Replies to This Discussion

Permalink Reply by myles fetterhoff on November 26, 2011 at 2:20pm

Please explain the one in trumbell county has 1000 members and the tri county group signed for 3250 and 18 percent roalties last monday night.

Permalink Reply by Sam Douglass on June 28, 2012 at 2:43pm

I like landmen.  Most of them adhere to a code of ethics.  The work hard and they have learned to do their job well.  The job of a landman is to sign up as many acres as possible on the best terms possible so the company will have places to operate far into the future.  

The companies that have moved to Appalachia are here to stay - far into the future - some boasting of already having reserves for maybe the next 75 years.  They need the fodder to feed billion dollar  plants ( yet to be constructed) for years to come, to ship LNG from facilities under construction, to serve displaced coal markets, to get a piece of the transportation market starting with fleets of trucks and buses.  

Producers take the long view; they want to get reserves tied up while they are cheap and landowners are satisfied with less rather than more.  They are coming from all over the world to get into the act.

Royalties will dwarf bonuses some day.  More than likely some day will be a day long in the future.  Meanwhile landowners better get decent bonuses which are a minor fraction of the total cost of bringing the product to the surface.  The producers are telling investors that inclusive of lease costs, they bring the gas etc. out of the ground to the wellhead on the surface for less than $1 an mcf and are predicting $4.50 an mcf for dry gas in the not too distant future - some say $6 [probably not a lot more because the producers want to keep the new markets they are gaining.

And the landmen will tell you that historically they compete on everything but price paid to landowners.  Somehow there is an imaginary prevailing price that gets established for an area by somebody and that price is "respected."

Landowners have no reason to respect the prevailing lease prices.  And the more of them that work together, without being in a rush to close a deal, the more likely that prevailing price is to move up ... and up.

And you can fairly wonder if, once you grant a lease and factories can be built on your property or your neighbors, whether or not your property will be marketable in the future - or mortgageable.  And the factories on the 5 acre plus pads will be factories more than once.

Maybe the groups need to start working together - and avoid being in a rush.  Be careful of groups that have to make a deal in a year or other fixed time or the organizers risk losing the chance of making a killing.

Permalink Reply by 1956 on November 26, 2011 at 2:25pm

that is a long ways from $5000 to $8000 and twenty per cent roalties

Permalink Reply by David Hunt on November 26, 2011 at 3:34pm

Richard Will you explain the big picture in more detail for those of us that are not looking at it? You say smaller is better so do you think I can get a better deal if I go it alone and forget about a group at all? If I have 10 acres (You can't get much smaller than that) and call Exxon Shell Chevron or any of the big guys do you think they will even take my call to negotiate a lease with me. Just asking

Permalink Reply by myles fetterhoff on November 26, 2011 at 11:11pm

They been getting 3000 now in mercer county on there own but nothing but a one to two page lease all in favor of the oil company.  People think oil company are there friend i have people i trying to help in my area. The oil company back in 1988 signed a lease and they give them all just pennies on the dollar for maybe ten acres.  you have a great oppertunity for the shale ply and there out of it because the have the wrong clauses to free them and they got 2 dollars a acre.  The parcel 340 acres in total and they pay for just 10 of the acres.

Permalink Reply by myles fetterhoff on November 26, 2011 at 11:18pm

The 3250 and 18 percent royalties came from claroin county.  The trumball county deals not final.

Permalink Reply by 1956 on November 27, 2011 at 8:51am

Remember this it takes 7 acre to make a sight and they drill two
miles in all direction. So they will need all that land in a 4 mile radius

Permalink Reply by Sam Douglass on June 30, 2012 at 4:29am

It is reported that the average length of a Range Resources well is a little over 3000 feet.  5 acer well pads are not uncommon.  Wells are drilled in two directions as determined by geologists and engineers - approximately NNW-SSE.  An unleased 1/4 acre in the right spot might be a major problem and stop the drilling of a horizontal well -- until it is leased.

Permalink Reply by myles fetterhoff on November 28, 2011 at 4:40am

Not all the land!  The landmen keep  knocking down doors paying peanuts for every  little pieces not included in the land owners group. 

Permalink Reply by Jim Litwinowicz on November 30, 2011 at 3:53pm

Whenever someone makes a statement like this it is usually from a landman that hates groups because he/she will not get paid.

Permalink Reply by Tony Rox on June 28, 2012 at 4:08am

Mr Litwinowicz,

I am a Landman. I also work in Mineral Rights Acquisition.
My personal experience to date has been that MANY groups ultimately solicite the industry professionals that deal directly with drilling companies.
It is also my experience that the leases presented to Landowners are usually filled with addendums that only repeat state statutes. Although I understand the potential change in the future of these statutes, I feel that these are actually clutter to the lease. Making the process more lengthy than necessary.
I am certain that you agree that not all land is desired by drilling companies. Therefore, it is my contention that 'unionizing' small landowners may be beneficial. But, if you are a landowner holding 200+ac.... you have some weight behind you. It is also my experience that anyone sitting on 200+ is pretty familiar with what they have.
An honest assessment of groups are that often they mislead landowners. I mean no disrespect to you or your group.
But, bigger is not always better.
Final note: An independent Landman who has been serving the industry for years can and will give Landowners a good deal with a REAL lease with REAL addendums that are acceptible to drilling companies. It really is a give and take situation. Also, there are SEVERAL areas that they can go that will prove more profitable.
I will leave readers with this question: You had nothing from Utica/Marcellus before. Is it worth your investing your time with a group that may raise your money per acre about enough to offset the fee assessed by the group? Signing bonuses are called 'bonuses' for a reason. The meat and potatoes are in royalties.
*not a blanket statement. But, a generally accurate one.
I mean no challenge, insult or malice towards you sir. This is not a retort to your criticism of other industry professionals. That is a tactic practiced by individuals who have some concern about thier own credibility. It is like name calling. Empty.

Permalink Reply by Jim Litwinowicz on June 28, 2012 at 3:38pm

Mr Rox; I have no issue with landmen that are honorable as many are. But many are not. That can also be true of people leading groups or purporting to represent landowners. As in all fields of endeavor, there are good, not so good, and bad. (I say that not in reference to the North West Landowner Group that appears to be led by honorable people)

Also, bigger is not always better, But many times it is way better. In my own instance, we had a group of about 1200 acres.  We were not getting much cooperation from the dominate player (I'll call Company A) in our county so we reached out to all the players in western Pa. Each one told us they weren't working in my county and to call Company A. Each refused to step into the other's territory.

Then we joined a much larger group and started to get interest from companies that had no footprint in the Appalachian field.  We ended up with a company new to the area that gave us twice the bonus, much higher royalty, and a better lease. So larger definitely paid off for us.

200 acres may give one some leverage when a company is looking to form a drilling unit in an area they hold leases.  But in an area where a large percentage is unleased, and a company is looking at acquiring ten or twenty thousand or more then 200, or even 500, is small change.

Leasing your rights is in essence forming a partnership with a drilling company. They need enough flexibility to do the work and make a reasonable profit. Overly restrictive terms help no one. But the average landowner is at a disadvantage and being in a group levels the playing field.

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