Range cancels lease in Clinton Co. Pa

WE own 3200 acres of mineral rights in Clinton Co. Pa. Range cancelled the lease due to economics. Wondered if anyone else has experienced this and if there are any other companies that are active in the area? I was real surprised since the area is going thru seismic this year and I thought they would wait for the results. I would really appreciate any input since I am really stunned.

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Permalink Reply by Ed Agostinelli on May 20, 2012 at 2:50am

Matt:

 

Keep in touch. Our property is located in Beech Creek, Colebrook and Bald Eagle Twps. Some one suggested Exxon. They apparently are doing seismic  this year. I would appreciate if you could share the test results or at least tell me how I can interpret them.

Permalink Reply by Chartist on May 20, 2012 at 2:17am

How can you be stunned with nat gas pricing so low?  The only sure money was the signing bonus.  If you're in a good section, another energy company will drill it....Though you may not be alive to realize the gain 20 years from now.

Permalink Reply by paleface on May 20, 2012 at 2:20am
Permalink Reply by Ed Agostinelli on May 20, 2012 at 2:51am

Thanks for your words of support. I think!

Jim ShoosPermalink Reply by Jim Shoos on May 20, 2012 at 2:20am

In the world of oil and gas the use of the term "cancel" has no specific meaning.  Companies can terminate discussions with a landowner during the lease process or after having entered into an oil and gas lease they can "release the lease".  Additionally a company (assuming they enter into a lease which requires the payment of annual delay rentals) can simply allow the lease to terminate by failing to tender the annual delay rental in accordance with the terms of the lease. 

When you say "cancel"... what are you referring to?

Permalink Reply by Ed Agostinelli on May 20, 2012 at 2:41am

We had a lease that provided for annual payments per acre but it had a clause that they could surrender at any time. This must be the anytime. They are filing the release at the courthouse,so as of now we have no contractual commitments at all with Range. I would appreciate any input or advise.

Jim ShoosPermalink Reply by Jim Shoos on May 20, 2012 at 3:36am

Some companies (especially in high risk or undeveloped areas) go with a lower up front bonus in favor of paying annual delay rentals.  If a company were to drill a dry hole in year one, or drill a well that they determine is unlikely to ever pay back the costs incurred in drilling, they will simply exercise the right provided for in the lease of not paying the annual rental and file a release of the lease. 

Some landowners like the annual delay rental concept because they don't incur the "all at one time" income tax implications in year one and view the annual delay rental as something of an annuity payment on an annual basis.  If you go that route you need to understand that unless you structure the annual delay rental as being obligatory during the term of the lease then you run the risk of having the lessee walk away. 

Permalink Reply by Brad Rivers on May 20, 2012 at 2:26am

Shell did the same thing in Muskingum County, Ohio.  Must be Bad well results (dry gas)

Permalink Reply by Ed Agostinelli on May 20, 2012 at 8:42am

Thanks for your input

 

Ed A

Permalink Reply by Ed Agostinelli on May 20, 2012 at 11:24am

Thanks for the comments. The original agrrement called for 25% down and the remainder in 12 months. Range cancelled the lease in 11 months and 29 days. Said the efffective date was the date of the second and not the first payment. A very argueable point which I diagreed with buy was not prepared to go to war with a Gas Giant. They signed a new lease that very plainly said on the first page that they had to give us 60 days before the annniversary. I did not realize that buried in paragraph 15 about ingress and egress they had an escape clause. Both leases were reviewed by "expert" attorneys who were not bashful about thier fees. We lost a great opportunity to lease to other companies. I thought I had good representation and a good grasp of lease law but I got tricked. I guarentee it will not happen again. We did get a great deal of money from Range over the 4 years but any advantage a landowner had is now gone.

Permalink Reply by Ed Agostinelli on May 20, 2012 at 1:20pm

When times are hot it's pretty easy to get a good lease and as long as times stay good their is not a problem. Range has taken some big plays and then retreated very quickly. When we signed the lease they must have had 40 people working in Williamsport. A few months later I think they fired almost everyone and transferred the leases to Texas. They go Hot And Cold real quick.

Jim ShoosPermalink Reply by Jim Shoos on May 21, 2012 at 3:51am

All companies, not just Range, will periodically assess the success of their developments.  Notwithstanding the popular belief that every acre of land in PA and OH are equally productive, companies soon discover that is not the case.  The economics of drilling for dry gas are pathetic and not all of the liquids and oil windows are proving profitable either.  The area where your properties are located may well fall into one of these categories of being less than ideal in terms of productivity. 

Range didn't fire anybody due to the fact that they altered their drilling plans or were pulling back on development.  Range quickly figured out that the oil and gas talent pool in PA is pretty meager and not very knowledgeable when it comes to oil and gas.  They shipped a number of leases back to their offices in Texas for processing and when they saw that the same number of employees in Texas processed ten times as many leases during the same time frame as the ones in the PA office they quickly figured out that it wasn't working to have lease records being handled in PA, so they fired most of them and reassigned the work to Texas.  

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