Crawford County, PA

Comment

Comment by Jim Litwinowicz on Tuesday

Its not valid and here's why. For a 1280 acre unit, $35,000/acre works out to $44,800,000...plus the $6 to $8 million to drill a well plus the cost of all the supporting infrastructure ....tell me what company would even consider that.

Comment by Bob Jenness on Tuesday

And discussion is what I was engaging in, as you are:-)

The reason it's such a good discussion topic is that it's a real valid question.  I'll listen to any rational set of engineering and geology that provides an estimate and uncertainty bands for 1, 100, 1000, 10000 acre samples, but I don't see anyone with any real expertise willing to post same.  That would add to the discussion, don't you agree?  Absent that, I just read what's written and try to ask the right questions.

I've worked on some pretty complex contracts, and I've seen them done both all-on and all-under the table.  One is a negotiation, and the other is a poker game.  I like poker, but I no longer play at casinos where they can see my cards and I can't see theirs, even though they assure me that they don't use their CCTV to look at my cards:-)

Comment by Jim Litwinowicz on Sunday

The $35,000 is in the title of a thread on the main page, not this one. And it is a made-up number that someone threw out for the purpose of discussion. It has no basis in reality. They may as well as used $100,000.

What happens is that people see deals that Company A sold acreage to Company B for a said amount.  People do the math of dividing the dollar value by the acreage and then complain that the deal was for some high value like $20,000 acre.  But this is folly to compare because these deals are done after an area has been proven and includes producing wells, pipelines, and supporting infrastructure. The land has been aggregated and the titles certified. All this adds great value to the O & G rights.

Think of it this way....for $100,000 dollars you can buy everything you need to build a house....lumber, blocks, shingles, windows, drywall, electrical, plumbing, heating, and much much more.  But without the skills, tools, and work to put it all together all you have are large piles of material. After the house is built, the same materials are now worth $200,000 as a finished house.

That is much the same as comparing what an individual landowner with 75 acres gets in a lease as compared to a company selling a large, leased, and proven oil/gas field with existing infrastructure.

Comment by Bob Jenness on Sunday

I didn't say I had an offer at that price, just that it was the headline of this thread.
Obviously everybody's parameters for time, $, etc are different, but I suspect we all want a fair deal with someone who will be a reliable long term player and payer. One of the risks that landowners take is that energy development will so change the 'hood that selling will be the only viable approach. I've received that advice a few times, and I'll carefully consider any such offer, with the qualifier that I have some surprisingly strong attachments to the land and a strong stewardship ethic.

Comment by Dave on Saturday

I would sell everything for half of that an acre.

Comment by Sam Douglass on Saturday

I think that anyone who can sell his gas right under a property today for $35,000/acre should give it serious consideration - with some limitation on the producer's surface use etc.

Comment by Bob Jenness on May 26, 2012 at 2:05pm

I bet the producer will be convincing his investors that he can answer the questions.  A test of the fairness of any lease would be that the producer, his investors, and the landowners (or at least their negotiating team) have the same set of all known/estimated answers to the common set of questions.  

Similarly, If we consider the Landowner's capital asset as his (very long term) investment in the NG future, the terms, risks, and returns should be identical or just slightly preferential to those of the investors.  

When we sign the kind of lease you're describing, it seems clear that we're making an investment commitment to the producer of 75 to 100 year term, unless we're careful to craft a more flexible term.  

As a landowner, I always have the alternative to seek an outright sale.   If I can sell at the $35K in the thread headline, I could buy an annuity at current rates and be assured an eternal income of $300 to $1000 per acre at current rates, which are depressed similarly to NG at present.  Obviously, lease bonus will be above that line, and the integrated excess will have to carry us til gas prices and drilling come up to parity.  What do y'all think?

Comment by Jim Dickinson on May 26, 2012 at 1:54pm

Heard there will be a meeting of the Western PA Gas Leasing Consultants, LLC
on Wednesday May 30... 7:45 PM... at The Hampton Inn, Meadville...

Claim to represent 8,000 acres in Crawford County...

Can't hurt..might help

Comment by Sam Douglass on May 26, 2012 at 12:14pm

The discussions about E&P, equitable and value etc. are interesting but I am pretty sure even the producer will not be able to answer the questions when the land man is out there trying to lease for as low amount as possible.  The answers will change with changing circumstances.   Certainly the landman will not know the answers; the landowner is not likely to have much of a clue.

One can assume that if the landmen are there it is worth leasing and published maps suggest where wet gas and oil currently in vogue might be [dry gas is predicted to go to $4.50/mcf within a couple of years simply by slowing down the drilling - and absorbing rapidly increasing demand]. 

One can guess that drilling emphasis will stay with wet gas and oil for some time because of greater profits.  But the high price of oil has been predicted to settle out at in the range of $80/bbl.

There are oceans of unconventional gas all over the world to help meet demand and efforts at conservation are whittling demand.

One can assume that it might be 75 to 100 years or possibly more before the drilling in Appalachia runs out.

Probably the best thing to do is get as big a bonus as possible.  The Lessee is going to want all the strata [except the traditional shallow stuff] and the answer to some of this is that over a period of time Lessee loses the right to non producing strata.  Possibly better, Lessee starts paying a meaningful minimum royalty (to be credited against production royalty] after a certain point in time or loses the rights. 

Comment by Jim Litwinowicz on May 25, 2012 at 10:48am

Things have been crazy with lots of people signing up in Mercer Co. If you want to join our Crawford Co group, email me at landownerslease@hotmail.com

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