Do you have a lease and have you looked at any deals to sell a percentage of your rights? I'm looking for advice, warnings, what to watch for, etc.!

Thanks! Christiane

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WJ,

You are entitled to your view and I, mine.  I am not a mineral buyer but, there are many reasons that somebody would decide to sell and would be rationally justified in doing so.  

I would like for someone to show me ANY shale well ANYWHERE that made 20 BCF off an 80 acre parcel.

 

The EUR of most Fayetteville DRILLING UNITS are well under 20 BCF...and that's 640 acres.

 

Your analysis is deeply flawed.   Ignoring the RISK at any particular stage of the game is also deeply flawed.  Yes, once it is clear there is potential IN YOUR EXACT SPOT...great, you have leverage to negotiate.

What about all the wells drilled in Woodruff Co, Arkansas?  It bankrupted Hallwood and Maverick and left landowners who bought stock in Maverick with huge losses...Bad risk. Do not buy stock in the start up company that just leased you....

The players talk about the "sweet spots" - those best areas where they produce the most... as a VP for SWN basically put it 20% of their wells are very profitable. 20% are badly unprofitable and the balance might break even...might.

There are ways to value mineral rights. There are people who do so and do so without being influenced by the hype of the gas company and the imagination of the sellers. The cold hard engineering determines the reserves.  It always has.

You can look back at each play and folks sold "too cheap" but you can also look at failed plays were folks held out for more money and ended up with none.  The Gothic?  They've flogged that for 5 years plus and haven't made it profitable yet....and may never. The Caney in E. OK?  Dead.  The Niobrara in WY killed some people back 15 years ago. Kachina Ex. went belly up and at the time and with the technology, it did not pay.

You can look at production figures for the Barnett and Fayetteville and those productions are dropping like a rock...

 

The basic problem is that landowners rarely have the expertise to know what they have as a play develops and further, they are too cheap to hire a geologist to evalute it.

I see folks try to manage their minerals without a clue and often they get into tax trouble, especially if the owner dies.  I know one such party who only got help after it was too late. They are now selling 3,000 acres of minerals just to pay the estate taxes...and they are selling their best prospects because no one wants the crappy stuff.

 

 

Reply by Unbiased Information

WJ,

"You are entitled to your view and I, mine.  I am not a mineral buyer but, there are many reasons that somebody would decide to sell and would be rationally justified in doing so."

i believe that that is essentially what i said in my post,when i said, "some folks need to sell, others might be way better off taking the "annuity" cash for life option. sometimes thats a gamble that pays off handsomely."

wj 

 Reply by LERRET

"I would like for someone to show me ANY shale well ANYWHERE that made 20 BCF off an 80 acre parcel.

The EUR of most Fayetteville DRILLING UNITS are well under 20 BCF...and that's 640 acres."

sounds like you made an assumption. you shouldnt do that.

i didnt say anything about a single well or even a single formation.

i suggest that you review cabots' current estimates for their oatka creek and union springs wells. 2 wells, 2 formations, one on top of the other.

 

"Your analysis is deeply flawed."

ya know, you're not the first person to tell me something like that. over the years i've had folks tell me that i should do things differently. i remember not too long ago, around 2006 i think, a guy saying to me that i was crazy not to invest in stocks. i was mainly in treasuries and cd's, and he felt that i was losing money by not getting the high returns available in stocks.

lots of friends have told me over the years that i was being silly because i wont have a credit card. but thats worked out for me.

you'll notice i trust, that nowhere in my posts have i said that anyone else should do as i do.

and the things that i say in my posts are the things that i have actually done and experienced.

all of my friends and family at similar ages are still working you see, while i have been "retired" quite happily now for some time.

wj

Great exchanges here....respectful.  .

My sentiments exactly. It is termed the 80/20 rule: 80% of all profits are derived from 20% of the wells. I tire of trying to make a rational argument. Too many land/mineral owners spew negativity about the O&G Companies and I have a very simple solution:
1. Pull out your wallet, drop several million to buy a rig, staff it and drill your own well. Then figure out how to negotiate a deal with a midstream for gathering and you can keep all of the proceeds.
2. If you are a few dollars short on option one, don't lease, participate as a working interest owner and pay your proportionate share of the costs.

Mineral owners get to participate in all of the upside without any of the associated risks of failure by virtue of an O&G lease but still want to claim the O&G Cos are ripping them off.

Christiane,    If you are getting offers in the mail to buy your minerals, you are probably scheduled to be drilled under in a drilling permit. People from Texas, Oklahoma and Ohio have been sending me offers to buy or share in my minerals.

My advise is to never sell your minerals. Do you know how many oil and gas plays are under your property? At least 3 to 4. Marcellus, Utica, and two in the Devonian Shale. There could also be oil before you get to the Marcellus as found in Summitville, Ohio.

If I had a money issue and couldn't find a relative to help me out for a percentage of my minerals, I would contact Jeff Rokisky in WV (see his website on line) who deals with WV, PA, and Ohio landowners to find a buyer for minerals from a group of 25 or more companies that bid on your minerals. The fee is 6% of the total money you make. Jeff and his team of lawyers will evaluate your minerals based on wells in your area. I believe this would be the best way to make the most money when selling minerals. But again if you can wait for drilling and real production with pipelines in place (2014 or later) you will be pleasantly surprised at how much you make in royalties. 

For $8k per mineral acre, I'll have my lawyer have my deeds in Mercer and Lawrence County finished by noon today. LMAO people are delusional. A farm just sold lock stock and barrel for under $6k per acre by me.

 Reply by Lance Nimmo

"For $8k per mineral acre, I'll have my lawyer have my deeds in Mercer and Lawrence County finished by noon today. LMAO people are delusional. A farm just sold lock stock and barrel for under $6k per acre by me."

lots of folks down in texas, many many years ago, thought pretty much the same thing.

others...held on to their minerals, some with their land and others while divesting themselves of the surface.

today, some of the descendants of those others who held onto their mineral assets are still reaping the rewards of their great great grandfathers forward thinking.

many of them never knew what had been left to them until a gasco knocked on their door with a lease...and a check.

one expression used by folks down in that area that i am particularly fond of, is "mailbox money". they just go to their mailbox once a month and collect old granpops' legacy to them. it's pretty cool.

of course others, whose great great grandfathers had sold out long ago for their own immediate needs are wondering, "what in the heck was he thinking?".

but everyone's gotta do what they think is best for them.

wj

Indeed. Like I've said before if any of my desendents unborn want to help buy a corn planter or pay my property taxes I'll keep their concerns in mind.

maybe this has been mentioned elsewhere, apologies if this is a restatement.

mineral estates are dominant over surface estates.

you may get a real good deal for your minerals, sign and live happily ever after on your now well financed shagri-la, until you get a knock at the door from a nice landman.

what's he want you would think, i sold those minerals years ago. i'm done with all of that.

and then he lays a map out on your kitchen table and shows you that his company is going to put a wellpad in where you had that tennis court built years ago with your check from a mineral buyer. but what the heck, it's 525 feet away from your backdoor. shouldn't be a bother.

no no no you say! but the nice landman explains that a surface owner cannot stop a mineral owner from accessing those minerals you sold him, under your surface property.

but he will negotiate with you and try to address your concerns in his development plan...for your property. oh...and of course you will be paid...fairly of course...(cough cough)

wj

The last offer I had for purchase of gas/oil minerals said they wanted NO surface rights whatsoever. Guess they could lie, ...so how do I put that in the contract that they cannot decide to put the "well pad" on my "tennis" court?

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