Replies to This Discussion

Permalink Reply by Jay Murrell on February 18, 2009 at 6:46

You want to respond to any of my points??

Permalink Reply by Jay Murrell on February 18, 2009 at 4:29

PS: You (KB) persist in egging people on to ride wells down and at the same time you lament the absence of concrete, quantifiable, data on what happens when this course of action is chosen. The FACT is that any three operators are likely to handle this situation differently. It can take up to a year (or longer) for a person who is leased to get their first check after first sales. If you have ridden a well down and payout is 16 months (at $4 gas), does that mean that you get your first check on the last day of the 17th month, or, the 29th month? Who knows?

What if the operator takes the position that they are going to leave your gas in the ground? The Mineral Code says they cannot do this, but maybe they want you to get a lawyer and file suit so that the judge will tell them that they need to be marketing your gas. What’s that going to cost you? My experience is that it is likely to be in the neighborhood of $40,000 for a competent oil and gas litigator.

Unless you invest in working interests in wells as your usual course of business you want to think twice before starting now. If your plan is taking a free ride on the operator’s dollar you best be lining up your legal council now because its going to be tough to find one that knows what they are doing that isn’t already working for the operators. Your garden-variety trial lawyer is going to cost you a fortune to get up to speed on the law.

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Permalink Reply by Jay Murrell on February 18, 2009 at 6:22

Methinks thou dost protest too much

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Permalink Reply by Jay Murrell on February 18, 2009 at 8:37

KB:
I have observed that when certain people get cornered in an argument they default to questioning the intelligence of the people on the other side. This ploy is intended to sidestep answering questions.

Here's my perspective.

The average non-industry type is ill served by people who likely have no experience in the E&P business suggesting that riding a well down is a viable alternative to leasing. There are likely to be consequences that are not pleasant for people that choose this course of action.

So, KB, and everybody else that suggests that a free ride is the equivalent ("leasing is OK not leasing is OK") of leasing or paying your way, needs to cite their experience in this area. Anything else is just theory. You might know what the law is, but the cost involved to get from injustice to justice is about $40 grand.

Best,
Jay

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Permalink Reply by Jay Murrell on February 18, 2009 at 9:12

KB:

So, who’s guilty of ad hominem attacks??

Are you implying that because I earn my living in the E&P business that I am dishonest, or, cannot see another point of view?

The widow lady that started this discussion asked for advice. I gave her some and have given my opinion of yours. You have responded with personal attacks.

I have stated my qualifications and experience, what are yours?

I believe that getting a well drilled is a two way street. The mineral owner and E&P folks both bring essentials to the table. I do not deny that the individual must be vigilant and should make provision in their lease to protect their interests for surface use, limiting shut-in periods, timely payment of royalties, what production holds what acreage/depths, etc., etc.

Unlike you, I am going to assume that you have no ulterior motives in these posts other than to demonstrate your intelligence to all of us great unwashed masses. The fact that you, and others, choose to discount my posts because of how I earn a living is really immaterial to me. I have always sought to be fair in my dealings with mineral owners. Occasionally I have fallen short, but generally, I don’t have any problems shaving in the morning.

So, to Carla, I say:

I think that you now have enough information to make your decision. Whatever that decision is, I wish you all the best.

Jay Murrell

Permalink Reply by Snake Stewart on February 18, 2009 at 12:44

To whomever it may concern,

As a UMI, are not the costs deducted from said portion of my procedes?
If they weren't deducted, I could expect 100% of my portion instead. Correct ? Then how in the world am I taking a free ride ? Answer the question , please. Thats what I thought.

This is exactly the kind of thought process that continues to plague the O&G's. Double talk! Both sides of the mouth and sometimes out the other end as well. For every good landman/industry person that has been understanding and extremely helpful to M/L owners on this site, there seem to always be at least one or two that make you question the integrity of the whole industry. Its not fair but thats life.

I seem to have 2 choices as a mineral owner that is unleased.

1) Accept bonus money that is rediculously low, with a royalty percentage that is "etched in stone" at 25%.

