Replies to This Discussion

Permalink Reply by Foxiecajun on February 16, 2009 at 17:17

I hope you get it. How did you come up with that number? You don't say where it is, but I only heard of Caddo Parish leasing for that amount last Aug. I am sorry for your loss, I too have been there trying to make those decisions on my own. Good luck

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Permalink Reply by Dion Warr, CPL on February 17, 2009 at 3:45

Carla:

Sympathies for your recent loss of your husband. I think I could speak for all on GHS in saying that our hopes and prayers are with you.

As to your leasing situation:

There has only been one report of $30K per acre for a bonus paid for mineral rights in LA, being Caddo Parish. That lease was taken during the summer last year, at which time the natural gas was within about 10% of its all-time high, and just after the big CHK announcement. The combination of perfection of the necessary completion technology on a broad scale, high natural gas prices, national sentiment, and the scope of the find created a perfect storm in which competition drove the bonus prices far above what was otherwise sustainable for more than a short period of time. That's my opinion; I do work in the industry as a landman. Others on this site (landowners, mineral owners, mineral rights advocates, etc.) look upon NW LA 2008 as more like a flood event on a river, which will cycle through on a more or less periodic basis. I see it more like the Mississippi River, 1927: a high water event to which all other events will be measured.

What you are seeing now (again, my opinion) in terms of lease offers currently being made is a dramatic correction made in reponse to long term economic sustainability, as well as a depressed natural gas price. To use an analogy, in order to keep the airplane flying, O&G had to bring the nose down and cut the flaps to bring the plane back to level flight in response to a drop in power; the plane was beginning to stall.

I am not sure where your land is located, but broadly generalizing, the number you are using is probably about 10 - 15 times too high for the market at the moment (according to some standard offers circulating, maybe up to 20 - 30 times) if some other people are leased around you. Hopefully for you, enough people are leased around you that O&G will elect to drill a well with or without your lease. This would at least give you a chance to receive some revenue at some point in the near future without your signing a lease. If there is not enough acreage leased around you, no one will drill a well any time in the near future, and your chance to receive revenue is lost for the foreseeable future; I say that because there are plenty of places that O&G needs to drill prior to their leases expiring, and they will not spend any time waiting for you to make a decision. The clock is ticking on a lot of acreage right now.

Many folks here have brought up the anticipated net returns in a unit as a reason to hold out for more money; to them and to you, I offer this example: all other terms being equal, if you will only sign at $30K per acre, and in a reasonably equal section nearby, almost everyone will sign at $2K per acre, O&G can put together almost an entire section worth of land (thus a drilling prospect) for what they would pay you for your 40 acres. If you could do the same, what choice would you make? In how many situations could you possibly see yourself changing your mind?

Now, add to that many of these companies are a little short on funds compared to what they thought they would have going in to this at this point due to the depressed prices of natural gas, and many have more prospects then they could possibly drill before leases start expiring due to the absence of a well being drilled or production prior to the ends of the primary terms of existing leases. Do you spend your budgeted money on acquiring new 'hard to get' leases, or drilling wells, and possibly picking up some less expensive leases along the way?

All that being said, your land is your land. Your mineral rights are your own, to lease or not to lease as you wish. As you have so recently lost your most valued counsel, I would hope that you seek and find the advice of a trustworthy and knowledgeable person to assist you in making your decision(s) in this regard. Take care.

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Permalink Reply by Jay Murrell on February 17, 2009 at 5:38

Carla:

I'm a landman. Here's an insider 30 year perspective. (If you were my sister this is what I would recommend.)

Forget $30,000/acre. It will not happen.

Get their best offer and add a couple of thousand per acre.....be willing to split the difference.

Ask for a one year lease.....if they are really serious about drilling that should not be a problem........be flexible if they are paying thousands in bonus, go to three years if they really push it.

Quarter royalty.

If you own the surface you will need special language for its use......

Make the best deal you can and be happy. There is lots of good advice on this site....and some very misguided pratter totally not based in reality. Looks to me like what has been posted so far is right on.

Forty acres is a bunch. A decent well will change your lifestyle. Just remember, pigs get fat and hogs go to slaughter.

Good luck.

Jay

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Permalink Reply by The_Baron on February 17, 2009 at 8:11

Or, in the case of oil and gas, you may find that there is not what you had hoped for, The value will decrease.

