Replies to This Discussion

Permalink Reply by Skip Peel - Mineral Consultant on August 6, 2009 at 7:49

Coonman. I find Mr. Miller's quote on lease bonuses to be accurate. These offer amounts are very localized being made only for specific tracts. EXCO, nor any other company I am aware of, is out there making blanket offers in this range. Landowners who go looking for a lease offer will get a company's lowest offer ($1,500). Those who do their homework and wait until their minerals become a priority for a serious operator should receive lease bonus offers in this range based on the specifics of their surface and mineral estates.

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Permalink Reply by Randy on August 6, 2009 at 8:23

I took the $5k-$15k an acre number to mean acquisition costs. As in how much they paid for title, land costs, acquisition, bonuses, etc all wrapped up into a number.

Was he referencing bonus amounts? I didn't go listen to the call so it may just be my ignorance.

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Permalink Reply by Skip Peel - Mineral Consultant on August 6, 2009 at 8:30

Randy, I responded to Coonman's comment and did not read the article. However considering the land and legal cost associated with leasehold acquisition, I think these numbers must be lease bonus offer amounts. Otherwise, EXCO is getting a good bit of acreage for a song.

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Permalink Reply by Randy on August 6, 2009 at 9:56

Good point.

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Permalink Reply by insomniacnla on August 6, 2009 at 11:47

A close friend of mine that I see everyday owns land located in Sec. 21 15n 13w. Exco began drilling a Cotton Valley well. Exco's last unsolicited offer to him was 20% royalty and $2,500 for a 5 year lease and will NOT exclude the Haynesville zone.

He just can't figure out why Exco will not make him an offer that he considers fair. He wants to lease but not at those terms, so he remains unleased.

The landman also told him that since he is unleased and the well is not located on his property, that he is excluded from the unit.

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Permalink Reply by Skip Peel - Mineral Consultant on August 6, 2009 at 12:08

insomniacnla. Get any sleep last night? Your friend is getting the usual approach. Because it tends to work. Time and time again. If EXCO wishes to lease to the HS, the minimum royalty is 25%, period. And if they want a 5 year lease as opposed to an initial three year term with an extension clause for an additional payment, just say No. The tact that I use, and suggest my clients use, is to say, "Thanks for your interest. When your company receives a HA unit order for the section encompassing my minerals and they spud a HA horizontal well, get back in touch with me. At that point I will be willing to negotiate a lease". Any offer prior to that is less than their best, IMHO.

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Permalink Reply by M. Mcwilliams on August 7, 2009 at 4:02

insomniacnla, this was the offer I received, as well. I never did ask whether they would provide a depth restriction, so I'm glad to know that I would be wasting my time by asking for such. What bothered me was that the guy wouldn't tell me anything straight - said they "planned" to complete it horizontally, possibly in the future, he noted that they had three zones unitized (CV, Hosston, HA), and commented that they could produce from any of those zones. Quite vague. I never got back with the landman. He did not tell me I'd be excluded from the unit due to being unleased, however. And by the way, they're doing something on the well site right now, possibly the completion? Sonris reports that is it waiting on completion as of 5/27/09. Do you know?

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Permalink Reply by Mattie on August 7, 2009 at 4:58

M. McWilliams,

While I know that all of these deeper depths are being drilled on smaller spacing in the past couple of years, I doubt very seriously that they can exclude you from being in the unit if it's a Hosston well or deeper. Most Hosston wells have been unitized on 640-acre spacing -quite different than shale formations where there is questionable drainage - Hosston wells are typically not "horizontal".

Nothing is an "absolute" these days with regard to spacing/unitization, but I doubt they can/will exclude you if a Hosston well is drilled.

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Permalink Reply by M. Mcwilliams on August 7, 2009 at 5:40

Mattie, I am not at all concerned about being excluded from a unit, I know I am included as a mineral owner in the section that is unitized. I was making that a part of my comment simply to say that the landman I spoke to did not try to feed me with that particular piece of misinformation. Leased or unleased, I'm in the unit, from whatever formation they decide to produce from. I wish it were a horizontal shale well in my section, but it appears not.

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Permalink Reply by insomniacnla on August 7, 2009 at 11:51

Thanks to all for the advice, I am going to print this out and give it to my friend.

I apologize about my wording. The landowner does know that he IS included in the existing unit and that the landman was just trying to pressure him into a lease with terms that he was not happy with. I was only trying to comment on what Exco seemed to say in their conference call and what is actually being offered to some landowners and that some leasing tactics have not changed at all from last year.

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