Replies to This Discussion

Permalink Reply by Skip Peel - Mineral Consultant on November 17, 2011 at 15:45

Samson Contour has not filed a lease in Bossier Parish this year.  What's their offer?

Permalink Reply by Pro Hobbs on November 18, 2011 at 2:47

Thanks Skip for your reply.  I hesitate to give specifics only because I have reason to believe that there may be a slight difference in the bonuses they are offering.  It's very possible that I could be wrong about that and hopefully they are offering everyone the same deal. I was told that they would.  I know some in the section and adjoining sections have already signed.  They offered us a 3 yr. with 2 yr. option (negotiable), 1/5 royalties, and the bonus they offered us was in the $200 - $300/acre range.  I believe that in this area, that the bonus money and the royalty is in line. As far as I can tell, the most of the activity in that area is some Petit oil producers, but nothing in that section. So this is sort of an exploratory area that is not proven in the deeper zones.  That is why I believe that the offer is pretty good. The landman for Samson told us that they are interested in drilling for gas in the Cotton Valley but that they would produce any zone that they found hydrocarbons that would be profitable to produce.  From a layman's prospective, I wouldn't be surprised if they might not be looking at the Bossier Shale or the Smackover (Brown Dense) for oil, and/or gas, but that's just a guess.  I can get around pretty good on the Sonris sight and I will be doing some research before signing but I am convinced that the best source of advice and direction is from the knowledgeable folks here on GHS.  Let me know what you think and if you turn up anything that will help me on this.   He also told me that the lease would include a horizontal and vertical pugh clause that would protect me.  I would like to know some other clauses to ask to be included that would not turn them off but would protect us from loss.  Thanks, Pro Hobbs

Permalink Reply by Skip Peel - Mineral Consultant on November 18, 2011 at 3:24

If landowners are negotiating wisely, there should be some variation in lease offers.  And the specifics of the mineral and surface estate will dictate what are applicable, beneficial terms and which are unnecessary.  Too many mineral owners with modest size mineral interests spend time on horizontal Pugh clauses, for example, when no cost royalty and shut-in language are much more important. 

I am unaware of anything that might indicate that the Bossier Shale is present in N. Bossier much less whether it would be economic if indeed present.  None of the Haynesville operators show productive Mid Bossier north of about the 15N townships.  If it was a viable stand alone target we might have seen a Bossier well or two from the operators that drilled Haynesville wells in N. Caddo.  They drilled through the Bossier interval in those wells.  The LSBD is certainly a possibility however I would not be surprised if Samson's target is the Cotton Valley zone. 

In an oil & gas lease, anything and everything is negotiable to some extent.  And with the thought in mind that lease terms can last for generations, I suggest that everyone with more than 10 mineral acres have an O&G attorney review a lease form prior to execution and that those with 40 or more consider having the assistance of a professional in the negotiation process.  Attorneys lacking in O&G experience are not included in either suggestion.  From your description of the offer here is the first thing that comes to mind that does not pertain to standard lease language: considering that the landman states the target as the Cotton Valley, you could require the standard vertical Pugh clause language that states that the lease burdens only the deepest depth produced plus 100' at the expiration of the primary term of the lease (that could be 5 years if the option to extend is exercised) with the added stipulation that the one-fifth royalty is effective for the Cotton Valley and above and that all depths below the base of the Cotton Valley would carry a one-quarter royalty.  I could suggest a number of other negotiation options stemming from this but I hope this serves to illustrate my point.  Good Luck.

Permalink Reply by Pro Hobbs on November 18, 2011 at 3:57

Skip,  Thanks for the great advice!  We do have more than 20 acres so we will try to find an attorney that will look at the lease offer before we sign. Can you suggest a good attorney as we don't have anyone in mind at the time.  Can you send someone a private msg. with that information?  I would like to include some or all of these options and maybe some others that would protect us and our heirs, but hopefully would not be a "deal breaker" for Samson.  The bonus money, (several thousand bucks), will not "make or break" us and was not expected and we are not depending on it but it would be a nice Christmas bonus. The landman has already told us that the only negotiable part of the lease would be the 2 yr. extension.  Of course they probably have to tell everyone that.  I wish some other folks in the North Bossier/South Lafayette would weigh in on some of this.  Thanks, again, Pro Hobbs

