with anybody, and nobody can take your minerals away from you. If you want to realize some financial benefit from owning the minerals, then you might want to lease them to a company for the purpose of exploration and production.

Permalink Reply by Dan Arnold on April 8, 2010 at 9:45

Here is another thing to consider. The price of natural gas is below $4.00 today and has been at about that price (or lower) for over a year. It is not particularly profitable for a company to tie up millions of dollars in lease acquisition costs at this time. Everybody wants a big royalty not realizing that with the prices being this low, what a huge bite that would take out of any profit the company hopes to make .
The minerals are of no value to the mineral owner as long as they stay in the ground. Some "Big" oil company will have to spend a fortune to attempt to acquire enough land to maybe drill a well. Then they have to spend another fortune drilling the well, another fortune to complete the well and establish production, etc. If the price stays low, they lose money, if they can't make a good well, they lose money. They can't put together a suitable block of properties, they lose money. The mineral owner risks nothing, financially. The odds are that nothing will happen on their land and they probably won't even get into a unit, so when the lease expires they lease again and hope something happens in the future. They spend the lease bonus money. Lease bonus is just money that comes along every 3-5 years or so. If a company can get in there and if they get some production going and if the mineral owner gets a tract or tracts included in a unit, then they get some mailbox money every month for as long as the well is producing in paying quantities. It is a gamble, but the "big" oil company takes all the risk.
This is not the days of the Haynesville shale play in Louisiana. This is an economic recession, the price of NG is very low and the dollar does not go as far as it used to. Where is the the incentive? Something is better than nothing.

Permalink Reply by Allen67 on April 8, 2010 at 12:00

I sure do believe that you work for or are part owner of a local oil company. You are correct in stating that I own the minerals. But you act like they cant be taken from me if I choose not to sell them . hmmmm If you get enough acres around me ,cheap enough, you will gladly force me to "give in" and take what you demand. According to you , this will be fair because I will receive something instead of nothing. hmmmm again. I wouldnt be willing to bet that the majority of oil companies are sooo poor that they are having trouble surviving. You act like the oil companies are doing us a favor by leasing and drilling. I would love to see your leases, if you have any, and just see what it looks like. Assuming that it is a different company than the one you are involved in. All I ask is that you please inform us of which oil mcompany you are involved in!!

Permalink Reply by Allen67 on April 8, 2010 at 13:25

Couldnt stand it ! one more reply! Well, being that you are a land man,consider this. You live on a block that everyone on has a new 40,000 car. Now I am interested in purchasing your car for 20.00. Hey something is better than nothing. What, you wont sell for that? Times are tough, come on. Ok, I will go to your neighbors. Lets say all of your neighbors need the 20.00 and I purchase all of the ones in your block. Apparently they just passed a new law that lets me force you to sell me your car for 20.00 and I am assuming that this really chaps your butt , doesnt it! It doesnt matter that money is still owed on the car, because you will still have to make monthly payments on it. I ,on the other hand am taking a huge risk in the fact that hopefully, none of these cars have something wrong with them. I have spent alot of money on these cars and I really dont like taking a chance on them, but I know Im helping you out. Oh and by the way, if all the cars turn out to be O.K. I will send you 10 cents per month until I get all of the usefulness out of these cars! Isnt that nice of me? Hey , something is better than nothing!!!

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