"Why Land Groups Fizzle Out"

In the beginning God created a Play, on the first day the oil company adept at leasing swooped in.  On the second day land groups formed and united the earth with great lawyers spearheading the crusade.  Oil companies enticed with hundreds and the thousands, lawyers told the flock this is good, let us rest.  Then the rigs moved in and substantiated the gold and more giants moved in.

 

Alas!  production revealed , bonuses corrected themselves and hundreds of earth owners were left wondering why they took the first offers.  "We were in a landgroup and they told us this is the best we could get." 

 

I have nothing against Landgroups and I have nothing against any property owner who wishes to lease at anytime.  What I do have a problem with is when landowners regret that they prematurely leased.  Well, what do we expect when we were led by non-business people, in fact leaders with no O&G experience at all.  Most landowners have an inate logic of knowing how to deal with their property, I believe it was the dazzle of oil which caused many to not look into themselves on when to lease.  Most property owners know value and know when to sell their corn.  As a business landowner, I have not leased and am watching the nearest wells and production.  It is basically real estate, location, location, location.  I will not regret what I lease for, even it goes up, it is not being greedy that drives me, I just do not want to be had.  The Utica's sweet spot is finite, and they will eventually need everything, I am looking towards a well, production, not swapping paper. 

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Permalink Reply by Robin Fehrenbach Scala on October 11, 2011 at 3:24pm

Good luck to your land group. Keep informed on this site and the other sites too. There is a lot of great info out there. 

Another thing you can do is visit the websites of the existing landowner groups to read up on the hows and whats. You can learn from their mistakes as well as their good fortune.

 

Best wishes to all!

Permalink Reply by AT on October 12, 2011 at 9:49pm

Landowner Group Meeting

Friday, October 14, 2011 at 6:00 PM

Wintersville Fire Hall

St. Florain Hall

286 Luray Drive

Wintersville, Ohio 43953

Dick Emens is working with this group and negotiating with the O&G companies.

Permalink Reply by Mickgyver on October 12, 2011 at 11:02pm
that  is what i like to see good support with a top notch attorney ,good luck all , hold your ground together , no pun intended
Permalink Reply by Tim Hale on October 13, 2011 at 1:50am
you need an person who went to law school but is a trader, with industry contacts....local attroneys do not have clue with is up ....please
Permalink Reply by Finnbear on October 13, 2011 at 10:21am
Dick Emens has many years of experience in Oil and Gas and Natural Resources law in OH and has the industry contacts you speak of.
Permalink Reply by Tim Hale on October 13, 2011 at 1:44am

My name is Tim Hale

 

My firm Clearfield Energy Services LLC just completed our 4 contract with a major oil and gas firm for a Lessor (ABC Butler). So far 200 K of AC. I charge 5% of the Bonus only for my service and will discount if the group is a larger one.

No one should ask for royalty...that the landowners right...in my oppinion! 

 

My day job is the VP of Business Dev for South Jersey Resources...the largest purchaser of Marcellus in the country. I am a graduate of Penn State Earth and Mineral Science, attended University Houston Law School and have 32 years experience in Natural Gas. Check out my web Clearfieldenergyservices.com...push on projects...Good luck to all!

 

Tim

Permalink Reply by Ron Eiselstein on October 13, 2011 at 10:31am
Tim are you involved in Ohio yet and if so, do you have production players interested in Mahoning and Trumbull county?
Permalink Reply by Richard Jones on October 13, 2011 at 10:39am

This is your land you are talking about.  You should want to be in control of what company will be drilling a well on or near your land.  Just as in any other business, there are exploration and development (e&d) companies that play by the rules and actually go beyond what the rules require to protect your property and there are others that cut corners to increase profits.  When you sign with a group or just take the highest offer being made, you give up the right to choose which of those companies will be on your land.  When someone contacts you about a lease, you should demand to know what e&d company will be the operator with regard to that lease.  If the person making an offer can't tell you that, they are buying your lease to flip it to one of those companies that will actualy be doing e&d work. Again, you have lost control.  If they give you a name, you should get on google and find out everything you can about that company and, if you like what you find, make sure that company's name is on the lease as Lessee.  Just taking top dollar offered is not proper stewardship of your property.

Permalink Reply by Mickgyver on October 13, 2011 at 11:07am

That is so true , I would love to have protection to the land first then the proper compensation based on the true value and profit potential for the company .Do you think we can really protect ourself from foreign control once we sign a lease . If so how do you write in the proper  protection that a company will really accept .  According to what some of the wells are producing , they appear to be   paid for in the first 4 month's of operation .,with variable expenses of course ,but the money rolls in pretty quickly when you compare even the lower production rates as they were posted .

 

 !500 barrels x ($60 -$80 per barre) =l ( $90,000-$120,000 ) x 30days per month =( $ 2,700,000-$ 3,600,000 ) x 4 months time this equates to between  ( $10,800,000- $14,400,000) 

 

Then with the average well cost of even $8,000,000 it looks like it paid for itself pretty quickly . Does anyone have the exact way they figure the investment cost versus when it is truly paid for counting deductions . It would be nice to know for sure so I don't pass on anything that is wrong .

Some of you well informed oilmen or ladies reading these posts can tell us the rest of the story please .

Permalink Reply by Jim Litwinowicz on October 13, 2011 at 1:43pm

Richard.  A good lease is imperative because all companies retain the right to "assign" the lease, which means they can sell it, trade it, or form a joint venture with another company to produce the unit. Plus, companies get bought out or are merged with all the time.

Another variable is that very few companies own the drilling rigs or the fracking equipment.  All the work is subcontracted out. This leads to great variability in the quality of the work. They may have an inexperienced crew doing various segments of the work. And different subcontractors doing the work at different wells for the same company.

Further, it is common for wells to be sold or subleased to various companies throughout their lifetime. Different companies specialize in the different aspects that develop over the life of a well.

This means that no matter who you lease with, you will not know who will the eventual owner or who will do the drilling or maintain the well. Only a good lease will protect the landowner.

Permalink Reply by Finnbear on October 13, 2011 at 2:04pm

And you only get one chance to get it right. Once you sign the contract you are stuck with it so you better better make sure you (and possibly your heirs) can live with it. It's not just about the money. You probably wouldn't cut your arm off or gouge one of your eyes out for any amount of money so why would you sign a lease that destroys your land that you'll probably want to live on, use, enjoy for the rest of your life. Make sure the lease is solid and enjoy the financial benefit that comes along with it.

 

Permalink Reply by Richard Jones on October 13, 2011 at 6:43pm

Absolutely a good lease is imperative, but if you educate yourself, you can negotiate a good lease.  If the landman won't agree to your terms, tell him/her to take a hike.  One of the problems with a group negotiating lease terms is those terms are only as good as the company that owns the lease, and you have given up the right to choose that company.  There are companies out there who do not care what the terms of the lease are.  They will agree to anything to get a lease, but once you sign, they are going to do things their way and if it violates the terms of the lease you can sue them.  A little research on the Internet will let you know who those companies are.

Yes, it is true that e&d companies contract out almost all of the actual work.  However, those contractors do the work according to the instructions of the on-site representatives of the operator ("company men") or they don't do it for long.

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