Replies to This Discussion

Permalink Reply by Ellis Sowell on August 3, 2010 at 3:39

I have had an offer to purchase these mineral rights at $7000 an acre. I realize that most of you are unwilling to sell mineral rights, but any thoughts on that offer?

Permalink Reply by ledlights on August 3, 2010 at 7:51

Yes given my situation it is easy for me to say, don't sell - I currently have no pressing need for the upfront money. I can afford to gamble.

It would be money in hand - $350,000+ for your 50+ acres. That would seem to be a sure deal. Do your research regardless of which way you go.

You have not told us what the royalty rate is from your lease. If it is 1/5 and your interest in your 50 acres is 100% then one good Haynesville well that starts producing at 10 mmcf/d in a 640 acre unit with an average gas price of $4/mcf (current ball park but it is hard to estimate - if it stays much lower then the shale drilling will probably be curtailed) would currently be expected to earn over $200,000 in 20 years with $100,000 coming in the first 2 years. Your unit could theoretically hold up to 8 Haynesville wells as well as another 8 Bossier wells eventually. There may be other payzones as well. But that is all THEORETICAL. (your being in the core shale zone is not theoretical - it is fact - but what will actually happen with drilling on your land is all theoretical) On the other hand remember that these shale plays are "resource" plays with almost every well at least a "producer". And you are currently leased with one of the best shale drillers - Encana. Remember also that there are wells near your land that are ultimately expected to produce better that the one I use as an example above.

Another possible way to deal is to sell a portion of your mineral rights. That way you could get a sure upfront payday, but you and your family still retain a potential underground annuity for the future.

Permalink Reply by ledlights on August 3, 2010 at 8:11

If you can afford to hold out for awhile then please do. I sincerely doubt that the offer will dissappear. Barring a collapse of the gas market, your property should remain imminently sellable. You can only benefit from continued education and research on you options.

Permalink Reply by ledlights on August 3, 2010 at 8:38

Another thought - these investors would typically expect to make 1.5 - 2 million dollars or more on a 20 yr. investment of $350K without too much trouble or risk. With the risk aspect involved I believe they are expecting to make significantly more than that on this investment.

Permalink Reply by adubu on August 3, 2010 at 9:14

ellis sowell---I srongly recommend you read and listen to what ledlights has told you in his posted replies to you. Recommend you carry everything to a good oil & gas attorney to review. Don't sell unless need some ER money for major reason your accountant told you no choice. Then only part need to cover the problem. You could also carry it to a banker for ER loan as collateral assets for loan. Don't sign anything without legal review IMO.

Permalink Reply by ledlights on August 3, 2010 at 19:06

In case you have not come across this yet, the only currently completed well with any part within the Totin survey (the wellhead is shown in the Chireno survey) is the Crane 1H - Haynesville shale well. You can probably dig up more info about this well around here. But its recently tested initial potential was the third highest of any Haynesville shale well to date. This test number is not an absolute indicator of quality but it has usually been a decent indicator. This well test was reported in late July.

Permalink Reply by reallyoldguy on August 5, 2010 at 5:36

Ellis: My family minerals are located close to yours. I have a family member who just sold some of their mineral interest at $8500/acre.

Permalink Reply by Ellis Sowell on August 5, 2010 at 8:35

any way you could point me in that direction?

Permalink Reply by ledlights on July 28, 2010 at 18:21

Ellis and Taboot,

Both of you may benefit from getting more familiar with the Texas Railroad Commission gis viewer.

http://gis2.rrc.state.tx.us/public/? - click on the Accept button and the viewer starts

http://gis2.rrc.state.tx.us/public/help/GIS_toc.html - online help

With some practice you will be able to view the surveys your property is in and the wells that are being drilled or already exist in those surveys

Permalink Reply by Nacman on August 4, 2010 at 5:49

Don't know if this is the correct place to ask these questions, but any input would be appreciated. My family owns minerals in various tracts east of Nacogdoches. We each own 1/8th of the minerals in 19 separate tracts totalling approx 300 acres. Earlier in the year, the other 7 leased, but I did not because I didn't like the lease contract terms. Bonus offered was $400/acre; 1/4th royalty. We are negotiating terms, but I haven't heard back from the company in over 6 months.

About two weeks ago, the company came back to our family to lease minerals in a separate tract in a survey immediately south of and adjacent to the earlier tracts. Approx 150 acres. They have opened negotiations at $1,500/ acre bonus and hinted that they will go up.

Should I ask for the same bonus and terms on both tracts or will I get left out of both? Can they hold me to the $400 on the first tracts even though we didn't sign a lease?

Thanks

Permalink Reply by reallyoldguy on August 4, 2010 at 6:13

Nacman: If you did not sign a lease they can not hold you to any of the terms of your prior negotians. Nacogdoches has recently become the "hot spot", on the Texas side of the Shale play. Several wells recently reported at 25 -32 Mmcfd. This would explain why this company has come back to you and reopened negotiations at a higher bonus amount. I always urge people, when negotiating leases, to contact a GOOD oil/gas attorney in the area. A good attorney will best be equipped to advise you in lease terms and negotiaitions. With that being said, personally, I would ask for more thatn $1500/acre. More importantly, I would be concerned the royalty percentage. In the long run, a higher royalty percentage will be worth more, to you, than the bonus amount! I would ask for for 27% on the royalty. Probably wont get it, but you should be able to agree no lower than 25%. Would you mind telling us what survey these minerals are located in? Ive got minerals located in the R. Totin A-56 survey. The wells that I mentioned, previously, are located in the J.A. Chireno A-57. EOG Resources has most of the acreage leased in that survey.
Good luck to you!

Permalink Reply by Ellis Sowell on August 4, 2010 at 7:13

Does anyone know if the Crane 1H well is well #31117 on the survey maps? Just want to know if I am reading things correctly. Thanks.....

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