Replies to This Discussion

Permalink Reply by Janice L. Hancharick on August 3, 2015 at 5:39pm

There is a big difference between BUYING the OGMs and LEASING them.  Tioga has had several very productive pockets amongst the townships, so if one's current lease is the old boiler-plate special (aka. load of _ _ _ _) and soon to expire ... Why would you want to renew such a thing? If only a few acres are involved, and/or they are divided among several owners, a repeat of a pitiful lease will only tie everyone up again  with terms that provide yearly royalty payments or delay rentals not even comparable to most kids weekly allowances.  For such a tiny amount, one that doesn't even cover land taxes,  it's likely that SELLING the OGM acreage is more beneficial.  Because of Tioga's Marcellus and Utica production numbers,  selling such acreage is running in the range of the low to mid $5,000 - $5,700 AC .  These numbers are varied by township, proximity to pipelines (current & future), and known wellpads in production.  Lease-signings and actual drilling on those leases are most likely years apart.  So folks still have to ponder ... LEASE  or  SELL,  but use professional services through a landowners group or an energy firm having years of experience to arrive @ a happy ending.

 ASIDE:  Recently noted on professional industry sites, the global oil powers (e.g. Exxon, Shell, etc. ) are downsizing their activity and footprint in oil plays to rev up their nat gas work.  Rigs counts down, but production up, yet prices down. The mid-east keeps flooding world markets w/oil.  It's what they have!  We have both oil and gas, so which is it smarter to expand production in? GAS.  Companies know this.  Investors know this. That's why land agents are still door-knocking, and the mailman continues to place offers in your box.  Reminds me of the infamous Publishers Clearing House offers that have made so many of us rich.

Permalink Reply by Frank Walker on August 3, 2015 at 7:43am

Shawn

Be very cautious about selling your OGM.  You should not sell unless your present financial circumstances absolutely force a sale.  And even then, you should first consider a partial sale if that will relieve the financial pressure on you.

You asked for comps.  Doing so here is problematic since only your land has the specific characteristics which gave rise to whatever offer(s) you might receive.  The best way, if you absolutely must sell, is to obtain at least five offers on your OGMs, more than that if you can.  That way all the offers will be on the same land . . . your land . . . so they will be comparable on an "apples to apples" basis.

Also you do not indicate if you are already leased, and if so, any terms of your lease.  Such things will strongly, and uniquely, impact your sale offers.  And remember, a sale is forever and forever is a long, long time, impacting your kids, your grand kids, your great grands, and right on down the line.  In Tioga County, in their time if not in yours, it's entirely possible Utica shale might be more important than Marcellus.  So one of your options might be, and again only if your personal circumstances force a sale, to sell only your Marcellus rights and keep your Utica.

It's a complex process and decision;  not at all something to be undertaken other than in the most serious manner.  Good luck.    

Permalink Reply by william Allen. Ladd on August 3, 2015 at 8:47am

To Shawn, I absolutely agree with Frank Walker!

In my case My property has been handed down to me from at least three generations. It has been a struggle for each generation. And I appreciate the struggles they went thru. A few people have been eyeing my property for many years, hoping that I will lose it thru tax sale. You know don't you, that some "Insiders at the county level" are in a position to gobble up property that might just go for taxes simply because the owners are not aware if they can hold on a few more years a great deal of money is waiting for them.

Eat a few more peanut butter sanwiches   instead of steak if you must, to keep the tax man at bay! It will be worth your sacrifice.

Once your resources are gone, (mineral rights), they are gone for good!

Bill L.

Permalink Reply by Janice L. Hancharick on August 3, 2015 at 10:15pm

You hit the nail on the head when you wrote "we are young and can wait for the potential royalties".  While I responded in a different fashion elsewhere in this thread, for the set of circumstances you are in --- holding on is darn smart.  Exploration and Production companies are doing VERY LITTLE buying currently.  Keeping their heads above water is their goal now.  Maintaining a profit level that allows them to function is a must ... not spending more.

