New member with a lease question

Hello, we have been approached to lease our farm for oil and gas drilling, but unlike many on this site the lessor wants to secure the rights to the layers under the Utica. The lease states from the top of the Blackriver down. The landman said their interest was the Knox Formation. Has anyone else experienced this? Also, are there other layers in the Knox that can be horizontally drilled? We are on SE Ohio. Thank you in advance.

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Permalink Reply by James Vanderink on March 27, 2014 at 9:32am
Ok, it's unanimous. Nancy L, have a lawyer take a peek at that. There are some formations in the Knox that the Big Boys are looking at hence the Farmout. Good Luck and keep us updated. I know a real good O/G lawyer in Columbus I would highly recommend if you want to message me.
Permalink Reply by Bobby Jo Smails on March 28, 2014 at 3:22am

Oh, and Nancy, make sure he gives you advice on whatever his original area of legal practice is....at least get your moneys worth:)  Kidding, of course.

Permalink Reply by Keith A Williams on March 26, 2014 at 12:14pm

Bobby,

I will bet that you did not get that 1000 more AT THE SAME TIME that the group did. Apples to oranges. Like selling stocks on a rising market. The longer you wait, the higher the price. Until the bottom drops out!

Our group was done at the same time $250 and 2 1/2 % more. Cost us $137.50. Oh we got a gross royalty, they got market enhancement. The lawyer was worth every penny.

You got market enhancement in your lease Bobby?

Keith

Permalink Reply by Bobby Jo Smails on March 27, 2014 at 4:26am

You bet wrong, Keith.  I got mine the same time as those in the land group.  I asked the landman if he could give my neighbor, who was a good friend, the same as he gave me and he told me that the contract my neighbor signed for the landowner group wouldn't allow it.  He was LOCKED IN TO THE GROUP!   So, it was apples to apples, Keith.

And by the way, I got gross....20%.  I am betting you got less.   Market enhancement is a joke.

As you, I just want to see landowners get treated fairly.  You and I just disagree in the means to the ends.

Permalink Reply by cj wyalusing on March 27, 2014 at 5:16am

In todays environment who would alow a gas enenhancement clause ?

015334grltd9mPermalink Reply by 015334grltd9m on August 25, 2014 at 8:10am

Bobby Jo, just found this exchange, so outside of a landgroup was it worth it?

I like your spunk, we also (Ohio Land Management) stayed away from the landgroups and were very successful at it.  Biggest plus, we mostly leased with Hilcorp albeit. a grand less, not greedy, just wanted a good company.  

We have interest in Columbiana and are amazed at how many were led to the chopping block for $2250 and 17.5%.  Before thay got their checks it was up to $6000.  Anyway, just impressed in you practicality and outlook on protecting your land.  You definitely won the bet!

Permalink Reply by sldouglass on April 2, 2014 at 9:22am

It is unusual these days for the interest to be so limited.  The lessors seem to want it all, every layer, in almost all cases.  It is normally desirable for a Lessor to limit the lease to particular strata.  I have been surprised by a request to review a lease of shallow strata only - conventional drilling.

Leases are complex and the form lease is drawn for the benefit of the lessee.  However, lessees will negotiate the terms and patience has its rewards.  If you need the money, grab it and run, but you can invariably do better on lease terms and financial terms by negotiating in a reasonable manner.

A lawyer can help significantly if s/he has knowledge about oil and gas and minerals and is familiar with real estate matters.  One would not retain a skilled heart surgeon to work on a rare skin condition.

It is a good idea to do a little exploring on the Internet to see what Texans pay Texans for leases - and there stuff is not as good as the stuff in Appalachia - if only because eastern production does not have to be carted so far to the marketplace.

Legal fees are all over the place.  Specialists should charge more for the expertise, but percentage fees can be suspect if the amount of the fee does not relate to the time and effort and benefit conferred.  If there are real questions about the amount of the fee, the ethics committee of the bar association should be contacted.  While this lawyer does not [except in unusual cases] charge percentage fees, there is some justification for them if the landowner is "land poor" and not in a position to pay by the hour or some other front end basis.  The fee should be more if it is contingent on the client getting money.

I recently saw something that suggested that there might be or than 20 layers of producing formations in the area.  If that be true, then the oil and gas lease is a license to operate for perhaps hundreds of years.

Permalink Reply by James Foster on April 2, 2014 at 10:48am

There are plenty of leases on line that you can read.  Make sure you understand the language.  Most of it you can look up online.  Take time to do it.  You don't know what a term means you can look it up.  Go to any meetings in the area.  We went to many before signing.  Talk to your neighbors at church, grocery store invite them over for coffee ... even if you don't have the same lease as they have they may realize mistakes they made.  They know how much they got and when they got it.  You may have neighbors who like you are not leased.  At least get together with them and even if you do your own negotiating don't settle for $200 an acre when neighbor is getting $5000.  All information is valuable.   I would never sign a lease that an attorney had not looked over.  Even if they never read an oil and gas lease before but have read contracts ... a lease is a contract.  Also I would not sign at my kitchen table w/o notary there.  Meet the land man at your attorney's office and sign.  We signed in a group so there were dozens of notaries there and I know that the lease I signed is the lease I was given a copy of that night and later I was provided a signed copy by both us and the company and I also saw and signed the copy that was filed at the recorder's office which typically does not have monetary compensation in them since they are public record and everyone could than see what was offered to whom.  The secret to a successful land man in the past was just that A SECRET. That ship has sailed.  Landowners know more and their neighbors also know a lot more.  The very first meeting we went to in 2010 there were several elderly ladies there who had received in the mail a check from an oil or gas company who had once held a lease on their land ... husband, father, someone else signed ... the ladies had no idea but they ran out and cashed that check and in doing so resumed the old and EXPIRED leases.  It was not pretty to watch all this going on but hopefully many have been educated since the companies first arrived at meetings, on sites like this, in groups .... and if I didn't have much knowledge about any of this I think a group is still a good idea.  One thing the whole group thing did was tell the oil companies we want you here ... we are interested in working with you on this ... and we and many around us are in units with drilled and producing wells.  They stay away from where they are not wanted if they have other land leased.  Ask everyone in Mahoning County .... they basically just washed there hands of that mess and walked away.

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