I am a landowner in Guernsey County with a 4 1/2 year old Oxford lease that is set to expire in about 6 months.  I, and apparently many others, have just received an offer from Eclipse to extend the lease for 3 years for a generous one time payment of $100.00 and the same 12 1/2%  royalty (but no line charges).  The extension provides for the grouping of 640 acres instead of the 160 acres in the old leases.  I had hoped that Eclipse would treat the landowners fairly, in contrast to the Oxford way, but apparently not.  The landman, who called me, reminded (threatened?) me that Oxford (now Eclipse) is still drilling its shallow wells to hold them by production.  According to the DNR records almost all of these shallow wells have only the tiniest of production of oil or gas or sometimes only salt water or nothing.  My neighbors tell me that Oxford comes in, sets up a small rig and drills for a few days and leaves.

 

One leverage the landowners have by not signing the extension is to deny Eclipse the right to put together the necessary 640 acres to drill a deep well.  If enough people do not sign the extension maybe we could get a realistic offer. 

 

Has anyone on here received a similar extension "offer"?  Is anyone actually signing these things?  Does anyone know of any law suits or other methods to stop this bad faith drilling of the shallow wells?  

Views: 23758

Reply to This

Replies to This Discussion

DodgeCharger,

   Your parents definitely have a leg to stand on.  In PA if a lease specifically states that it can NOT be unitized then the gas company would need an entire new lease (or i guess they could just do an amendment/ratification). Regardless they would have to renegotiate and I feel its similar in Ohio for your parents. 

  As far as trying to increase the royalty percentage.  It's obvious that all producers don't want to give high royalties.  Production is where they make their money and they want every percentage point they can get.  I personally have been able to negotiate higher royalties in similar situations as your parents but each situation is very different.  I would hate to speculate as to your parents options but I feel they are in a good position. 

Thanks LandRights for the reply.  For what it's worth, I talked with the Eclipse rep (out of Zanesville) last night, and in my opinion, the guy was very nice and talking out of both sides of his face.  Let me explain:

I was requesting a map of the proposed unit and the location of the well pad.  After all, he told my parents the unit was going to be 500 acres and have eight laterals (four ea. going NW and SE).  He initially told me it was just preliminary and too soon to have a map.  He hemmed & hawed around, looking at a spreadsheet, etc and lo and behold after a few minutes it was now down to only two parcels keeping them from unitizing and drilling: one they didn't know who owned the mineral rights and the other was talking with a company to possibly sell their rights.

He then proceeded to ask if anyone had contacted us about having the pad on our property, and was saying they're "very close" to getting it all done and start drilling.  He did slip up and mentioned right in the middle of conversation the lease was expiring 03/2015.  That to me said it all: they aren't close to drilling and are likely saying ANYTHING to get out of the Oxford lease to tie up my parents property.

But, this is just my opinion!

I know someone who was in this exact situation almost. He ended up getting a big settlement to be able to unitized him but they never would come up on he royalty percentage

Evan,

So you're saying they gave more bonus $$$ but did not increase the %?  I don't think my parents would fall for that... but have no idea what the company that bought half their rights would say to that.

I bet the bonus $$ was low too. Evan, care to share that figure?

Using the information from this Farm and Dairy article: Utica and Marcellus shale: Companies expect growth in 2014 lets do a little math exercise.

Eclipse Resources recently acquired some 185,000 acres from Oxford.

The typical unitization language in the old Oxford leases call for no more than 160 acres.

Based on this: 185,000 ac. / 160 ac. per unit = 1156 units to be drilled

According to the Farm and Dairy article; Eclipse has three rigs drilling in Ohio now.

Therefore: 1156 units to be drilled / 3 rigs drilling in OH = 385 units to drill per rig

The typical term language in the old Oxford leases is five (5) years.

Assuming a worst case scenario, that all the leases still have five years left on their term:

5 years * 365 days a year = 1825 days remaining to drill

We can then conclude: 1825 days to drill / 385 units per rig = 4.74 days to drill a unit per rig

AN ABSOLUTE IMPOSSIBILITY!!!

Even assuming Eclipse successfully doubles the rig count to six by the end of 2014 as stated in the F&D article that would still only increase their drilling window to 9.5 days to drill a unit per rig which is still an impossibility not to mention a logistical nightmare!

The moral of this story is that anyone with an old Oxford lease that has not yet signed an amendment with Eclipse and has been approached to sign an amendment is in an excellent position to negotiate better royalty terms and percentage, signing bonus and landowner protections! Eclipse has bit off more than they can chew and they know it! Not to mention the recent Belmont County ruling against Oxford/Eclipse in favor of the West Family. I would encourage landowners to be resolute and demand what they are due. Get your piece of the pie now because once you sign on the dotted line it is too late to have any regrets. Like in many things in life, knowledge is power, and the only way to become more knowledgeable is to do your homework and communicate openly with those that can help educate you.  Keep strong and pass it on!

I agree 100% with your thoughts --

I do have a few questions about the math--  Of the 185,000 acres Eclipse purchased from Oxford, how many of those acres are already held by production (shallow or horizontal)?  How many of those acres have already been extended by amendments/ratifications? 

I don't have the first clue but Oxford has been drilling and producing traditional wells for years right?? They would have to have a good percentage of those acres already held by production.  If they didn't why would Eclipse purchase all those ticking clocks and all that leg work to go back out and either extend or hold the leases?  

If I had to guess I would say 75% of those 185,000 acres were already locked up by production or already in a second 5 year term at a few bucks per acre.  The remainder percentage that is expiring is what were seeing on here now which is no where near 185,000 acres.   My guess is they have a few thousand acres set to expire within a short period of time.  

Hate to see them drilling those leases to hold them.. 

I don't agree on they can drill a shallow well in two days! My neighbor Bernie lease was to expire within weeks and they came and they used every bit of the weeks and then some! no pipeline in to deliver the product so how can it be held by production? nothing left the property! they freaking drilled clear though gun season and wasn't close to being done as far as I know. They seamed to be drilling for many weeks but not really sure. 

all they have to do is have rig on property by the day lease expires and then they have 15 more days to spud well and 12 months to make it productive

While WranglerRouser did some nice work with the numbers I should point out that the vast majority of what Eclipse bought from Oxford was considered "non-core" and is of much less importance to them.  They bought it because they had to buy all or nothing and there was enough meat on the bone to make it worth while.  They'll focus on their core stuff and if they can't get the non-core acreage amended will likely end up losing some of it rather than pay landowners big bucks.  They're offering some people very little to amend ($100/acre) and others are getting 10 times that, which shows you where they're prioritizing.

Oxford has been rogering people for decades.  Don't think for a second that Eclipse wasn't aware of that business model when they bought in.  Meet the new boss, same as the old boss.

"rogering" hahaha that hilarious Marcus, but accurate as well....

RSS

Local Groups

advertisements