Comment

Comment by Nate on December 8, 2010 at 8:46am

Right of first refusal is a way for a lessee to get an extra few years free on a lease. It is highly unlikely that anyone will try to make a deal with you while chk or whoever can simply match your deal.

Comment by Dan on December 8, 2010 at 8:08am

Chuck is right. Oxford probably has a clause like that in their lease. My understanding is that there is only one automatic extension, so at some point it will finally run out. I know that is something that I've seen in the proposed contracts from Kenyon/Chesapeake, and something for which I've seen addendums that remove that right, or reduce it to a right of first refusal, so that they have to match a competing offer if they want to keep the lease. That link you gave didn't work for me, but I went to the wvsoro.org website and found my way to it. Here is the link again for anyone having trouble with it:

http://www.wvsoro.org/resources/minerals_royalty/Gas_Lease_Addendum...

That whole www.wvsoro.org site by the way is a great resource. Thanks, Chuck!

Comment by scott jackovitch on December 8, 2010 at 7:59am

Thanks Chuck I'll look into it.

Comment by Chuck White on December 8, 2010 at 6:34am

Scott, Rod, and Dan
If you have a current lease read it.
Most leases have an automatic extension added if the company is exploring, drilling, running pipelines, storing equipment, etc. and the list goes on and on.
This also doesn't have to be on your property, it could be on someone else’s property that is in your Pooled Production area.
The Company that has the lease does not have to be the company that does the drilling.
There are many companies leaseing property to sell to the highest bidder for drilling.
The good news is, you will get royality payments if they drill in your production area, you may never get any more up front money.

http://www.wvsoro.org/resources/minerals_royalty/Gas_Lease_Addendum... .

Comment by Dan on December 7, 2010 at 10:10pm

Scott, I think you should hold out for the best deal. It seems like many landowners are getting offers of $1500/acre up-front lease payment with 15% royalty paid on gross wellhead production, plus a contract that is decently friendly to the landowners, so that can be a starting point for you.

Comment by scott jackovitch on December 7, 2010 at 7:31pm

Thanks Dan, thats some good advice. I think i'll give them another call down the road a bit and see if I can get some more info. I still have several months left on my lease I'm gonna give it a little time. I do believe if they ask me to renew my lease i'm gonna reject the offer. Currently there is no signing bonus per acre and I believe I should hold out for someone who will offer one. What do you think ?

Comment by Dan on December 7, 2010 at 6:02pm

Scott, you could ask Oxford what they plan to do. I know when Tri-Star was trying to sign some leases a couple of months ago, they said they were just going to do vertical drilling. Then again, you don't know if the company that you sign with might subcontract the drilling to someone with the equipment and knowhow to do it. Chesapeake supposedly has 27 of their own rigs in the Marcellus fields, but they might have subcontractors do the drilling sometimes too. So maybe Oxford has realized that there is money to be made even if they don't do the drilling themselves, or maybe they have horizontal equipment, or maybe they are just going to go vertical. They would probably tell you. Seems like you should have a right to know if they want you to sign a lease.

Comment by scott jackovitch on December 7, 2010 at 5:16pm

Dan, I am taking a lot of what I hear with a grain of salt. All I can say is that is what they told me. I Believe the big shale discovery was made about 5 yrs. ago. And it was shortly after when Oxford approached me about a lease. I find it hard to believe that they knew nothing about the shale gas when they started leasing in Harrison county. I wonder if there is any way to find out who is and is not capable of doing the horizontal drilling ? Is there a list ?

Comment by Dan on December 7, 2010 at 4:38pm

Scott, I would really wonder whether Oxford can drill a highly productive well in these shale plays. The current technology that makes these new shale plays good producers is the horizontal drilling, which I'm not sure if Oxford can do. Anyone else have ideas on this?

Comment by Dan on December 7, 2010 at 4:31pm

Chuck, that's very interesting that DPS Penn is representing Chesapeake in Jefferson. It made me curious so I made a few calls. Apparently there are several Kenyon offices, and of those one in St. Clairsville handles most of Harrison County. DPS Penn also handles some of Harrison County, but they don't overlap because they are not generally trying to compete, since they both represent Chesapeake. I didn't realize that Kenyon wasn't the only representative of Chesapeake in Ohio. Learning more and more everyday...

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