Recent Offers in the Marcellus Shale

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1. State
2. County
2. Lease Bonus Offer
3. Royalty %
4. Terms (length of the lease)

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Permalink Reply by Erin Carpenter on May 11, 2011 at 6:12am
I have 2 friends in Ridgebury Township in Bradford County that just signed for $4000 per acre.  Granted this may be rare....but it is happening.  The company that they signed with is the same company that I signed with a year and a half ago at $2000 per acre.  That company is EOG and they have a lot of acreage in the area.
Permalink Reply by Mike Sebago on July 29, 2009 at 2:41pm
The arrogance of you presuming I should accept what you think is proper astounds me.

I said, “I'm willing to accept $2000 per and 18%.”. Key word being willing. I own this property outright and I can do with it as I please. If I am willing to take $5000 an acre, than that’s my prerogative. If they are not willing to accept my price then they can move on.

I presented my experience as a tool for fellow landowners to gage their offers against. What do you offer other than the sarcasm of a "Texas Landman"? Go away Mr. Hodgkins. I find you pampas and rude.
Permalink Reply by b bz on July 29, 2009 at 4:48pm
Your minerals are only worth what some one is willing to pay.
Why wouldn't someone not just lease another (160) acre parcel and/ or another 80 adjoining it next to it for $500 an acre , why lease yours for $2000. The minerals generate no income for you at all unless someone is willing to spend 4.4 Million or more to drill a horizontal , plus they probably would have to spend another 300k to lay a pipeline to take the $ 3 dollar gas. The bonus money you get for the lease is really small compared to the 15% royalty you might get so do the math. Just because someone owns the land means jack unless your willing to spend the 4.5Million to get it out yourself, and then figure out how to get it to market.
Permalink Reply by roy jones on July 30, 2009 at 5:44am
Mike when did you get this 1000 an acre offer? Im guessing it was when gas was above $4/mcf. It was probably last summer even. And I think this because of a few reasons

1. Nobody is drilling in Wyoming county... there's maybe one well im missing.
2. Nobody is even really permitting there..
3. Wyoming county is not core acreage.. from a geologic standpoint it is in the lower 25% of the basin.
4. People can pick up "core" acreage next to producing monsters for $500-1000 an acre in SW penn. But you are in.... Wyoming county? Unproven... Yuck. And you wont take $1000 an acre??!?!?!

Tell me. What makes you think your acreage is worth more than $50 an acre. $100 an acre? 200? $2000? I mean honestly, how are you analyzing your acreage?? Or are you just blindly taking their offer and doubling it? You obviously have no idea how lucky you were to get that offer BACK THEN, because your county is crap right now. There's a million other acres, literally, that look better geologically than wyoming county.

Guess what, you are willing to take a $2000 per acre offer... Completely ridiculous but okay, but you must also be willing to sit on your land forever because guess what, NOBODY will take a lease like that in the next few years. I would take that in one place across the basin, and thats near ranges monsters down SW penn. Wyoming county??? hahah are you kidding? God, some landowners are greedier than anybody. Its disgusting.
Permalink Reply by terry hazlett on July 30, 2009 at 9:06am
roy , i can tell your in the og industry, because you people are the only ones that are pompas and arrogant enough to tell us pa landowners that we're greedy to want a reasonable offer for OUR LAND ! Obviously you and your buddies have something to gain by badmouthing the marcellus play! And from what the range report had to say we even have a better decline rate curve on our wells than the other plays do, so more gas for longer period before production tapers off.And as far as the unproven part you talk about that is changing more everyday,with every new well being drilled& results that were held back are now starting to be released. Going to be hard to contain once production numbers start flowing & everybody sees what our property is really worth Like a buddy of mine says, if you don't want to pay than just go away!!!!!!!!!!!!!!!!!
Permalink Reply by roy jones on July 30, 2009 at 11:08am
Terry, YOU arent paying anybody. YOUR LAND is worth nothing without the oil and gas industry. So instead of trying to twist our **** why dont you all be reasonable? Would you put down 4 million dollars to drill a well that's not within 100 miles of anybody???? I know the potential of the Marcellus, and I'm excited about it and hope everybody gets paid big bucks, including the landowners (myself included). When I negotiated my land I wanted them to drill a well. That was my goal. That should be everybody's goal. The longer you all hold out, the longer you'll get the real money, which is in the DRILLING.

You talk as if the Marcellus is going to get proved up in a matter of months, or a few years. You cant prove up 2 million+ acres in a few years. The Barnett took 3 years, and that is 1/8 the size. Be realistic here. You all are going to have to take some pay cut INITIALLY so these companies can actually afford to put a well down on your property. If you keep having this mentality of get everything you possibly can RIGHT NOW, then you'll never get a well drilled.

