$4,250/acre was the bonus and I think the royalty was 18%, but I could be wrong about the second part. Either way it's a preposterously high amount.
I wouldn't pay you $50/acre for drilling rights in Ashtabula. Clinton has been pretty well played out, Knox Unconformity is really, really deep and hard to judge unless you shell out for nice 3D seismic and the Utica/Point Pleasant is not attractive. Had dinner with a geologist friend of mine over the weekend and I told him about that price. He almost shot water out of his nose from the laughter (at the O&G company, not at landowners). There's no good reason why someone would shell out so much cash for such an unproven area that has the general consensus of "stay away" stamped on it. If those fine landowners up there can extract that much cash from someone then God, Buddha, Allah and Yaweh bless them.
What are your thoughts on the Noble,Monroe, and Washington Co. areas?I have heard of up to $6,000 an acre with 20%.royalty.Thanks for your posts I love reading these strings,from people that know alot more about the O&G biz. than me. Thanks again.
i had friends in Southern Monroe/Noble (and maybe northern Washington) who got $6k/acre and 19% from a broker representing Antero. others i heard in central and northern Washington County are getting 4k and up.
Do you think Antero will be leasing more land it that area? Can you tell me why southern Monroe/Noble is getting more than central and northern Washington Co.? If it is not in the"wet gas" zone why are they paying such a high price? thanks guys I am not realy trying to butt in but it seems to be a pretty high price.
"If it is not in the"wet gas" zone why are they paying such a high price?"
For the same reason that CHK paid north of $30,000/acre for leases in the Barnett: companies are often very, very bad at assessing risk and often have an inflated sense of what a potential asset is worth.
The value of the black oil part of the play is significantly lower than the wet gas or volatile oil windows. If a company cannot economically extract it then there is no value. Maybe within a few years prices move up and technology costs come down, but the truth is that most shale wells that get drilled are marginal at best. Very, very few sweet spots exist.
HUH ??? !!! "truth is that most shale wells that get drilled are marginal at best."
I have led some fairly large business's in my career. At no point in my career have I invested in a single dollar in a business that is "marginal at best". To invest $5million or more in a single well, my expectations would be for results significantly better than "marginal at best". (And, yes, a million dollars is just as valuable to a large corporation as it is to a small one.)
Where in the world does this statement come from: "truth is that most shale wells that get drilled are marginal at best." ????
tell that to gulfport!
"At no point in my career have I invested in a single dollar in a business that is "marginal at best"."
Then you would not do well in the oil and gas industry. Or more accurately, you would not do well in the business of private equity that funds the oil and gas industry. Do you have any idea how many fund managers and Masters of the Universe have sunk billions into shale development and have gotten absolutely clobbered? Know how many wells have drilled in the Barnett? It's over 14,500. The play encompasses, on the low end, ~4 million acres. Of that there has been real, commercial, viable production from approximately 610,000 acres. All of the other stuff? Duds. Marginal at best. EURs are off by original estimates by nearly 50%. You would do very, very poorly in the oil and gas industry if you were unwilling to invest someone else's money into marginal wells. Hell, that's pretty much how CHK got where they are today.
"Where in the world does this statement come from: "truth is that most shale wells that get drilled are marginal at best.""
Numbers--actual numbers and not lofty estimates by snake oil salesmen--don't lie. The numbers for shale plays are bad. Luckily, we're sitting on a liquids rich play which has much better potential than the straight gas plays. Sadly, that still means there will be a pile of marginal wells drilled outside the core areas. Be as angry as you want about, it will not change the facts.
Read this. It will give you some insight into the way that shale plays actually work:http://www.nytimes.com/2012/10/21/business/energy-environment/in-a-...
Wow, one heck of an article,Thanks for the link.
" Sadly, that still means there will be a pile of marginal wells drilled outside the core areas. Be as angry as you want about, it will not change the facts."
What do you consider to be "the core areas"? Dan