ATTENTION Landowner Group Members
The IDEA of "strength in numbers (acres)" is quite apparently agreed upon by many members. Let’s not forget that a portion of those "numbers' will not have a chance at the lease being paid. Because if your "numbers" are not connected/contiguous to other "numbers" the valve of your numbers are not as appreciated by the potential LESSEE. And an outfit, no matter how financially secure, only has so much capital it is willing to spend/risk on a project.
Hypothetical Question: What if a group of 25,000 acres agrees to sign but only 10,000 of those acres are contiguous, what would be the incentive to pay the remaining 15,000 ac scattered all over the area? After-all, 10,000 ac would be quite enough leasehold to form producing units.
Also remember lawyers are paid directly from the amount of time spent "consulting" with the client(s) board leaders and it is very profitable to drag the process along for themselves. Every time a call/letter/email/fax is addressed concerning the process of your group.....cha ching, time is being billed. Another thing to remember, your area is not the
only area.....rather than drag it out, an outfit (especially a proven profit making producer not a flipper) just may pack in it and move to another more open-minded area and spend their money there. Which would leave your area open for another round of negotiations with another outfit and the much anticipated billed time for your friends at the law firm?
Hope you didn’t have plans for the bonus money anytime soon, yet the possibilities of a royalty check. Don’t worry, that new roof on your house/barn can wait (it isn’t leaking "that bad"). You can always wait for next year’s model of the truck/tractor you were planning on buying. Paying off those loans can also wait...after all you've been paying on them for
years already. College tuitions can be paid for by the loans you were planning on getting anyhow. Your daughter’s/son's wedding will be fine downsized, their so in love it won’t matter. Vegas....you can do just as good at the local casinos that are closer to home and are popping up everywhere, you can’t afford to take that much time off of work anyhow.
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Replies to This Discussion
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Permalink Reply by Blindsquirell on
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Tom....I realize know that you are obviously new to this industry. Landmen DO NOT work hourly, most are independent and have contracts with their client (broker who has OG Co client) and are paid a day rate and per diem. Landmen that are organizing groups are leach's, preying on the uninformed and misinformed. Some have even went as far as to start "consulting firms" touting their experience and knowledge. Most have relatively few years in the biz and think they can backdoor the typical way of doing things. IMHO
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Why is it so bad to be a landman? Maybe I am missing something here. My Atty from Mercer put me in contact with a Landman. The guy who I talked to from Chevron was a Chevron employee, he was from Pittsburgh and was based out of their office by the Pgh. Airport. He told me he has been in this business for 12 years. I believed him. Thats his job and he seemend to enjoy it very much taking on new projects. He also told that leasing is only a small part of what he does. Was he not telling the truth? if you read around here alot of people give nasty opinions that seem unfounded.
Just my thoughts.
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Permalink Reply by Nelson Roe on -
Schnoozie,
I believe that just like with any other profession there probably are good landmen as well as bad ones. The bad thing is, that the bad ones give them all a bad rep. People are usually more willing to speak openly about an unpleasant experience than they are a pleasant one. As a society it seems that we expect pleasant transactions & when we run into one that we feel is not so pleasant, it gets spread very rapidly. It is rather unfortunate that the bad apples spoil the reputation of the others, but that seems to be the way it goes... It sounds like you may have met with one of the more upstanding landmen & I am glad that you are satisfied with your experience there. If more people that had similar experiences as yours were to speak out, then the rep of "landmen" in general may not have such a dark cloud hanging over its head. IMO.
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Permalink Reply by Paul Martinelli on
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I think some landman my be being paid on a commission basis.....more acres leased under $X the more they make.
Couple that with the fact that there are lots of uninformed landowners and you have perfect condition for "greed" to take over and leases get signed that are not as fair as they should be. I know it is America, and I am all for capitalism....but i like to think most people are honest and try to treat people fairly.
I mean come on.....if you go out and get a landowner to sign a lease for 1000 acres at $300 an acre is that a fair practice? I know it is the landowner's responsibility for knowing what they are signing...but some people are still too trusting in this world. There is something called ethics/morals.
