Replies to This Discussion

Permalink Reply by Skip Peel - Mineral Consultant on December 8, 2018 at 11:57

Lynne, I'm confused.  Possibly you can offer some detail.  Mammouth Minerals is not registered with the state as an operating company therefore they are unable to propose, apply for or form any drilling units.  Mammouth sounds like a "mineral company" that buys mineral rights and royalty as opposed to a "land company" that acquires leases for a client.  You mention a "print out".  Is that a map or a list of sections?  Can you describe where Duke Estates is located?

If you require more than $1250 per acre for a lease bonus you may be waiting a very long time.  Although 18N-15W is not proven, the newer wells immediately south along I-20 are quite good and mineral lessors under those wells have realized some meaningful revenue even with small acreage interests.  I know.  I have some clients under those wells.  The bonus is the least important term in an O&G lease and it is a good idea to seek some professional counsel should you consider executing a lease.  I look forward to the newer version wells to be drilled in 18N-15W and am hopeful that they will be economic.

And please don't worry about sink holes or operations devaluing your property.  These horizontal wells have limited surface locations and even if one were to be on your land, which you can forbid in your lease, it shouldn't be a problem.  Most land owners in a drilling unit will be far from a well pad.

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Permalink Reply by Lynne Ashby on December 8, 2018 at 15:11

Skip, I had a co-worker whose land was next to a drilling area in Keithville and when the company left the area they left huge ruts behind the end of her property so deep that it was dangerous for her kids and animals. Trucks going in and out of the area disrupts an otherwise peaceful country life. Deterioration of roads and depletion\contamination of our water supply is another thing. I understand that multimillion dollar companies need to make a profit but the land owners should be compensated more than $1250 an acre. The average person can't understand all the legal wording of a lease agreement and that's where people get screwed. I'm sure it's your job as a land man to get as many leases at a low price as you can. I'm not saying how much we got years ago but it was way more than $1250 and the company was more than happy to pay it. Maybe you can answer this for me..what is the purpose of a land man putting a lien on my property?

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Permalink Reply by Skip Peel - Mineral Consultant on December 8, 2018 at 15:28

Not only do I not "get leases", I've never taken a lease in my career.  I'm not that kind of landman.  My clients are individuals, families and trusts that own and manage minerals.  I also work with their attorneys and accountants.  A bonus is not intended to compensate for damages.  That is one of the lease terms that experienced O&G attorneys can help with.  Yes, roads can get rutted and drilling operations can be noisy and generate a lot of traffic but that only lasts a few weeks.  There has been no confirmed contamination of potable water aquifers or wells by Haynesville Shale operations.  The average person needs the assistance of a good O&G attorney to make sure all those concerns are covered in a lease.  If all someone needs is help with the language in a lease, you are talking a few hundred dollars but far too many don't want to spend the money.  They'd rather take a chance and sign a lease that they don't understand and are unqualified to negotiate.

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Permalink Reply by Spring Branch,mineral owner on December 10, 2018 at 6:16

Great response to Lynn, Skip.  She needs to understand that the Lease bonus is not intended to mitigate her concerns.  However, as you said, the language in the Lease document itself, prepared by a well qualified oil & gas attorney, should alleviate any concerns she has.  Oh, they may leave ruts, but it'll cost them!!!  I personally think that $1,250 in 18/15 is an attractive offer, but what do I know.

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Permalink Reply by Skip Peel - Mineral Consultant on December 10, 2018 at 7:13

Thanks, Spring Branch.  An experienced O&G attorney can craft lease clauses that address damages.  And it is possible to include a "no surface operations" clause for those that just don't want to allow the use of their land.  I am also of the opinion that $1250/acre is not only attractive for 18N-15W but aggressive given past history.

A reminder on risk.  In the early days of the Haynesville Shale many land/mineral owners in north Caddo Parish were considering lease offers.  This was during a time of seemingly never ending increases in bonus per acre offers.  It was also a time when there had been few, if any, historic wells drilled to the Haynesville in that area and companies were leasing based on little hard information.  A number of individuals were sitting on offers of up to $10,000/acre confident that the offers would go higher.  Then the first horizontal Haynesville shale wells were completed and announced.  They were a bust with production volumes a third to a quarter of what the same well designs were producing further south.  When the announcements were made, the lease offers did not decrease - they disappeared.  Here we go again - hopefully for a better outcome but understand that the economic area of the shale is not unlimited and the end will occur somewhere in north Caddo.

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Permalink Reply by Jesse Joyner on December 10, 2018 at 9:04

Good advice from an indie landman who attempts to help the small landowners, Skip. As the saying goes: "Those who cannot learn from history are doomed to repeat it." Indeed, in the present climate of overproduction, if I was offered 22.5% and a $1250 bonus, I'd hire Randall Davidson to scrub the lease and plug in the good addendum clauses, then sign such a lease if Randall advised that I do so. I would call that savvy management of a mineral estate.

 

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Permalink Reply by Skip Peel - Mineral Consultant on December 10, 2018 at 10:46

Never hurts to ask for a quarter royalty for leases that target the Haynesville Shale however a 22.5% royalty with a good "no cost royalty" clause can often outperform a quarter without such a clause.  Of course not all "no cost royalty" clauses are created equal.  I'd get an experienced O&G attorney to craft one if I couldn't get a quarter.  The royalty clause in my O&G attorneys' custom O&G lease is one and one half pages in length.  Of course that is for their clients that own many thousands of acres in recognized proven or prospective areas.  They also often craft or negotiate clauses which limit post production deductions to royalty revenue.  The bottom line is that it is always a good idea to get professional help when considering an O&G lease.

Permalink Reply by Lynne Davis on December 20, 2018 at 10:30

$500 is what most are offering. Just make sure you don’t have to pay for a lot of services at the well site.

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Permalink Reply by Skip Peel - Mineral Consultant on December 20, 2018 at 13:41

Mineral lessors do not pay for "services" at the well site.  I think you must be referring to "post production deductions" to royalty revenue.  Those costs are for gathering, treating and transportation and not associated with the well site.  Post production costs can be addressed by language in a O&G lease.

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Permalink Reply by KIM CASWELL on March 25, 2019 at 8:28

If anyone has mr Taylor's phone number please let me know. He contacted me but I lost it thanks!

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