Info from a person working in the industry regarding leases

Who ever reads this I would recommend not signing leases now or joining a landowners group. My reasoning is this. Chesapeake Devon PDC etc etc all have known about the Utica and Marcellus shale for years. If you sign a lease now only sign due to financial hardship other wise wait it out. I have property in Lawrence County Pa. A few years ago the going rate was like 50 per acre and 12.5 in royalties here I am 2 years later with a lease for 3,000 per acre and 17.5% royalties. The hydro carbons have been there for centuries and they will continue to be there. Do not sell yourself short to a oil and gas company whos profits are in the billions every quarter. The reason for joining a land owners group is to pool land together and have someone work for you to get the lease in the early stages of the shales development when you could simply wait it out and do it yourself and not lose a cent in royalties or bonus money. The real scam is a land owners group. Also land men are mostly contracted to work for the company so they get paid if you do or dont sign the lease. In 5 years from now the people who held out will be getting 10-20k per acre and 20-25% royalties mark my words.

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Replies to This Discussion

Permalink Reply by scott peterson on August 11, 2011 at 5:01pm
So if we are at the same rate you are now after 3 yrs 3k  or better and 17.5 % we should pass and hope it gets better?
Permalink Reply by MANDERSON on August 12, 2011 at 12:32am
Yea of course I havent signed yet. They are getting 5500 per acre or more in bradford county and those rates took about 3 years to get there. The utica is going to be more valuable than the marcellus because of the oil it can produce. If you look at the rates people get in the barnett and other places it triples or quadruples the money we are being offered now. Another thing that indicates this is the fact they changed the going rate for leases in Lawrence Co from 1500 to 3000 per acre over night. 85% of tioga bradford washington and greene counties in pa were leased on average for 2000 per acre or less.
Permalink Reply by scott peterson on August 12, 2011 at 12:34am
Yeah, i definitely see your point....
Permalink Reply by Jon Henderson on August 12, 2011 at 1:01am

I see your point also, and I have not crunched the numbers, but the longer we wait to lease, the longer we have to wait on a well. To me, that's where the real $$ are.

 

I really do see your point though, and I have struggled with it. Don't want to sign too early, but don't want to pass up $$ on a good lease.

Permalink Reply by scott peterson on August 12, 2011 at 1:02am
exactly, i have same struggle...
Permalink Reply by Jon Henderson on August 12, 2011 at 1:13am

You know, the longer we wait, the longer it takes for lease renewal. By the time we wait for 3 years to get $5k or $6k/acre we will be close to renewal if they don't drill. It's kind of like getting it anyway. I could certainly use some bonus right now.

 

Also, the landowner on Little Indian Road certainly took less than any of us will, and probably a poorer lease, but he has a well being drilled.

I'm just saying there are different ways to look at it....

Permalink Reply by scott peterson on August 12, 2011 at 1:14am
true...
Permalink Reply by MANDERSON on August 12, 2011 at 1:29am
I understand that side of things as well but for the things I have seen working out there like going to locations and drilling the well and having only one stage fractured to keep the lease or they signed an early lease and fees get taken out for the completion costs of the well. People sign on for 1500 an acre then they renew at another 1500 per acre they are in the same boat compared to waiting a few years and getting 3000 and 3000 on the renewal. All things to take into consideration. The biggest wells I have worked in pa have all come from leases that were under 500 per acre and 15% royalties for the landowners I have spoke to. Also the more you wait the more favorable the lease terms. Way all of your options because really in the end you are making them a bigger buck than they are making you by signing early.
Permalink Reply by Jon Henderson on August 12, 2011 at 5:11am
I totally agree with you on that. Patience is very important, as is a well written lease.
Permalink Reply by paul geiger on August 12, 2011 at 1:32am
I do believe   the $ 5K 6K  isn't   that far away . When the well in Wheeling township is finished that's  it .
Permalink Reply by JoKlause on August 12, 2011 at 1:49am

I feel everyone's pain.  We all have been waiting so long for things to get moving in Lawrence County.  I am in the Mt Jackson landowners group.  I hear $3,000 and 15% is what on the table right now.  Our meeting is next wednesday and we shall see.  But it does make us VERY nervous that if we sign to early, we might lose out on a bigger lease.  We live roughly 2-3 miles from the Ohio line.  If they are striking crude there, I would think we would have it here.

My dad was at the Pulaski Flea Market Yesterday and he was talking the several guys there that are using the area as a Fracking station for the Patterson Well.  The head guy told him that there is a well in eastern ohio right now producing $3 million  a DAY!  I would love to have %17 of that!!

 

Again I am just happy Lawrence Co is finally in the loop!!

Permalink Reply by MANDERSON on August 12, 2011 at 2:02am
he means probably 3million mcf

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