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Permalink Reply by Finnbear on
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Paul,
The job of a landman is to lease as much as they can as cheap as they can for the oil and gas company - period.
With that in mind, deal with them accordingly, no matter how nice or honest they seem, or how much you might like them. They do NOT have the landowner's best interest at heart, they are paid to look out for their employers, not landowners.
Follow the money - the trail tells all.
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I am still trying to determine what is fair for my area. I am starting to learn that South East Mercer is not as good as say closer to the Ohio Line or parts of the Southern PA Counties. So I am not expecting a big payday if I sign. And
I am very waryy of the group mentality since they hold your land for a year, leave you no room to talk about the individual needs of your own land and charge a pretty hefty fee. Plus their landman who is on here constantly seems to have nothing but slams and scare tactics for everyone else, just not making me comfortable.
I am going to keep looking my gas and oil are not going anywhere.
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Permalink Reply by Paul Martinelli on
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Finn...I understand that 110%
In this scenario, I wouldn't trust my mother!
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Permalink Reply by Jim Litwinowicz on
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Two years ago, I talked to a landman that was working in Colombiana Co for a major company that everyone knows. He was signing people for $100/acre. I asked why there since there is very little Marcellus Shale there and he told me about the Utica and said he was told to sign up as many acres as possible before the word got out about the Utica. Two months later word got out and the bonus payments quickly went to over a $1000/acre. How moral was that?
I know a retired couple with 167 acres that two years ago signed a lease for $10/acre/year for ten years. They coulda used the money.There is a commenter here that always talks about how well he was treated by his landman. But he didn't know to ask for a Pugh Clause and the friendly landman of course didn't offer up that piece of advice so he didn't get one. There are a couple of other important clauses he didn't ask for and therefore didn't get. So how well was he treated by that friendly landman?
One came to me last month and said he had a check that I would get immediately if I signed a lease with his company, one of the big boys. When I pointed out it was a bankdraft, not a check, he said "Yes but you can take it straight to the bank!" as if I could cash it right away. When I pointed out the cash would not be available for 90 working days, he changed the subject.
A banker told me they get people all the time trying to cash these bank drafts. One couple had even ordered a new car, thinking they could pay for it right away. Had to cancel the car.
I could go on and on.
Treat people fairly and the bad reputation will go away.
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Permalink Reply by Nelson Roe on
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Schnoozie,
Not all groups make you commit for a year. The group that I ended up signing through did not make you commit at all up to the point that you signed either the lease or the O&G companies commitment letter. I know that many do though, but there are some that do not. I also know that groups are not for everyone. I just didn't want you to think that all groups are structured the same either. They most definitely are not.
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Permalink Reply by Finnbear on
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Jim L.
Landmen are not paid to treat landowners with morals or ethics or to educate landowners. They are not paid to treat people fairly. They are not paid to tell people the truth. They are not paid to have a good reputation. They are paid to lease as much as they can as cheap as they can for the company who employs them and they can and will use whatever tactics they have to in order to accomplish this. As landowners we need to view them as such and deal them as they are, not as we wish they would be.
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Amen Little Cougar!
Your situation is more in line with what I have been thinking for some time. Also your position on groups who charge a % is spot on. From what I can gather there ARE groups out there who are strictly grass roots and are not PROFIT DRIVEN. My hat is off to them. I salute them for being for the common good and not personal gain.
Like you I negotiated on my own and , though I probably didn't get everything I could have , I am satisfied and glad it's behind me...........AND I DON'T OWE ANYONE A DIME! My lessee has been A1 in my book. Nothing like "the evil gas company" portrait painted by these cowboys in white who just want what's best for "you".....................for a "small fee" !
They can Hold Me By Production with a horizontal well or two any time!
These are my opinions but if anyone chooses to go the fee charging group route that is there choice and I respect that. I just feel that was not for me.
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THE $$ IS IN THE GROUND.....DRILL BABY DRILL
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