Leases Offered in Noble County

I'm new to "gomarcellusshale", as well as new to this business.  We have a 152 acre farm with "Clinton" gas wells which supply our needs.

We've been approached by Fossil Creek Energy Corp (FCEC) for $50/acre, 12.5% Royalty, and $10,000 if a well is drilled.  We are sitting on the Utica Strata.  I've carefully read the lease and am very suspicious of the terms.  We are consulting attorneys.  I don't see any members from Noble County..and some interesting notes from Guernsey which lead me to suspect the FCEC lease.  Can they broker a lease after signing "cheap"?

We have news of ARTEX Oil offering leases in our County, they're out of Marietta.  Any comment on FCEC, ARTEX, and my suspicions would be welcomed!

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Replies to This Discussion

Permalink Reply by Private KeepOut on August 10, 2011 at 7:17am
Makes sense and let's not forget that the oil company can write off that expense. Can we as the lessor?
Permalink Reply by BMR on August 10, 2011 at 6:51am

You've been grossly misinformed. Pun intended.  The oil and gas company has to pay their share of post production costs and do you believe that they are coming away with less than 50% of the total Gross Royalty?

I have not seen a lease where Gross Royalty means you are paying all of the post production costs, you are simply paying your proportionate share ie. Lessee pays 85% and all Lessors make up the remaining 15% (assuming everyone in unit signed a 15% net royalty lease).

These landowners in WV and PA that signed at 12.5% would not become overnight millionaires if they were only getting 6%.  Obviously the Oil/Gas Company wants to negotiate, with the transmission companies, etc. for the lowest post production costs and the lower the cost the more royalty for Lessor and Lessee alike.  

Permalink Reply by Nelson Roe on August 10, 2011 at 2:43pm

BMR,

Not sure where this response was directed, but it is my understanding that yes, even with a gross royalty... both parties will incur some expense, however they (drilling companies) will not be able to deduct additional expenses after the transaction.  A gross royalty is paid off of the gross proceeds of the sales transaction, which would not allow for deductions such as marketing expense, compression, dehydration etc...  Whereas a net royalty would allow such expenses to be deducted prior to the landowners portion being calculated.  If this is not true, please elaborate on how the net vs. gross payout actually works. 

Permalink Reply by Private KeepOut on August 10, 2011 at 7:09am
I have also heard the same thing.....well something happened to the rest of my post so I'm not retyping it lol
Permalink Reply by Private KeepOut on August 10, 2011 at 7:04am
yup......I get what is left after all the post production cost! Hmmmmm......my first royalty payment might afford a nice treat to Mcdonalds for dinner! LOL
Permalink Reply by Private KeepOut on August 10, 2011 at 2:42am
Sawtooth, I was very impressed with kwgd....they cover all angles and the best part is that it's about you and not the oil company. Also from what I gathered from the meeting last night was that we will see a much better sign on bonus and gross royalty payment.
Permalink Reply by sawtooth on August 10, 2011 at 1:31pm
that sounds great TP.  I'm signing up and going to the 24th meeting to see what is said.  Did they offer a copy of the lease yet for you to review?  If so how did it look?
Permalink Reply by Nelson Roe on August 10, 2011 at 2:47pm

Sawtooth,

I have received a copy of the draft lease from KWGD.  In the papers that you sign when joining the group there is a confidentiality agreement, so we are not really able to disclose any of the actual terms of the Lease.  But after reviewing it, I will say that I believe there is definitely a reason that the group has grown to the point it has.

Permalink Reply by sawtooth on August 10, 2011 at 3:16pm
well i've decided to head to the meeting on the 24th
Permalink Reply by Nelson Roe on August 10, 2011 at 3:51pm
Hope to meet you there!  Although I am sure the place is going to be packed, so probably wont be able to actually see everybody that is there.
Permalink Reply by Private KeepOut on August 11, 2011 at 1:21am

Sawtooth, the lease will be the topic of discussion on the 24th and be voted on/agreed to by group to be submitted to oil companies. You have the option to back out all the way up to the signing of the lease.

I hope I'm not disclosing too much information. ;?)

Permalink Reply by Nelson Roe on August 11, 2011 at 2:25am
I wouldn't think so.  The way I am approaching it is that anything that was discussed at the 3 public meetings is fair game for discussion or repetition.  The only thing that I am not discussing with anyone is what is contained specifically within the packet you receive after signing up with the group, namely the terms or details within the draft lease that were not already disclosed at the meetings.

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