2) or, decide that because they are unwilling to give enough bonus consideration for me to give them 75% of my portion, I go unleased and am viewed as greedy and selfish because I wont play by their rules. If that's the only 2 options we have......It makes the choice less "Risky" for me, IMO.
Even if they chew up 40% in questionable charges, that still looks way better in the long run then $1500 an acre and 25%.

Some of you guys are still trying to play by the old rules. This is the Haynesville Shale. This thing that you are posting on is called the Internet. The "Information Super Highway". We know!
Just about the only action that is even taking place in this horrendous economy, O&G wise, is happening right here! Looks like you guys better get to leasin' before this thing just vanishes right out from under us and you arent even able to flip the leases you are holding on to.

You just keep playing that same hand and there will be much more information in the future about how UMI's performed on the Haynesville.I do not want to go unleased. I have said that 50 times on here at least. But I am certainly willing to if need be.I will not give away my future so you can have a better life. Its nothing personal.......

Just business. (wink,wink)

Permalink Reply by lanadan Ds3 on February 24, 2009 at 1:04

K.B.,
Look up "ARBITRARY and CAPRICIOUS" in the dictionary. It says it all!

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Permalink Reply by Snake Stewart on February 24, 2009 at 15:58

Hey Lanadan,
Similar to the Newscast from this weekend. At first the O&G's wanted everybody to group together so it would make their job easier. They "prefer the well informed organized type". Now, they must have been offended or something and seem to have sworn a solemn oath never to talk to a group of landowners ever again. HA!HA!HA! Now they have the time and extra money I guess,to deal with each individual landowner to come up with the solution that best fits each persons needs.When this doesnt work out , are they just going to get their toys and go home ?

.............."Doing a world of good"

Yea, Right!!!!!

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Permalink Reply by pilgrim on February 18, 2009 at 4:31

Have you thought about negotiating for more royalties and accepting a lower bonus? Has anyone figured a sliding scale for less bonus and more royalties?

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Permalink Reply by Dion Warr, CPL on February 18, 2009 at 4:45

Pilgrim:

To do that, you would need to know what each operator does in their cost vs. benefit analysis (or return on investment; very similar) in evaluating each play, and then each prospect within the play, to be able to value these two terms accurately against each other. You would also need a look at the proprietary data and analysis as well, which no one is going to share with you. At best, even the most educated third-party observer is still looking at a black box.

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Permalink Reply by Grillin' - MmmMmm on February 18, 2009 at 7:56

Disagree Dion. To do this analysis for one's self, you just have to make an assumption on timing of the well(s), production flowstreams, gas price and deductible fees under the lease being considered. You are looking at the options from the landowner's standpoint, not the O&G co's. so it doesn't matter what their calc's are. Whether or not you take a lower bonus/higher royalty or a higher bonus/lower royalty probably won't impact the O&G's timing and whether they will drill. I said probably because in some extreme cases, it could.

So, assume when the wells will be drilled and put on production, say one on Jan 1, 2010, and then one every 3 months thereafter until the 640 acre unit is complete. Now, figure out what your interest in the unit will be (your acreage/640). Then grab a typical well production curve from the public domain and use that to build a production forecast for the unit and your share of same. Then multiply it by the gas price you assumed and then deduct any allowable deducts.

Now the fun part, run two cases, one with your first assumption of high bonus and lower royalty. Figure up the after tax revenue (remember to treat bonus money carefully as it may jump you into a higher tax bracket for one year). Then do same for the lower bonus higher royalty case. Compare the two revenue streams and see what you feel more comfortable with. Then, look at what would happen if the wells are crappola by reducing the rates by 75% and looking at two revenue streams. Then you'll have all of the information you'll need to make an informed decision. But at that point, only you can assess your risk tolerance and the timing of the cash flows.

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Permalink Reply by The_Baron on February 19, 2009 at 5:26

600 acres is almost 94% of the unit (assuming the unit will be along section lines and your section is regular). The unit will probally be drilled with or without you. Personally, I would concentrate less on bonus and more on royalty, but thats just me. Although if I was offered $125 @ 3/16 I would probally go unleased as well. But I also think the days of 10k an acre are gone, at least for a long time. IMHO

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