Leasing outlook in Eastern Ohio (Guernsey/Noble/Belmont/Monroe)

Curious - whats the opinion on those in the industry on leasing in SE Ohio - specifically the 4 counties mentioned above. 

Obviously theres ALOT of land yet to be developed - and at current pricing/production cost its possible it could stay that way for some time. 5-7 years ago - felt like we were getting mailers/calls daily from someone offering to lease/buy minerals. Once we signed - still regularly received offers to buy. Now that the lease is over and I am evaluating selling minerals (as one owner is elderly and unlikely to benefit from waiting for the next bounce back in pricing) seems like return calls are dropping off. Unless your in a currently producing unit - no one wants to speculate...and even then they want to pay you 2 years current royalties  at most (for fear of a big drop off). 

As mentioned previously, I've signed a lease on some property - but the lease holder is not responding...so potentially going to have to find another dance partner on that property shortly. Doing my own research, there are ALOT of properties signed in 2014/2015 coming off lease with no offer of renewal. Clearly the market is in a consolidating phase - with operators pulling out leaving less to develop and prices dropping/with the remaining operators having the ability to pick and choose where they drill. 

Is it even possible to lease minerals not currently in a production unit with so much leased ground sitting untapped in the dry gas areas? What price range/percentage are you seeing and how difficult is it to find a lease? Got a few people telling me they can get me a lease - but in my experience people promise alot and deliver less regularly - especially when it comes to O&G. 

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Permalink Reply by shakeshale on November 6, 2019 at 3:21am
Very simple they have picked the very best spots and will now keep developing those areas
There will be no more land groups ( remember those ) No more minerals meetings no more pesky Landman bothering everyone
There will be lots of outfits speculating on leases who won’t be able to sell them or pay the landowners their lease payment
They will now only lease where they will drill no where outside the planned units
For those who are in units your royalty will keep declining as the price of Nat Gas stays low and goes lower due to the huge glut we have
Put it this way
We are going back to pre 2010 when talking leasing or buying if any legitimate firm will even bother to make an offer
For all of those who said the money was not enough for leasing or selling your minerals
The ship has left the dock
You missed the boat
Maybe 20 yrs from now there will be another boom
Permalink Reply by djefferis on November 6, 2019 at 3:42am

Interesting take - a few things though. 

You refer to "pre 2010" as if this was a 1 time speculative occurrence, the likes of which has never been seen before. History tells me that is wrong. Theres a reason there are tons of old leases on the books from areas not developed/not producing in some time. 1900-1905 there was a large boom in the industry - 1955-1960 saw another. In another 20 years there might be another boom? Historical track has been more like 50 years. 

Prices are depressed no doubt. I remember oil at $15 a barrel in the mid 1990's - and the subsequent spike in pricing to well over $100 - that took less than 20 years. Point is - no one knows when the market will correct, only that it will take a major shift in something to cause it. Alot of hopes pinned on these cracker plants - I can see them helping to alleviate the oversupply quickly...and where does that leave us - $4, $5 possibly? I doubt we see north of $8 again in the next decade - but the case for pricing to remain sub $3 for an extended period of time (+5 years) is not likely sustainable. The overproduction/glut was caused by too many producers pumping too much and needing to explore new wells in search of $$ - with less wells being drilled/less supply comes online...more producers fold or leave the area - pricing gains traction. If your short nat gas long term at this point - you might well be the next "victim" of the game.  

Lots of speculators...again, speculators need something to keep them playing. The promise of quick returns/high markup...if no ones buying - the speculator doesn't participate. There are plenty of other markets to speculate on. I cannot see speculators staying here - they need $$ and hope of a return on investment. If either is in short supply - they will fail quickly. 

End of landowner groups...possibly. Strength in numbers only means something if there is a high demand. If there are just a few buyers - its much easier to divide and conquer. Offer someone a nickel more than their neighbor got and see if they stick together in hard times. 

Permalink Reply by bo boboski on November 6, 2019 at 12:31pm

One thing that could change things in those counties, hopefully as a result of Ohio's oil&gas leasing commission's meeting held today where the topic was to be;leasing minerals under state grounds.State parks,lakes,interstates. Be nice if someone who went to the meeting could give us all an update.

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