Replies to This Discussion

Permalink Reply by Jimmy on October 24, 2008 at 14:43

Do those terms sound out of the ordinary?

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Permalink Reply by Jimmy on October 24, 2008 at 18:18

Hey thanks for the info. I really appreciate you taking the time to explain some fundamentals for me. Once again, thank you very much.

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Permalink Reply by Ladyoaks on October 25, 2008 at 1:10

I would also strongly recommend that you seek a local oil and gas lawyer who has experience in leasing. You may end up paying a few thousand, but it will be well worth it.

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Permalink Reply by Bobi Carr ("parker") on October 25, 2008 at 5:18

Jimmy,

The landman may have told your aunt that they company didn't plan on drilling a well for 3 years. One way or another, I agree with LadyOaks, you need to have everything reviewed by an attorney. It is money that is well spent. Also make sure that your attorney is an Oil and Gas attorney and charges by the hour. Don't rush into anything. The better you educate yourself the better you will do with or without an attorney. But be aware that what you sign will probably affect your family for decades to come. Do your best to get it right now; there is no going back to fix it later.
GOOD LUCK

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Permalink Reply by CS in TX on October 28, 2008 at 3:26

Hi Jimmy,
When where you offered your $5000/acre?
We received our lease offer and draft yesterday from Devon.
It was for $5000/acre w/ 25%.
When I read through the lease agreement, I too read the same thing about not receiving royalty payments until after the 3 year primary term. When I asked about it, I was told that once a well is drilled and production begins the primary term ends at that point, no matter how much longer you actually have. There was also a mention of Shut-In royalty after the 3 year term. Maybe that is where your Aunt and I got confused.

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Permalink Reply by Antsu-in-Japan on October 26, 2008 at 2:48

Great points, Kenny!

But here's another one: my father, being the wonderful Christian man that he is, said that he may be dead and gone by the time a company comes to lease us in this shale..but he is holding out for what WE believe our property is worth because it was never to be for him. It is about our family's legacy and financial well-being.

He mentioned that he looks forward to working with the O&G companies...not having our property work for them against us! Not bad thinking...

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Permalink Reply by Antsu-in-Japan on October 26, 2008 at 3:19

Hey KB....I can honestly say that my folks are GREAT people! I can see my father's first stop after royalty checks start rolling in: 10% tithes to the church monthly (already been discussed)! My mom would probably hire temporary staff each Thanksgiving to help her with the 80 or so dinners she makes annually for the homeless and elderly who live alone in our town...and yes, she makes everything from scratch and GIVES it away.

Now, if this is the mark of greedy folk...I thank GOD we are!! If only more people in here were GREEDY like us!! HAhahhahaaa.... :-)

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Permalink Reply by HBP on October 26, 2008 at 3:31

I say this with all due respect and to give another perspective: I think it is hard to separate emotion from business when its "family land" involved, but many times that is to the detriment of the landowner. It's hard because all of the sudden an asset that has emotion involved (family land) is involved with an unexpected business venture (exploration). If you allow too much of that emotion to color your business decisions, then it becomes hard to look at the numbers in a reasonable way. Im not saying that it is the wrong way, I'm just saying that you have to accept that you are losing some much needed clarity when you allow emotion into a deal.

Also (and I will type this on here as much as I have to): Don't confuse the prices this summer as some type of reasonable valuation of the price per mineral acre. I'm a free market, atlas shrugged kind of guy, so I know that the market can be what anybody is willing to pay at a given time under certain conditions and factors. BUT there was one factor this summer that Floyd and Aubrey allowed into their own business that shouldn't have been there - emotion.

I'm not saying we will never see 25k/acre bonuses again (because I never say never), but it won't be without the field being proved up, NG prices much higher, and more demand created for the commodity (because we have a history of supplying ourselves out of commodity needs - Boom then Bust, Boom then Bust - repeat). It will be years, not months - if at all.

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Permalink Reply by HBP on October 26, 2008 at 4:17

It is exhausting. I've met many landowners who were due almost millions of dollars but were worn ragged mentally by the end of it all. Not necessarily from the land companies, but just their own mental energy from having to deal with financial issues that they did not have to before.

You read it correctly. Aubrey, Floyd and their collective decision makers were giddy (or something), more Aubrey than Floyd, but FLoyd proved he could play poker.

Boom, Bust, Boom, Bust, Boom...... The next chapter has to include promotion and innovation for new NG demand.

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Permalink Reply by Antsu-in-Japan on October 26, 2008 at 4:41

Thanks guys...I thought all this sudden extra napping was age-related!! Again, many thanks for the insightful post, HBP! Likewise, KB. I promise to stay cool...(can't help it since it's going to start snowing here soon.) :-)

Stay blessed...

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Permalink Reply by Antsu-in-Japan on October 26, 2008 at 4:56

Hey HBP and KB...do you see any industries other that the automobile industry taking advantage of the NG that is being 'discovered' around the world?? I mean we're seeing this thirst for NG cars...(did you know we use gas to heat our bath water here in Japan. Actually, our tubs are computerized and the gas keeps the water hot for the amount of time specified. If I don't turn on the gas in my home, I can't get hot water. Neat, huh...?)

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Permalink Reply by Antsu-in-Japan on October 26, 2008 at 4:45

HBP - thanks for the suggestions. Actually, we are VERY CLEAR as a family unit as to what we expect from our share of the shale. That's not to imply that we are incapable of negotiating with others or that we will not settle for less than what we were initially offered. It depends on MANY factors and my family realizes the importance of sitting down (via phone and email-different states and countries) and rationally discussing our future.

I am a wedding researcher/planner here, in a facility running approximately 450 weddings per year, in one of Japan's most cutthroat industries (puts O&G to shame!!). I know the importance of watching for trends, forecasting movement and predicting the most viable 'routes' in regards to business...and I can beat my chest with the best of them. I recently graduated from the GWU School of Business (as valedictorian of my department). I have had classes in law, so I know the basics. Up until now, my family was a part of a group and I was not in the leader loop when it came to the negotiating process. This do-over has given me the chance to help my family as its primary researcher and negotiator. Trust me...I have been as COOL as a pickled Japanese cucumber these days since the CHK incident...cool yet vocal!! Again, thanks for the advice...it will come in handy!

I do not, for the most part, allow emotion in my business dealings, which is probably why I'm so sought after in my area here in Japan. (But I'm probably the first to cry at a good wedding.) I'm sure you've seen my posts ranting about CHK and its recent reversal regarding our section and leases. For those who may think I'm just a hot-headed, overly emotional landowner based on what I write, I'd just like to add: please don't "read" too much into everything you read. Trojan horse, anyone?

PS...I had been following gas-related news from around the world even before the "no" came. Even got a little "international" file started. Smiling more each day when I think about how it will all someday affect and be affected by our shale. After round one, we've decided we can wait until we have successfully negotiated a CLEAR win-win leasing situation for both parties involved. Of course, the O&G companies hold the advantage as the experts, but we hope to give them a good run for their money (after careful preparation) the next time around. No regrets...

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