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Permalink Reply by Skip Peel - Mineral Consultant on March 17, 2018 at 10:36

IMO, an unconventional reservoir play should have a higher lease value than a conventional reservoir owing to the potentially large areal (economic) extent and the reliably repeatable well locations.  As always, larger mineral interests have more negotiating power. 

At his point: one well, no seismic and focus on leasing - the market is what mineral owners can make it.  Those with a high risk tolerance can wait to see where the economic rock is located.  Mineral owners in those areas will see improved offers and increased royalty for all regardless of size of mineral tract(s).  Those without a high risk tolerance should note, the play has not been defined and it is a crap shoot at this point as to who is in the good rock and who is not.  The EOG Eagles Ranch is not necessarily "in the core".  It will take a number of "appraisal wells" to define the play area.  Those that wait and do not end up in "good rock" may see offers disappear.  Those lucky enough to be in good rock will definitely have improved their negotiating position by waiting.

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Permalink Reply by Bob Zimmerman on March 17, 2018 at 12:47

Does an "improved negotiating position" translate to a 1/4 royalty or more?

Permalink Reply by Jesse Joyner on March 17, 2018 at 13:52

True, Skip. And there's also the added complexity of the TMS/DT (plus the AC) stack, where certain wells were drilled and proceeded to have proven oil production, albeit in uneconomical quantities per the high cost of the hz drilling. Nevertheless, at least one of these wells in the Felicianas is still producing 1000 barrels a month. And like you have clearly stated numerous times before, landowners can get ahead of themselves and let the sugar plums go to their heads before the geology has actually been nailed down per consistent patterns of good rock.   

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