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Permalink Reply by The_Baron on February 18, 2009 at 4:04

Just saying that should the well not pan out, the prospect could have little to no value.

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Permalink Reply by The_Baron on February 18, 2009 at 10:28

Some wells north of town are starting to come in, they don't look so good.

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Permalink Reply by Jaime T on February 22, 2009 at 17:35

Which wells north of town are you referring to?

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Permalink Reply by Billy mac on February 17, 2009 at 11:40

Carla,
PLEASE, PLEASE take Jay Murrell's advice. I am also in the business and his advice is sound, especially at todays gas prices.

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Permalink Reply by Snake Stewart on February 17, 2009 at 16:58

Hello Ms.CarlaJ,
I too am sorry to hear about your lose.Speaking of your families future,seeking good, sound legal advice, as Mr. Dion Warr eluded to, may be your best option at this point.

These responses still doesnt answer the questions that seem to be on peoples minds does it ?

For the most part , people on this site are well intensioned, I believe. Sometimes we may get ahead of ourselves or let the emotions get the best of us, but it still comes down to shareing insights and/or experiences that can help everyone make the best decissions possible. We as landowners , generally didnt have the answers, before our schooling anyway.Thats why we have to ask the questions. Sometimes those questions have been asked numerous times yet still havent been answered in a way that makes sense to us mineralowners.

The forced pooling issue is one of several that have caused many a headache in regards to trying to understand what we could be faceing. That in turn brings to light the reason people are even considering going unleased. And that is bonus consideration and royalty percentage. That still hasnt been explained nor will it ever,IMO.

It cant be because of lower N/G prices.
We now know that they are somewhat protected or hedged against these lower prices. I know that Center Point is still doing rather well considering what I had to pay them this month for this "cheap gas".

We also know that these companies didnt even really flinch when they paid people on the Barnett $27,000 an acre and 26.5% on a play that is at least 1/6th the size of the Haynesville. This may become the largest field ever. But I better take what I can get before I lose out ? They built it up only to come back and tell us later, that they were wrong ? What makes them right this time?

If the Haynesville isnt economical, how stupid are these guys to pay that kinda money on a field (Barnett)that isnt even in the top 10? Yet expect us to get swimmy eyed over $1,500 an acre and 25%. Surely it isnt just because of bad timeing.

The economy is suffering, no doubt. But why give away, maybe the most tangible asset that you own? One thing that will hold value as long as O&G is still used to keep this big gas guzzlin' country moving.

I do not know your situation Ms. CarlaJ, nor would I feel comfortable telling you how to try to handle your business.I do know that these are some of the many questions that still havent been answered in my mind.It does seem that you may have some of those same questions. But in the end, each person has to chose for themselves what is best for them. I just know that it would make it a whole lot easier for us as m/l owners if they could make more of the pieces of this puzzle fit together.

Maybe one day our questions will be answered.
Good luck to you and yours.

P.S. Please dont do anything that anybody on here tells you to do without good, neutral, guildance. If it doesnt make sense to you , find out why.

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Permalink Reply by Jay Murrell on February 18, 2009 at 3:49

KB:

You MUST be an engineer. Some I've known (engineers) have analysis paralysis.

Its called the market and fair market value is what A is willing to pay and what B is willing to accept.

If nobody wants to pay you what you want and you think going unleased and not paying your way is the way to go then have at it, but, if you cringe at the unknown this option should be the least appealing, because every operator is going to handle people so situated differently. It (in my experience) can range from swell to very, very, very, very, badly.

Best,

Jay

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Permalink Reply by Jay Murrell on February 18, 2009 at 4:36

What's unfair KB?

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Permalink Reply by Jay Murrell on February 18, 2009 at 6:31

Really? How is it not to somebody's advantage (fair) to have and E&P company come along and pay them money and royalty and assume 100% of the risk of drilling a well? The only bargain to be bargained is $, royalty, term and special clauses. This can be done if both parties are being reasonable. What you have suggested (elsewhere) is for mineral owners to take a free ride on the operator's dollar and I find this to be problematic for both parties.

Is that a diatribe?

If you think so, then you should consider getting out of the kitchen, or staying on the porch...whichever suits you best. I am probably not going away, you might ask around.

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