Permalink Reply by Skip Peel - Mineral Consultant on November 18, 2011 at 4:16

The landman is telling you what he has been told.  But he is an intermediary, not the ultimate decision maker.  Someone else has set the goal of getting x number of acres in a particular location at target lease terms.  And my example of a split royalty based on depth is one way to explore where the lessee may be flexible.  Leasing companies and land departments are quite experienced with what the average lessor wants/values.  The landman may have some flexibility to vary the bonus depending on the term of the lease because that is what most landowners inexperienced in leasing value.  Has the landman presented you with a written lease or just verbally conveyed what he is offering?  I'd get a copy of the actual lease he is asking you to sign and take it to a good O&G attorney.  My first choice is Davidson, Jones & Summers but there are several other experienced O&G attorneys/firms that probably don't have a conflict of interest problem.  John Frazier and Cliffe Laborde come to mind as does Phillip Downer.  They are all listed in the Shreveport-Bossier area phone book and can be found on line.   I always counsel my clients to convey an appreciation for the offer and an interest in leasing your minerals to the landman.  Be polite but firm and don't be pressured into signing on some compressed time frame.

Permalink Reply by Pro Hobbs on November 18, 2011 at 5:00

Skip,  Those are all very good ideas and I really appreciate you taking your valuable time to advise me on this.  We should have a hard copy of the lease in hand one day next week.  We will consult with one of the attorneys that you suggested and let him look it over and follow his advice along with your great advice. I will keep everyone informed about this new activity. Do you think that it's possible that Samson may be leasing up some of these properties just to make some profit on re-leasing them to bigger companies?  Thanks again,  Pro Hobbs

Permalink Reply by Skip Peel - Mineral Consultant on November 18, 2011 at 5:11

Energy companies have understood the value of development rights beyond what they may intend to drill themselves for decades.  And that understanding has been modified and accentuated by the new age of unconventional reservoir development.  My example above is actually the reverse of what is happening currently in other plays some of which are discussed here on GHS.  Some companies are offering a lesser royalty for depths below what they state they intend to drill.  That puts them in a good position to assign those deep rights to another company and get a favorable royalty differential themselves.  Say I drill Cotton Valley prospects but nothing deeper.  I offer you a fifth above the base of the Cotton Valley and three-sixteenths below.  I know that should it work out that the deep rights are of interest to operators who drill unconventional reservoirs, I can assign my deep rights to them at a quarter and get the 6.25% differential in addition to a cash consideration.  There is much money to be made from development rights besides drilling a producing well.

Permalink Reply by Pro Hobbs on November 18, 2011 at 7:59

Yes, I understand.  I have heard or read where some energy companies will keep an eye out for opportunities to get in on some holdings very early in a potential play, even knowing in advance that they will not be able to explore these plays, but hoping that if something does break big, that they will be in a good position to profit from their holdings.  I can understand how that could work for them and I don't fault them for making a profit because that is what keeps this business going.  However, I have also read how some property owners got left holding the bag and signing for very meager bonuses and royalties by signing the first lease that came along and later they were locked in and very disappointed that they had not done a little homework first.  Where we are at, there is probably not any conventional or non-conventional reserves, but I know of other areas where everyone had been saying for years that there is nothing there and then all of a sudden oil and/or gas is found in abundance. I'm at the age where I probably wont ever see anything developed out there, but I can still kinda look out for the kids and grands.

Permalink Reply by Skip Peel - Mineral Consultant on November 18, 2011 at 8:08

Do not discount the potential for production from "tight" formations and unconventional reservoirs in your area.  Our Ark-La-Tex region has a long history of "Daddy (or Grandpa,  Uncle Joe, etc.) always said that there was oil under our land".  Unless "everyone" was a petroleum geologist or similar professional, they were simply practicing wishful thinking. I do my best to remind members and clients that the rules of the game have changed.  And making decisions based on what happened in the past is not advisable. 

Permalink Reply by bobby r steward on July 30, 2012 at 5:09

i had a lease with sampson. wont lease to them again ,

Permalink Reply by Farmer on July 26, 2012 at 11:27

I highly recommend Davidson, Jones and Summers as I have used them in the past and was extremely satisfied.

Permalink Reply by hazel c's grndter on August 28, 2012 at 5:50

Thank you Skip for the attorney recommendations. I used Cliffe Laborde and was very happy with him. He took the time to explain things to me and came up with a counter offer that covered my concerns. We are signed now and I am glad I had the help of an attorney since the O & G leasing business is new to me.

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