"Is Ohio's Utica now worth $20,000 per acre?"

When Chevron bought out Atlas for $9.3 Billion and when Chief oil sold it's leases also, the practice  in the past has been that the purchase price devided by the acreage roughly sets the new bonus price per acre in that leased area.  For Chief's deal, it equated to the bonus rising to $5000 per acre.  Recently in Jefferson county (Ohio), Marquette just purchase a bundle of leases which caused the bonus price in Jefferson county to be disclosed at $3700 per acre.  With Chesapeake going public that it's Million acre leases in Ohio is worth $20 Billion, does the math mean that an acre is now worth $20000 for a signing bonus?  Not to be greedy, but also being one that never tries to leave money on the table, I believe this is what OIL is worth and NG is yesterday's story and cannot compare.

Views: 29381

▶ Reply to This

Replies to This Discussion

Permalink Reply by Robin Jackson on July 31, 2011 at 7:32am

Well I'm sure that Oil being located has the probability of changing the lease per acreage bonus money..Why wouldn't it..but NG is not out ..Story and Headlines wise maybe for a while , while this boom takes place, but NG value is good and here for the duration till the pockets are empty..Pennsylvania will probably do the same thing afterall it is the state of OLD OIL..

 

Permalink Reply by Ron Eiselstein on July 31, 2011 at 9:03am
You are correct, W PA and E OH are the same but for an imaginary line.
Permalink Reply by Quincy Spitzer on August 9, 2011 at 12:48am
I believe South Western NY has very similer geology as OHIO, Wellsville was a major oil producer in the 50's!
Janice Lanphere HancharickPermalink Reply by Janice Lanphere Hancharick on August 9, 2011 at 11:01am

Zach, Please make every effort to attend the 4-County Meeting in Shinglehouse on Thursday PM. It will begin @ 6:30 in the Fire Hall, 121 S. Puritan Ave..  You're doing a good job staying involved.  I'd like you to see our shape files on the live map.

 

E-mail: [email protected]

Permalink Reply by Jim Litwinowicz on July 31, 2011 at 10:25am

I read the question and thought "that's a lot of money....$20,000/acre"  Then I thought....the CHK CEO stated that this is better financially better then the Eagle Ford.  So I wondered what the going rate was in that area.  I went to a website similar to this that concentrates on the Eagle Ford and looked what people were getting there. I was surprised by what I found.

 

They are getting substantially less per acre,  anywhere from $600 to $1500 per acre...but the leases are three years with a three year option. Also, almost all are getting royalty offers from 20% to 25%, substantially higher than here.

 

What does it all mean?  Are they smarter for getting a higher royalty? And why are the leases for a shorter time period? Are there differences in the development costs that require the drilling companies to have different offers or is it due to the expectations and traditions of the landowners? Maybe it is because the parcels are usually much larger so that gives landowners a big bonus even at a lower rate and allows them to be patient for the royalty? Why are they willing to sign only 3 + 3 leases there but insist on 5 +5 here? Is it due to infrastructure? Or a smaller area to drill? Or just more rigs, more workers, and less regulation?

 

I don't think $20,000 is going to happen.  Maybe 5 to 7 K, maybe not.  Maybe better to take $2500 or $3000 and ask for a bigger royalty.

Permalink Reply by Ron Eiselstein on July 31, 2011 at 10:35am
Exactly, now we think as businessmen and capitalist.  We have a Texan oilman in our property management group, your deduction about the "royalties stupid"........is more correct.  But also remember, Chesapeake reports Wall street identifying the Utica as the most economical play better than N Dakota.  Again, $20K an acre is just for brainstorming what the oil giants would pay for Chesapeake's leases.  Food for thought, landowners with good Utica already have the asset and it is better than in the bank.
Permalink Reply by Marc on July 31, 2011 at 11:34pm
I think Chesapeake's numbers amounted to $12,000 to $16,000/acre. Ultimately, you are comparing apples and oranges.  First, their numbers amount to an asking price, which it's fair to presume is on the high side.  Second, Chesapeake is talking about what acreage might be worth to a joint venture partner after it's already been packaged and vetted. Nobody can claim to know the value of acreage (obviously it's varies based on a lot of factors, some of which change over time).  I wouldn't hold my breath for 5 figures though, even in the sweet spot that has been identified. But that's just me.
Permalink Reply by Nate on August 1, 2011 at 8:48am
The only person who's going to be paying $20,000 per acre is the Chinese or other foreign partner chk's going to sign on here real soon.
Permalink Reply by Paul Martinelli on August 1, 2011 at 11:13am
CHK  will be selling off a large chunk of acreage before the year is out......or taking on a foriegn partner to help develop it.
Permalink Reply by Ron Klingle on August 1, 2011 at 5:26pm

I think you are misinterpreting what is being said by Chesapeake.

 

First Chesapeake has stated that they have 1.25 million acres under lease in Eastern Ohio and paid just over 1 billion dollars for those leases.

 

They paid about $1000 per acre for what they recently acquired.

 

Their recent press release used the $20 billion dollar figure to estimate the total estimated increase in value of the stock of Chesapeake to their shareholders.

 

Apples versus oranges....big difference.

Permalink Reply by FXEF on August 1, 2011 at 8:57pm

"Is Ohio's Utica now worth $20,000 per acre?"

It is if you can find somebody to pay that, but don't turn down a reasonable offer in hopes of the 20K per acre.

It's the second mouse that get the cheese.... third mouse gets nothing.

Permalink Reply by Ron Eiselstein on August 3, 2011 at 7:43am
To put things in perspective back in October, there were NO signing bonuses for Mahoning Valley acreage.  Then a Nomac drill was planted in Lake Milton and all of a sudden Trinity and Chesapeake were offering $1500 per acre.  Once the drilling was completed in Lake Milton, Chesapeake began offering $2000 an acre.  Now we read that Shell in Lawrence county is now offering $3000 for all of Lawrence county acreage.  Does this mean $20,000 is possible, probably not, but Castlo in Struthers was about to sign a lease with an independent for no bonus and never knew they could get $2000 until Chesapeake made them the offer, they never thought $2000 was possible either.

RSS

1 2
+ Add a Discussion + Add a Blog
+ Add a Photo + Add a Video

Local Groups




Stay Connected
Like Us

Follow Us

Subscribe

Join our lists

Top Content on GMS 

1 CONSOL Speaks

CONSOL Speaks
2 With Reduced Well Spacing & Stacked Shale Plays & Higher EUR: Royalty Buyers Are Acquiring Landowner's Rights for Dirt Cheap!

With Reduced Well Spacing & Stacked Shale Plays & Higher EUR: Royalty Buyers Are Acquiring Landowner's Rights for Dirt Cheap!
3 CHK putting Beaver County wells inactive

CHK putting Beaver County wells inactive
4 HOW MANY FEET/YARDS/MILES PUT YOU IN A WELL OR OUT OF A UNIT?

HOW MANY FEET/YARDS/MILES PUT YOU IN A WELL OR OUT OF A UNIT?
5 Harrison County Ohio Helicopter activity

Harrison County Ohio Helicopter activity

advertisements