Replies to This Discussion

Permalink Reply by Skip Peel - Mineral Consultant on February 27, 2012 at 16:18

There have been few recent posts regarding lease offers.  I think that is a reflection of the fact that the pace of leasing has slowed considerably.  SWN has already acquired over 520,000 acres and they only need to get infill leases where they plan to develop in the near term.  The bulk of the site discussions pertaining to lease offers are old and contained in the Arkansas Activity Group.  That was before we attempted to combine all the LSBD related discussions in this Brown Dense Lower Smackover Group.  I suggest you review these discussions in the site archive.

http://www.gohaynesvilleshale.com/group/arkansasshale/forum?groupUr...

Permalink Reply by Big McInnes on February 27, 2012 at 18:59

There is a broker out of Jackson, Mississippi actively submitting lease offers in Union & Claiborne Parishes. I am a landman and had an acqu. of mine ask if he should take 300/acre and 1/5th royalty maybe a 4/2 or 4/4 lease term can not recall. The landman calling him claims the company behind his broker plans on buying 300,000 acres over three parishes.

If you are contacted by this company, my advise would be as follows:

1.) If you are not hurting financially and you would not miss the money if the play does not work out, sit out and see what happens....remember, this advise would be for the gambling man/woman.

2.) If you have 100 acres and $ 30,000.00 seems like a lot of money to miss out on, take it....             $ 30,000.00 is better than $ 0.00 any day of the week. If you decide to go this route, promise yourself not to pay attention to what anyone else is getting paid if the play starts producing monster wells.

3.) Option #1 would be most beneficial if the play is economical, because the bigger companies will be willing to come in and pay more bonus/acre and will be willing to exceed the all to familiar 1/6th and 1/5th royalty amount offers. If the play is viable the royalty amount will rise up to 1/4th and become the common denominator in lease negotiations, just like it does in all of these productive shale plays.

4.) The play should be proven or disproven in 12-15 mos.. If you receive a call from a leasing agent, remember it could be the first of many or the last of anyone willing to lease your mineral rights.

5.) In a perfect world as a landowner, you would be looking at a 3 year primary term, preferably without any type of option to extend, 25% royalty, vertical and horizontal pughs, no surface ops and cost free royalty clauses, etc., please remember you will not be seeing these kinds of deals until the play is proven and these big boys are willing to give up some of there profit/pride for a bigger piece of the pie.  

Thats my two cents, hopefully it will help a little bit in making a decision when the phone starts ringing. Please remember it is always a good idea to have someone look over everything sent to you for final execution before you sign with any company.

Permalink Reply by flex auger on February 27, 2012 at 19:19

Big Mc, you are exactly right with your advice, that is a carbon copy of how the leasing occured here in the fayettville play, your dollar amounts and time frames are spot on. Your best advice was to be happy where ever you jump in and not worry about the other fella with a different deal.

Permalink Reply by HBP on February 28, 2012 at 4:14

Who is the broker out of Jackson?

Permalink Reply by The_Baron on February 28, 2012 at 4:52

I tend to agree with Big Mc.

 

My only problem with most of these leases is the 4/4 terms.

Even if the play is succesful, holding out for bigger bonuses may not work due to AR force integration laws.

Permalink Reply by Mark on February 28, 2012 at 5:13

My 2 cents...b/c of the very fast pace of the technological advancement in the reservoir part of this industry (rock characteristics/makeup and how and what materials/fluid to use when fracing) I do not believe it will take many wells to determine viability.  Timing is dependant upon the drilling of those wells.  In my opinion, less wells than the guesstimate that has been mentioned so far.  What we are doing today in completions is a world apart even from a couple years ago.  The sharing of reservoir and completion data between organizations (voluntarily or involuntarily) is rampant. 

 

In short, I believe a particular company will have their opinion after just a few wells (low single digits).

Permalink Reply by Skip Peel - Mineral Consultant on February 28, 2012 at 5:22

Single digit LSBD wells may be sufficient to model a modest portion of the entire fairway  however the prospective fairway as presently defined will take many more.  We need more companies drilling exploration wells.  SWN will not get this done on their own.  Also keep in mind that SWN's analysis of the Brown Dense is that it has varying hydrocarbon zones.  Updip - oil, middip - wet gas and downdip - dry gas.  The current interest is in the areas believed to be prospective for oil.