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

Permalink Reply by Finnbear on November 16, 2011 at 7:25pm

But you do need to be pooled into a drilling unit that has a producing well...

Permalink Reply by Nelson Roe on November 16, 2011 at 4:39pm

I for one am not afraid to use the term bonus... I am grateful.  Grateful for possibly being able to reap an additional benefit from my land, a benefit that I had no hand in creating... Grateful for the companies that are willing & able to potentially extract these resources & make us able to prosper from that resource.  I don't know many (if any) individual landowners that would be able to develop & drill the wells on their own. 

 

I don't see where there would be a true conflict of interest there.  The lawyers are operating on a percentage of the people who sign the lease through their group & actually get paid.  Telling the group that potentially only 50 - 70% of the group may end up with a well sounds like something that would scare people off.  If they were trying to entice people to join there group & they were not stating factual data, it would make more sense to me for them to have told the group that 90 - 95% of the people in the group would likely end up with a well.  Just my line of thinking though I guess...

Permalink Reply by k farmer on November 16, 2011 at 4:56pm

I am certainly grateful for all of this as well, but at the end of the day its a symbiotic relationship where oil companies need us and we need them.  Thats all I am saying.

The conflict I meant was that during negotations the lawyer groups might use this data to say we need to negotiate for more $ and less royalty.

Permalink Reply by Nelson Roe on November 16, 2011 at 8:53pm

Yes, it is definitely a two way street.  Remove either party (landowner or O&G Co.) & the process goes bust.

Ok, I see where you were coming from now with the conflict.  Makes a little more sense to me now.  But I would hope that a competent attorney would not compromise the royalty rate for a slightly higher upfront

Permalink Reply by Jim Litwinowicz on November 16, 2011 at 4:01pm

I am no geologist, lol, but I think the 50% -70%  is a bit low for a success rate in these shale plays.  From what I hear the rate is much higher, at least in the main fairways of the play. Wells have different flow rates and composition but almost all produce in commercial quantities.

Homer, any comments on that?

Permalink Reply by Nelson Roe on November 16, 2011 at 4:14pm

We can only hope that the success rate is extremely higher than those figures.  Only time will tell.

 

Is Homer even still around?  With the looks of his username on some of the old posts he left, it almost looks like he may have deleted his account.  I guess when he said no more free advice... He meant it.

Permalink Reply by Blindsquirell on November 16, 2011 at 4:29pm

I was looking for the beginning of this "side-thread" because somehow we have gone off subject a bit.  I believe the initial "topic" was a question on the percentage of leases that would eventually be part of a producing unit.  Standard/typical answer used to be...1 out of every 10 leases would get a well on property.  Standard vertical well left 30% unrecoverable gas.  New technology and improved techniques concerning a Horizontal Well, leaves approx 5% unrecoverable gas.  Horizontal Wells drilled to a "dry hole" status are essentually non-existing.

Permalink Reply by Nelson Roe on November 16, 2011 at 9:15pm

What side thread are you referring to?  I don't mind spinning off topic at times.  Sometimes interesting discussions are way off track from where the original topic started.

And someone please correct me if I am mistaken on this one as well, but didn't I read somewhere a contradiction to the 5% that blindsquirell mentioned.  I was almost certain that somewhere along the line (outside of this site) I read where even with the new technology they were still only able to capture about 5% of the total gas/oil within these shale formations...  This is completely open for discussion/debate.  It is just something that I vaguely recall reading somewhere & again come to you all here to see if anyone else may have read the same article, or can present any data to confirm or negate that which I believe I read...

Permalink Reply by Blindsquirell on November 16, 2011 at 9:40pm
I read it.too. I believe it was referring to a horz well with only one lateral.
Permalink Reply by Nelson Roe on November 16, 2011 at 9:54pm

Ok, I didn't think a 5% recovery seemed like it would even be worth the trouble...

Permalink Reply by Blindsquirell on November 16, 2011 at 10:26pm

I hear ya.  I think that was brought about when my friend Jim started posting about how great the 150 ac units in OH are producing.  Which I still cant understand how profitable it would be to have a one legged 150 ac horz well.  Jim may have been out smokin some of that home grown that evening. :)

Permalink Reply by Finnbear on November 17, 2011 at 12:09am

Blindsquirrel,

Are you from Ohio? Want to see a bunch of well plats with single laterals?

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