You guys want a responsible offer? How would any of you know what is a proper offer and what isnt? You (general landowners) dont do any of the work. You get presented an offer, and you look at it, think about it with absolutely no information about whether its good or not, then just ASSUME its a bad offer and the companies are trying to rip you off. Hence the "I only got offered 1000 an acre! i want 2000!".... What in Gods name are you all basing these acreage prices on??? Do any of you actually do any research? Obviously not with comments like that. If it was "Well 3 miles down the road they have 3 rigs running full time, there must be good shale, and I live in a wet gas area that has a high btu content of the shale that's 150 feet thick, you can put 3 horizontals on my property, gas prices are assumed to be X in the next 5 years.." as in a careful evaluation. But no, I hear, well my neighbor got this offer last summer, so I should get it too. Its ridiculous. These companies are willing to pay you hundreds of thousands of dollars in royalties - yet your initial inclination is that they are trying to rip you off. You're biting the hand that feeds you. Get a clue.
Permalink Reply by terry hazlett on July 30, 2009 at 12:10pm
No Roy you people in the buss need to get a clue, the days of cheap leases are over ! and as far as time , i can wait it out till they decide to give a fair offer, didn't need them before & i don't need them now! I know next you'll tell me i should be thrilled they made me an offer and its found money i should be honered they want to put a well on my property! chesapeke made money years ago and the gas prices were comparable to todays market, so just because prices are down doesn't mean they aren't making money. And by the way we landowners aren't as stupid as the buss think we are! I've been researching any info i can get my hands on for almost 2 years. and the only thing you guys feed us is a boatload of crap! YOU DON'T WANT TO PAY JUST GO AWAY
Permalink Reply by Mmmarkkk on July 31, 2009 at 1:36am
Don't want to get into your argument about what is a good/fair offer for you land. I would challenge you on the statement concerning chesapeake making money years ago at comparable gas prices. Years ago, the wells CHK were drilling didn't cost what these wells cost today and the wells had very different decline curves. Most third-parties would tell you that Marcellus Shale wells have a break-even price of around $4.50 per MCF. That's not CHK's number, that comes from Wall Street analysts and others who do the cashflow analysis. Looking at gas prices today, I see sub-$4, so these wells ARE NOT economic at today's prices. And most of these numbers are using an assumed land lease value of $1500-2000 per acre.

I fully agree with you on one point: if you don't feel that the offer is sufficient, then don't take it! Fully your perogative. But you may find that it will be a while before you get to participate in the real bonanza here...the royalty checks. Lease bonus is nice, but royalty checks are forever! Well, a long time! Don't know much about Penn's forced pooling laws or anything but you could find yourself unitized in to a well where the company will recoup all of its costs and then start paying you a share of the well. That's good too, but the delay is sometimes painful for some. Personally, I wouldn't have a problem with it, though.

And finally, with gas prices as low as they are right now, if you don't have a need for the money, probably better to wait anyway. The same MCF of gas that will get you $3.50 today will probably get you double that in a few years!
Permalink Reply by Craig on July 31, 2009 at 5:28am
As far as I know, there are no forced pooling laws in PA. Unless something has changed in the last six months.

I know NY has forced pooling, but not PA at this point.
Permalink Reply by terry hazlett on July 31, 2009 at 7:56am
Well Mmmarkkk, i hate to contadict you, but as for chesapeak , i just looked over their annual report and the average gas prices stayed in the $ 2.50- 5.00 range up to and including 2004. Chesapeak first horizontals were drilled in the early to mid 90's. So your saying they were'nt making money, also i would assume the wells cost more to drill back then, and ever since they have been working to reduce driiling expenses. so i have to question your logic also. If they were'nt making money of that gas price they would'nt still be here , and one of the biggest operators at present time.
Permalink Reply by Mmmarkkk on August 3, 2009 at 1:48am
Here's my logic: take any of the number of "type curves" for a horizontal well in the Marcellus. Run it through a cashflow economic model using various gas prices and see where the company gets a 8-10% rate of return. Include well drilling costs, the cost to lease the land, the royalty rates, lease operating costs, gas gathering and transportation expenses, then taxes. Don't forget to include the new PA severance tax that will be in place shorly. I do this for a living and I've run the numbers so I know the answer. I've also seen the exact same analysis from about 10 investment banks, a dozen or so producing companies and a host of advisory firms. The breakeven point for the Marcellus is generally in the $4.50 to 5.00/mcf range.

That's the bottom line. Many companies right now are drilling wells that are marginal at today's prices for a few reasons: gain information on where the sweet spots are, get leases on production so as to hold them prior to expirations (once production is established from a lease, the lease is extended at no cost for as long as the well produces). So it makes sense to drill a couple of wells that don't make a lot of money right now, hold leases and then later go in and drill the additional wells to fully develop the fields.

BTW, the cost to drill and operate in the 90's was a lot lower than it is today on a unit basis.
Permalink Reply by terry hazlett on August 8, 2009 at 1:17am
Mmmarkkk, well from everything i've read about just about every co, they're saying drilling costs are lower than the 90's. And besides that the range report i just read says they can make a 20% rate of return on gas at $ 3.25 NYMEX pricing , not to shabby in my eyes! or is it the gas co are greedier than you all say us landowners are? and apparently you are in the buss as are alot of people on here, so i can see where your logic comes from!

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