Lease Offers in Harrison County

Updated November 8, 2011

This webpage is a little over a year old. During this time frame oil and gas leasing
offers have increased significantly.

As of November 8, 2011 the signing bonus has increased to $5350-$5800 with the royalty percentage at 20 % gross. Leases are being signed by several companies. The best lease terms are being realized by the landowner groups that offer their acreage through a competitive bidding process. I personally believe the money offers will continue to increase with time. The highest offers occur when landowners pool their land into contiguous units.

Presumably, all are aware that Chesapeake recently leveraged 25% of their leaseholds in

Eastern Ohio for $15,000 per acre by forming a JV with an undisclosed oil major.

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Replies to This Discussion

Permalink Reply by scott jackovitch on August 1, 2011 at 3:32pm
Thanks.
Permalink Reply by Josh on August 1, 2011 at 3:34pm

http://seekingalpha.com/article/283620-utica-shale-plays

 

Something to check out, gives overview of shale players.

Permalink Reply by Finnbear on August 2, 2011 at 3:24am

I recently received an unsolicited lease offer in the mail. The letterhead says "Kenyon Energy LLC" and lists a Parkersburg, WV address. It was sent by an Austin J. Alexander who titles himself as a Land Agent.

Does anyone else here have any experience with this guy?

This solicitation starts out like this.

"The records of the Harrison County Recorder's Office indicate that you own mineral acres in the subject tracts. We are acquiring oil and gas leases in this area and respectfully offer you the following terms to lease your interest."

The letter states the following as lease terms:

    "1. 2250.00 net min acre, 5 year term, and 1/8th Royalty with a 5 year option"

The letter does not indicate what land is indicated by "the subject tracts". The odd part is that I do NOT own land or mineral rights in Harrison County and never have. I also do NOT live in Harrison County and never have.  I live about 100 miles away,  so where did he come up with my home address and connect that with land I don't have in Harrison County?

Permalink Reply by Al Cramblett on August 2, 2011 at 3:56am

For gods sakes man, call the landman and tell him that you will accept the offer then pray that you receive some money. Obviously, just kidding. Many mistakes are being made now, but the most egregious are those being made by landowners who are signing bad leases. I just had a landman call me and offered $3800/18% royalty. I told him that my minimum was 25% gross so what was the signing bonus that he could pay. He didn't hang up but said he would get back to me.

Permalink Reply by FXEF on August 2, 2011 at 6:24am

Al,

 All mineral owners should require a 25% cost-free royalty (minimum), then negotiate the best possible signing bonus for their individual situation. While the signing bonus can be a significant sum, it is a one time payment. Whereas the royalty payment comes at each month of production, which can last many years down the road. It's just my opinion, but I think mineral owner get caught up in the lump sum signing bonus and let the royalty slide by the way side, and in doing so lose many dollars down the road. 

Permalink Reply by Nate on August 2, 2011 at 7:29am
That sounds a little oinky FXEF, remember the company risking 6 million to drill the well? This not a sure thing by any means. I prescribe to two minds of thought. Pigs get fat and hogs get slaughtered. Also, its not what you deserve, it's what you negotiate...
Permalink Reply by FXEF on August 2, 2011 at 8:13am

Nate,

To a landman buying leases it may sound oinky, however to a mineral owner selling a lease, it would be to their advantage and good business. 

 

Like you said, "Also, its not what you deserve, it's what you negotiate..." That's why a mineral owner should negotiate lease terms they can live with for the rest of their life, because these leases most likely last well past their grandchildren lifetime.  

Permalink Reply by Paul Martinelli on August 2, 2011 at 8:25am
I would think asking for 25% royalty  would get you and your acreage left behind with no deal.  
Permalink Reply by Nate on August 2, 2011 at 8:48am
Hogs get slaughterd in that case perhaps??? Haha!
Permalink Reply by Paul Martinelli on August 2, 2011 at 8:56am

You must watch  Jim Cramer!

 

Bears make money....Bulls make money.....Hogs get slaughtered!

 

If I were a driller....25% royalty would put you last n the list of places to drill.....it is economics....and royalty % is part of the formula to determine break even point.

 

Permalink Reply by Peter Schueler on August 2, 2011 at 11:06am

I agree. 25% royalty will put you at the end of the line on the drilling schedule. I'm 71 and prefer to get royalties sooner than never. In any case, your individual circumstances must be factored. Bonus, if needed to retire debt, is a valid case for up-front money. Once leased, your land's value will be significantly affected by the lease terms. Any sensible buyer will want to factor the lease terms in their offer.  

The term of a lease could be extended indefinitely if the producer puts in a vertical well on the cheap and starts minimal production. Make sure the lease has a smaller unit size for vertical wells such as 80 acres for vertical vs 640 for horizontal. These leases will be traded and auctioned just like any other property so who you sign with may not be the producer. The lease terms will rule, not the landmen's promises.

 

Permalink Reply by Josh on August 2, 2011 at 2:01pm

Al, If you have any contact info, I would like to  talk to this person.

 

-thanks

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