High offers to buy minerals

I have been hearing of companys offering $12000, $13000 even $15000/ acre to buy mineral rights. So far I haven't been able to find out who is making these offers. If you've received an offer in this range could you please tell me who made it? Thanks.

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Permalink Reply by Finnbear on January 21, 2015 at 2:19am

The drop in crude prices is in part, being driven by OPEC. It is an artificial lowering of the price per barrel which is intended to slow or stop the shale development in the US which is threatening OPEC's monopoly on worldwide oil prices. They only have to keep oil at or near the break-even point per barrel for shale development (in the $60/barrel range from what I've read) and it becomes unprofitable here in the US.

Permalink Reply by Werner Kostendt on January 21, 2015 at 2:59am

On the other hand, the OPEC nations do need their oil revenue to pay for their huge welfare states. Assuming OPEC still has some control over pricing they cant let it go down to low.  There are nearly 30 million people that live in Saudi Arabia. 

There is a lot of room to cut costs in shale development.... 6 figure salaries for Petroleum Engineering grads fresh out of college could be a thing of the past.  The E&P companies will bargain hard on prices for everything including minerals and leases.

I wonder sometimes what if there was a moratorium placed on all frac'ing like there is in New York State.  Then what? Oil and gas could be worth close to zero under that scenario.

Your right, as they say the only thing that is highly likely is that the price will go up, down, or stay the same.

 

Permalink Reply by David Allen Lilly on January 20, 2015 at 5:13am

I think the numbers from NE PA and eastern Ohio will be quite different, and I firmly believe $200,000 an acre over the lifetime of the lease is very reasonable.

Admittedly, I am in the hottest part of the play here in Millwood township Ohio.

Permalink Reply by Puzzled on January 20, 2015 at 8:45am

What county is that?

Permalink Reply by evan on January 20, 2015 at 12:17pm
Millwood isn't hot part of the play. That would be noble then Monroe or possibly Belmont. The only reason Millwood is seeing so much is because of old Oxford leases. These wells fall off real quick. Just compare the Karen wells 1st quarter of production to it's latest.
Permalink Reply by David Allen Lilly on January 21, 2015 at 12:01am

Hot parts of the play doesn't understand county lines. Millwood township borders Noble and Belmont counties, and is hot because of the numbers being reported from production.

Are you saying that drillers are hitting this area hard only because of Oxford leases, even if the play isn't hot ?

Please.

Permalink Reply by evan on January 21, 2015 at 2:33am
If you know how check out odnrs well viewer and look at Carroll county compared to every other county. There wells may not be as good but look at the number of wells drilled compared to here in Millwood. An eclipse person , actually persons told me that in person, about all the activity in Millwood. Yes the wells are decent but in no way the best area
Permalink Reply by Dexter Green on January 21, 2015 at 4:36am

Millwood is geologically a great location, no doubt about it.  The problem is that the area is being developed by two companies that are in huge trouble financially.  ECR may not exist this time next year and REXX is in the tank and is cutting capex back to bare bones.  With oil over $80/bbl, NGLs at >$40/bbl, and nat gas at $4/MCF Millwood is an absolute gold mine.  At today's prices it's simply not.  So you have to be patient and hope that an eventual rebound occurs and that the operator of your lease is still around when that happens.

Permalink Reply by Philip Thackray on January 21, 2015 at 7:47am

Dexter,

The only wells reporting from Guernsey, Millwood are the Rex Anderson wells.  Averaging the 5 wells production and applying the "good old days" numbers you list above I get a gross $ figure of about $6.3 million dollars per well to the end of the third quarter 2014.  Reducing this number by 20% for landowner royalties and another 20% (AT LEAST) for wet gas gathering, transportation and processing that nets Rex $4.0 million per well in a little under a year of operation.  Rex lists the cost of these wells (Warrior South) at $8.5 million.  In the course of less than a year, the oil production has fallen form 175 barrel/day to 20 barrels/day, the latter number being the average production of the third quarter.  The actual oil production on the last day of the third quarter would be down from that.  The wet gas production has fallen from about 4 million cubic feet per day to about 2 million cubic feet per day.  Given the precipitous fall of the oil production, it will probably take about 3-4 more years to get to the $8.5 breakeven point with most of that money coming from the wet gas production.  Just how good that is, I'm not sure.

At todays prices these wells are not economic.

Regards,

Phil

Permalink Reply by evan on January 21, 2015 at 7:48am
Well I'm with chk. Some say it's bad but in a situation like this with the lower prices I think chk is a safe company and this won't hurt the company as bad as some others
Permalink Reply by David Allen Lilly on January 20, 2015 at 5:10am

Again, I ask are you selling all future royalties from your lease, surface to core, or is it just the Utica/Point Pleasant shale production ?

Permalink Reply by Puzzled on January 20, 2015 at 5:56am

The offer I got was for everything  pertaining to oil or gas.  All formations 

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