Replies to This Discussion

Permalink Reply by psychosid on October 1, 2011 at 1:20am

Are you 100% sure?  I've read the royalty payment multiple times and Bill Williams of KWGD has stated that it has some processing fees that will be taken out of the gross.  Obviously you can't believe everything you hear, but rumor is that XTO has admitted that some processing costs will be removed and that is why "Gross Proceeds" doesn't appear in the addendum.  I have friends that signed the deal and don't know if it is gross or net.....that's why they brought the contract to me to read.  How can people sign without knowing for sure?  I read it as market price and the other pages are defining market price.  It does not say "Gross Proceeds" anywhere in the lease or addendum.  There isn't a clear definition in 17. Royalty and Gas Measurement.  If you signed the XTO lease, I'd suggest you call XTO directly and see what they say.  I hope for everyone involved that it is on Gross Proceeds and no costs can be pulled out of the production.  It is odd that the largest group in Belmont County cannot get $5000/acre and 19% gross, and only has been offered by XTO 20% on the net proceeds. 

Permalink Reply by Mickgyver on October 1, 2011 at 2:05am

They are not the largest group ,but they must have been content as a majority. It sometimes happens when any group gets in a position of the possibility of separation the leaders will generally try to get a signing done to keep the majority together . I have spoken to others groups out of state that this occurred in.

Permalink Reply by Mickgyver on October 1, 2011 at 4:30am

If the production from the wells keep up as they have been the companies will adjust the royalties and the way they are allowed. When the eagleford and Bakken did well the rates went to 25% gross on several of the leases I was able to access . But I firmly feel the landowners will do the best with various addendums and overall lease if they do not split up and allow the companies to pick them off cheaper as wishguard did months ago. I personally sat in their meetings and we were told that they would not be coming back for the 50 and 60 acre plots once they go through.It is Ohio law that they must have a minimum of 40 acres to effectively reach the area they are accessing so these plots will be more and more valuable as the various extraction methods become more effective . They are talking now of bringing wells closer together for maximum production from various bits I have found . At a 3-5% recovery window this gives a lot of room for improvement .

Permalink Reply by 09bp5t05myjl3 on October 24, 2011 at 5:40am

Good point Mickgyver especially when the group leader is profiting from the group!

Permalink Reply by AT on October 1, 2011 at 1:31am

The XTO 19% royalty deal in Belmont County is clearly "net". Furthermore, they can terminate the lease at anytime with no reason, there is no cummulative limitation on the shut-in and the 1280 acres in the pooling clause is not contiguous acres - meaning you could get grouped with 1280 acres scattered all over the world resulting in your royalty based off of some hole they sink in the ground Boliva and not based on what lies under your property.

Permalink Reply by AT on October 1, 2011 at 4:25am

I couldn't get a straight answer on the royalty either which led me to believe there was a fleecing there.

Permalink Reply by Mickgyver on October 1, 2011 at 5:40am

I have never seen anything that would allow a unit to be formed if the acres are not connected , the state of Ohio sets the unit standards for size when a permit is issued. They cannot run the laterals under ground under any property which is not held under a pooled unit, Also all of the 15 different leases I have seen are allowed to be terminated at any time after official start date  as long as clean up and reclamation has been completed. It would be bad business to ever terminate a paid up lease even if they don't plan to drill it . They can still throw it in as combined acres to impress the investors and attract operating capital. I am always interested in looking at any additional information so. The sad truth is that even if people are not satisfied with the lease being discussed ,it would not have been that good if an individual would have approached them alone . The group is the best way to be unless you have at least 700-1000acres and even then it is not a sure thing that their company lease would have many alterations because they still have to be able to transport the products from the property and unless there is enough acreage to be worth the deal they like to have a large group together . It is amazing how much information is available on the internet if you take the time to look . It also is very interesting when i can keep up with the area news.

