Hillcorp re-lease or release?

This may be a little premature, but has anyone been approached by Hillcorp to re-lease or be released?

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Permalink Reply by gracie on July 7, 2016 at 4:49am

Are they even still around? Haven't heard anything about them for a long time.

Permalink Reply by Jesse Drang on July 7, 2016 at 9:03am
Yes, they are still around. It is a privately held company so you don't hear much market chatter. I think they are laying low and working to keep cash flow going.
Permalink Reply by james on July 8, 2016 at 9:14pm
I talked to them last year, they told me they have dropped bonuses a lot and are only leasing landowners that fit into the units they are drilling. I look for them to let most of the leases expire and then try to lowball landowners with the properties they want, they more less told me they are the only player in this area so they will not pay big bonuses. When they leased 5 years ago there was Halcon, Shell, Hilcorp, Chevron all doing active leasing, now Hilcorp is pretty much the only company left in our area. i hope another company or two starts leasing again or they will be able to lowball everyone.
Permalink Reply by james on July 8, 2016 at 9:20pm
If they don't pay a big bonus I wouldn't sign a lease, the royalties I have read about sound like they don't amount to nothing, if people refuse to lease for low offers then they will have to raise them or move out. Landowners still control their land and if Hilcorp starts trying to lowball us next year just turn the offer down, if your like me I already got a nice payment from them, so if they don't renew my leases for the same amount then I will tell them to get lost, I already got a nice chunk of their money for free.
Permalink Reply by Jesse Drang on July 8, 2016 at 10:19pm
Hilcorp has a commitment to Shell to supply the cracker plant ... there are articles on-line. Hilcorp NEEDS your wet gas. Don't give it away.
Permalink Reply by james on July 8, 2016 at 10:29pm
I agree, I still believe they are going to let a lot of the leases that come do this year and next year expire and make lowball offers. I hope landowners hold out and refuse to sign cheap leases, they need us more then we need them. No land to drill on then they go out of business, if they can afford to pay every employee $100,000 bonus then they can afford to pay the bonus they agreed when they signed all these leases 4-5 years ago. They will pay if landowners don't give in.
Permalink Reply by Barry D on July 9, 2016 at 9:21am

FWIW,

When making a decision to re-lease with a lower bonus payment one factor would weigh heavily for me. Does the company properly pay royalties?

We have seen on this site numerous horror stories about companies cheating landowners of their royalties. Does Hilcorp play these games with royalties? Or is the company fair?

If Hilcorp properly pays the royalties I would re-lease with a lower bonus payment. At that point the real money is in the royalties, and from what I read here, Hilcorp is leasing for units it plans to drill. Which would mean the company doesn't plan to tie up the oil and gas rights. A landowner could expect royalties in a reasonable period of time.

Just a thought.

Permalink Reply by M.A.B. on July 9, 2016 at 12:06pm

That is good logic...is anyone out there getting royalties from Hilcorp and paying deductions unfairly?

Permalink Reply by james on July 9, 2016 at 12:13pm
I haven't heard anything good about royalties from any company yet, everyone talked about all the big money is in the royalties, I would be happy with a bonus every 5 years and hope they never drill by the horror stories I hear about landowners getting big deductions from the wells. I don't think any of them are very honest.
Permalink Reply by Jesse Drang on July 10, 2016 at 5:49pm
Hi Barry -

I agree: the money is in the royalties. The concept of "bonuses" has changed in PA with the last leasing bubble. Originally, it was a periodic payment (usually annual) to compensate for the delay in drilling. Way back when, which was not too long ago, land was leased with the expectation of drilling it within the lease term, not for purely speculative purposes or to block other drillers out. When deep wells, technology, and higher energy prices converged here, it not only brought E&Ps from all over, it also brought more sophisticated and landowner-friendly terms.

From all of this ... the $5/acre/year delay damages suddenly evolved into upfront bonuses that exceed the value of the surface land in some areas by multiples. And, God bless, some folks are coming up for re-leasing.

No point, other than to observe that the money is in royalties, but there is a boatload of cash in bonuses. I can't believe the changes to leasing terms in less than a decade!

J
Permalink Reply by Barry D on July 10, 2016 at 9:43pm

Hey Jesse,

No doubt about the changes in leasing and bonuses.

At this point I don't think land owners should worry themselves about the amount of bonus payments.

It appears that most O&G companies are spot leasing where they plan to drill. So it is with Hilcorp. I wouldn't lose much sleep until one of their representatives knock on your door.

But remember, lease payments were driven by competition for  acquiring a significant leasehold. I am not sure that competition will exist this time around. Not sure how much bargaining power a land owner may have.

Still, no one has answered whether or not Hilcorp properly pays royalties (according to the lease terms). Knowing this would be important to me if I had to decide to re-lease.

Permalink Reply by james on July 10, 2016 at 9:59pm
That's the problem, Hilcorp is the only company doing anything major in our area, they know this and are going to put the squeeze on landowners. I hope more companies move in and force them to pay decent money to landowners.

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