Replies to This Discussion

Permalink Reply by Joe Aldridge on December 2, 2013 at 7:59

Steve,

Where are you in the Parish? Slaughter, Ethel, Chipola???????

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Permalink Reply by Steve Jacob on December 2, 2013 at 8:07

Hwy 961 between la hwy 10 and 432, closer to 432.

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Permalink Reply by Joe Aldridge on December 2, 2013 at 8:23

Steve,

I'm lost. Can't find those hwy # on Mapquest. Just not the familiar with the area. What towns are you near?

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Permalink Reply by Skip Peel - Mineral Consultant on December 2, 2013 at 9:48

IMO All Depth leases are becoming less common for good reasons.  Why should any lessee hold formations and zones they either do not wish to explore and produce or, as in many cases with small independents, are incapable of exploring and producing from a technological and/or financial stand point.  A single horizontal well can cost more than a year's operating budget for many small independents.  And a horizontal well gone bad can bankrupt a small independent.  Not to mention a lack of experience with horizontal drilling and completion.  It is seldom mentioned now but much of the better Haynesville Shale lease bonus money went to small operators with all depth leases held by skimpy, shallow production instead of the mineral owner.  When landmen come making offers for small independents I like to advise that there is a place for them in the scheme of things and that it is not always logical to expect the bonuses and royalty that mid-major and major operators pay for resource play prospects.  On the other hand the small independent should in turn accept lease terms that release any depths or formations that they do not explore and produce in a reasonable length of time.  For smaller companies a three year lease term should be sufficient.

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Permalink Reply by Steve Jacob on December 2, 2013 at 11:56

Joe,

Hwy 961 is 2 miles E of Clinton on hwy 10. 961 runs approx. 9 miles and intersects with hwy 432. That intersection is approx. 20 miles west of Chipola. Hwy 432 runs between US hwy 67, about 10 miles north of Clniton, and Chipola. 961 is just west of the Amite river.

Skip,

My description of the independent could be a little misleading. The names we have the most confidence in right now are Comstock and Sanchez. The landman wont say, Is that normal?

 

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Permalink Reply by Skip Peel - Mineral Consultant on December 2, 2013 at 12:46

It is normal for a landman to decline to identify the client on whose behalf his company offers the lease in the early stages of lease acquisition.  However it's actually not that big a deal as time goes on and it gets harder to hide the operator behind the lease offers.  In my experience the operator will give their permission to divulge that information as instruments (leases, memos and assignments) are recorded in the public record.  It's not a good idea to get in any hurry on the front end of lease efforts.  Better to wait until a little more information is available.  Knowing who you are dealing with will have implications regarding lease terms.  When a landman will not divulge their client I suggest that my clients state that they would prefer to wait until the landman is able to do so.  That usually has the intended effect.  Far too many mineral owners get caught up in the rush to lease.  Don't ask just once.  Ask every time a landman contacts you.  Too many fear the loss of the sure thing lease bonus check.  Land companies count on that.  Unless someone is destitute and can't chance the loss of that bonus check, it's better to wait.

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Permalink Reply by Joe Aldridge on December 2, 2013 at 14:03

Steve,

Great advice from Skip. The thing you need to realize is you are in the "Hottest" part of the play. If you can take a wait and see attitude then the price and terms will go up. I guess its kind of discouraging to me that they would come in with this low ball offer at this time. I would have expected the offers to be more in the range of 300 - 500 per acre as a first offer. An offer like this would have made me angry and I would have told the landman to not come back or if he really wanted to do business to come back with a "REAL" offer.. But that's me.  

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Permalink Reply by Joe Aldridge on December 2, 2013 at 14:17

Steve,

Whatever you do don't put a figure on the Bonus amount. Just let it be known that that is not a realistic figure. Let them make the offer.

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Permalink Reply by Steve Jacob on December 2, 2013 at 14:23

I agree with both of you. He and I are on two different planets..

If he sticks to his depth and zone lease terms his up front and royalty terms wont fly in my yard.

Thanks

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Permalink Reply by Skip Peel - Mineral Consultant on December 2, 2013 at 14:44

I suggest to my clients that they should not only be firm but be cordial.  Keep in mind that the landman doesn't call the shots.  He/she is far down the pecking order and has little if any authority to negotiate terms.  I want the landman to get the impression, and convey to their boss, that my clients are interested in leasing and having their mineral interest developed yet they will not be stampeded and will require certain information in order to enter into serious negotiations.  Forget the bonus until the other more important lease terms are agreed to.  And get a sample lease form to review where possible.

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Permalink Reply by Steve Jacob on December 2, 2013 at 15:07

Got copy of lease, lawyer going to look at it. I'm not a lawyer but I was not impressed.

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Permalink Reply by Skip Peel - Mineral Consultant on December 2, 2013 at 15:21

Opening offers usually don't impress those with some idea of what is going on.  However the form lease is often the best starting point for negotiations.  An experienced O&G attorney will use it to craft the Exhibit A Addendum.  Just any lawyer will not do.  You need an experienced O&G attorney.  The good ones will likely have seen the form lease before and could very well have other clients being approached by the land company or companies representing the operator.

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