That you were approached signals that investors may be the ones reaching out to you.  Those with $$$ and commitment for l-o-n-g term investments are simply hoping to pick up reasonably priced acreage.  My question is for whom is the amount deemed most reasonable?  Even if a wellpad isn't built in your backyard, currently horizontal arms are able to extend out 2 miles straight on.  That linear leap from the first days of Marcellus drilling has only been a few years. What will technology be making available to the industry and the public in a few more years.

I am reading wisdom in your last statement.

Permalink Reply by Jack Young on August 4, 2015 at 9:32pm

Not sure if anyone mentioned this on the forum yet, but Shell announced they were shutting their Pittsburgh office today. All the staff is being offered a transfer to Houston.

Permalink Reply by paleface on August 5, 2015 at 5:37pm

 Jack the Pittsburg office is being fazed out Shell has very little activity in that area now.Houston and Tioga county is where there headed.Tioga seems to be a real sweet spot for Shell.  

Permalink Reply by Jack Young on August 5, 2015 at 7:19pm

Paleface - the Pittsburgh office is where the guys managing the Tioga County operations are based. Those guys are being moved, and not to Tioga County. Shell isn't making any money on their Utica wells right now due to high costs and low gas prices which aren't expected to improve materially for several years. You probably noticed the announcement about two weeks ago that Shell was cutting $4 Billion/year from their capital spending going forward. There was no mention of the Utica in that press release - their focus is on Arctic drilling and LNG. Nobody, not even Shell, can ignore the low price of gas in the continental US.  

Permalink Reply by paleface on August 5, 2015 at 7:44pm

The school they bought on rt 6 Penn college I think it was called is gonna be restaffed with people from Pittsburg office. Jack the drillers can't get to the well pads because the bridges are being updated to handle the excess weight,they should be done at the end of September.Shell loves Tioga.

Permalink Reply by Jack Young on August 5, 2015 at 8:19pm

That's an old rumor, the announcement in Pittsburgh yesterday was the reality. Just run the numbers - you can't make any money on wells like the ones Shell has been drilling at current gas prices. With the negative basis adjustment that producers in that area are suffering from, Shell's average gas price for 2015 will be roughly $1.30/dth. If you could sell the entire reserves from one of their Utica wells on day one you couldn't even cover their drilling and completion costs at that gas price. So you certainly can't make money when the revenues are spread out over 30 years. But if you want to believe something else, it's not my goal to spoil your fun. Just don't spend the money before you see it!

Permalink Reply by paleface on August 5, 2015 at 9:02pm

 There going to both places.As soon as the road work is done the drilling will start.There paving rt 249 from rt 287 all the way up to Neals pad in Chatham.The seismic work that has been done has pin pointed the sweet spots.

Permalink Reply by Jack Young on August 5, 2015 at 9:27pm

OK, believe what you want. I've heard Shell's schedule for the rest of 2015, and it's not very impressive. And you don't use seismic to pick individual well sites. You really do need to have a certain level of industry understanding to be able to tell which stories are credible and which aren't. But there isn't any question who's right at this point. There will be very limited drilling in Tioga County until gas prices are high enough to allow Shell to make a profit. And that's something anyone who has access to a good price deck, reserve estimates, a standard decline curve and well cost information can determine pretty easily. Run the numbers, determine the IRR for a drilling project, compare it to the hurdle rate the operator requires, and you can answer your own question. Testing will continue at a slow rate, I suspect. But there won't be any developmental drilling until gas prices in Tioga County have climbed substantially. Anyone who understands the economics of the industry will be able to confirm that.

Permalink Reply by Richard Kubas on August 9, 2015 at 8:44am

So after seismic work they must throw darts at a map. All large company's especially with horizontal wells have a bulls eye and a target area that surrounds it. Aim for the Bulls Eye but the target area is acceptable. If you miss the target you plug back a portion of the well and make a correction run. 

Generally Bulls Eye's are in Anticlines.

In structural geology, an anticline is a fold that is convex up and has its oldest beds at its core.

So to the people that own land and are waiting for drilling on their land everyone probably has hydrocarbons underneath them but it could be 50 years before it's profitable to drill.

Another thing to consider is company's like Shell with deep pockets can drill wells cheapest when all the drilling and service company's are stacking rigs and laying off. I would drill now and produce later.

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