Permalink Reply by Mirabelle Dictu on October 1, 2011 at 5:51am

I don't understand and maybe this is a dumb question, but here goes. It seems like I've read a couple of leases that say they can pool your acreage, whether contiguous or not, with a unit. Does that mean that if they pool your acreage and drill somewhere where you are not included, you will still be held by production?

Permalink Reply by AT on October 1, 2011 at 12:24pm

Mickgyver, 

   My point is, without the pooling clause specifying "contiguous" acres in the drilling unit, they can unitize or pool your acreage with some well they are drilling in Bolivia to hold your land by production. Ohio law would have no jurisdiction on a well drilled outside of Ohio. Furthermore. the XTO lease specifically states in # 26 or #28 (can't remember) of the lease that it may be neccesary to pool smaller tracts of lands to lands elsewhere that are not attached. The addendum does not fix this issue.

 

Regarding terminating the lease, if the 15 different leases you have seen allow them to terminate after you sign and before paying you the upfront bonus money for any reason other than 1.) you don't own the gas & oil rights and/or 2.) your land is already under lease, you have looked at a lot of bad leases. Those are cherry-pick leases.

Permalink Reply by Janice Lanphere Hancharick on October 2, 2011 at 4:42am

Check with early 2007-2008 lease-signers along the northcentral PA counties ... Bradford, Susquehanna, etc..  Way back then the Marcellus prices were $5,000+ per AC ... prime drilling country and it still is.  This has brought a wonderful economic boost to these counties, and neighboring ones.  The flip side: Deals also went sour in 2008 when our nation's economy went bust.  Evidently the gas companies didn't see it coming any more than many of us, because they (and rights holders)signed lease agreements that had both sides salivating.  Up front bonus money on a 300 ac farm equaled over a million dollars for cash-strapped farmers.  They ordered new tractors, got fences and roofs fixed, saw opportunities for their families to get out of debt... natural gas and possibly oil was their manna from heaven.  What was happening on Wall Street was not on their radar.  Then the letter came.  The gas company they had signed the lease agreement with was rescinding the deal.  No money was coming their way.  Some were in bigger holes than ever.  They could go find some other company.  Lease deals are not like marriages.  There is no divorce unless you are the gas company. 

NO INDIVIDUAL should think that he/she can outsmart a bank of gas/oil company lawyers who author lease deals for a living.  Very few Group leaders have long-standing experience at this endeavor either.  The pots at the end of most rainbows will only be filled if the representation being used is on equal footing with these companies ... not just willing but experienced and  having proven savvy.  How full do you want your pot to be?  How much control do you want to maintain over your own AC?

 

4-County Leasing Group Coordinator    jlhanch@nc.rr.com

Permalink Reply by Finnbear on October 2, 2011 at 8:10am

None of this money is real UNTIL you have cashed the check and paid the taxes on it. Anyone who would go out and spend it before they actually received it probably ought to refer back to something I'm sure they heard as a child "Don't count your chickens before they've hatched.".

Permalink Reply by Janice Lanphere Hancharick on October 2, 2011 at 9:18am

You are absolutely right Finnbear!  I wouldn't have gone into such detail except I believe there are some OH folks wanting to jump in feet first who need to know ALL the possibilities before they sign anything.  Forewarned is forearmed if we're throwing out cliches.  Since late 2007 I've strived to impress upon PA/NY   4-County residents and those in multiple other states ALL aspects of this shale boom, so it can make a positive impact on their lives.  It has been a challenge for numerous reasons, the least not being that the rules are constantly changing, as do company strategies, technology, and foreign involvement.  Even our own gov'ts. (local, state, and national) can't make up their minds what the rules are or should be.

Penn State has been a huge help to me and many others across the Marcellus/Utica states, as has this site and numerous others.  Every time I learn of another Group that has reached its goal of  a solid lease  that brings no harm,  but instead brings many pluses to the signers, the industries involved, and a region's economy  I am thankful.  Why this seems such an impossiblitity at times is a puzzle. 

Please continue to stay involved. 

jlhanch@nc.rr.com

 

 

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