Hilcorp updates??

Ok I did the HUGE leasing event in Lawrence Co. back in September with Hilcorp.  We actually got a letter in the mail from Co-Exprise stating that once our bank info was faxed our lease check would be wired.  Now what??  Yah, we have a nice sum in the bank now, but do we get notified somehow if Hilcorp is going to drill on our land? How do we know what's going on?  I google "News updates on Hilcorp" and get nothing recent.   View points please!

 

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Permalink Reply by Marty on January 30, 2012 at 7:22am

Hilcorp update-

I've not signed yet.  I have received unsolicited contracts in the mail from a Hilcorp rep offering 18% and 3500 an acre.  I honestly think as soon as I sign the price will go up even more and I do plan to sign soon.

Permalink Reply by Bob Moran on January 30, 2012 at 7:41am

Co-Exprise is having a two day signing event in Hermitage for Hilcorp. Net of $3250/17% with a lease comparible to the Mt. Jackson lease. What township are you in ?

Permalink Reply by Bob Moran on January 30, 2012 at 3:34pm

Those are my thoughts too. I just wanted to pass on information. I have the feeling that the wet gas/dry gas question for my part of Lawrence county, (Mahoning Twp), & the potential for higher rates, is going to be answered by the Gateway well.

Permalink Reply by Bob Moran on January 30, 2012 at 4:37pm

These are the same questions I've been asking since Mahoning County took off a few months ago & Lawrence county didn't.  I don't plan on signing until I know more of what's down there. In Sunday's Vindicator a YSU geologist stated that the eastern Mahoning county/western Lawrence county area was dry gas. Until we have proof such as wells into the Utica layer, I think claims like this are premature. Ron Eiselstien gave some good advice awhile back. He felt that you should wait until the wells get close enough to make an informed decision about what you have before you sign. Thanks for your input Mark.

Permalink Reply by Jim Litwinowicz on January 31, 2012 at 3:36am

First, you need to understand there is no "line" between wet/dry gas.  It is a transition from one to the other with different percentages of various fractions of the gasses. So when people talk of a "line" between the two zones, they are really showing the center of the transition zone. Thus the area of the line will have some wet gas but not as much on the wet side. Thats why one place gets $3250/acre and a few miles away the offers are $5000/acre.

As for waiting, that is your choice.  But keep in mind that the current offers are based on best guess knowledge of this transition zone. And it is obvious that the transition zone is not well defined since different studies place the center line on different areas of the map.  Only by drilling wells will they be sure.

And if you wait, you could win or you could lose. If the YSU geologist is correct and eastern Mahoning/western Pa is a dry zone, then offer prices will drop as soon as that is established, especially if dry gas prices remain as depressed as they currently are. But if they find higher levels of wet gas than expected, offers will go up.

 And keep in mind that by waiting, it will be that much longer before your are placed in a producing unit and getting royalties, which are much larger than the bonus payments. Say you have 30 acres. Does it make sense to hold out to get another $2000/acre for a total of $60,000 but miss out on several years of royalties that could be $10,000 to $15,000 per month? (based on $333 to $500/acre/month)

By waiting you are gambling with a lot of money on the table. If you are financially secure enough....and won't cry too bad if you lose....then by all means wait.

Permalink Reply by Jim Litwinowicz on January 31, 2012 at 4:04am

True it will always be there...but it may be five or ten years later before offers return to current levels, especially if the area proves to be dry gas. Then it may be even longer.  People have to decide if they want to wait that long.

You can do as you please.  I just want people reading this to fully understand that here is no guarantee that offers will go up and they may just as well go down.

Permalink Reply by Tim R on January 30, 2012 at 4:55pm

I'd probably be OK with the bonus and percent, but I don't like the lease.  I tried to add additional language but was told take it or leave it.  There is lots of wording that works against the lessor.  Other than the broad "limitation of forfeiture" wording there are no definitions of default such as non payment of royalties or not having insurance, let alone cures for any such defaults.  No security interest provision to give the lessor leverage for payment of royalties.  No per occurrence dollar amounts in the insurance wording.  Maybe Hilcorp has all the insurance in the world but they can assign the lease at will to a third party who could be anybody.  They don't even have to tell you if they assign the lease.  My neighbor has gotten checks from four different oil companies in ten years.  She never even knows who owns her lease.  The force majeure clause can be invoked for 6 months no questions asked, it doesn't say what happens after that.  And they don't have to notify you of a force majeure event.  It pretty much goes on and on, way more than I can write here.

Here is a link to an oil and gas lease check list from Texas.

http://www.tlma.org/oilgasleasechecklist.pdf

It doesn't match up too well with the lease being offered to me.  Or go look up the Friendsville landowner group lease, it is 18 pages long.  Study that one and compare it to the ones being offered.  I'm not signing my rights away for 3K an acre for a lease with what I perceive to be trap doors everywhere I look.  I'll happily sign when I can get a lease I'm comfortable with.  This thing is going to last way longer than most marriages and unlike a marriage you can't even get a divorce.  Any body else concerned with the terms of the lease?

Permalink Reply by Marty on January 31, 2012 at 3:02am

Thanks for the info.  Thats why I posted it up.  I guess I'll continue to wait like I did when it was 1000 an acre.

Permalink Reply by Tim R on January 31, 2012 at 4:44am

I've been to both Hilcorp and Co-x events.  Hilcorp's event was through their direct representative Western Land Services.  I have seen neighbors leases that they signed.  They were the same as the ones I was offered.  If anyone has knowledge of different leases being offered I would be interested in finding out.  I'm betting they are all the same.  I was told by Hilcorp's Rep. that if I wanted better terms my only option was to sign the Co-x lease and pay the 5% (after taxes, some people don't realize this).  The Co-x lease is somewhat better, no doubt about it.  The take it or leave it approach left a bad taste.  As an example if 17% is really 17% then what is the harm in adding some additional language to reinforce that? 

I know a lot of people signed these leases.  I'd really like to see some feedback here from people who UNDERSTOOD the terms of the lease and what their thinking was.  The meetings I was at people were peeing down their leg to sign the lease.  All they heard was 3K an acre.  I asked my one neighbor it he was going to take it to a lawyer to review - he said he can't afford it!!!!!!!!!  That is the mentality of many out there.  And that mentality is what put most people into the position where they can't afford to have a lawyer review the lease in the first place.

Like I said I'm OK with the bonus and royalty amounts.  Again just as one of many examples I could give, what if Hilcorp sells the lease down the road.  And what if you don't receive a royalty check from the new owner.  Wouldn't you sleep better knowing your lease explicitly defined that as a default and had specific cures, such as termination of the lease and/or a security interest?  Without that wording your fighting it out in court, can you afford that?

Permalink Reply by Dale Ross on January 31, 2012 at 5:03am

Tim,

Don't disagree with most of your post, but did want to correct you in that the 5% charged by Co-ex on the bonus payment is not taxable income to you.  Their $ is taken out before the check is cut so you do not pay taxes on their portion. 

Permalink Reply by Finnbear on January 31, 2012 at 5:56am

So Co-Ex gets a 1099 from Hilcorp for that 5%?

Permalink Reply by KML on January 31, 2012 at 6:37am

At the last meeting they did say if your 1099 from hilcorp happened to include co-exprise's portion (5%) you can have your tax preparer write it off as out-of-pocket professional fees...so you do not pay tax on their 5%

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