Bonuses

I apologize if I missed it but I didn't see any mention of bonus payment anywhere.  What kind of bonus prices and royalty % are being paid in Ashtabula County?

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0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on January 7, 2013 at 6:52am

$4,250/acre was the bonus and I think the royalty was 18%, but I could be wrong about the second part. Either way it's a preposterously high amount.

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on January 7, 2013 at 7:55am

I wouldn't pay you $50/acre for drilling rights in Ashtabula.  Clinton has been pretty well played out, Knox Unconformity is really, really deep and hard to judge unless you shell out for nice 3D seismic and the Utica/Point Pleasant is not attractive.  Had dinner with a geologist friend of mine over the weekend and I told him about that price.  He almost shot water out of his nose from the laughter (at the O&G company, not at landowners).  There's no good reason why someone would shell out so much cash for such an unproven area that has the general consensus of "stay away" stamped on it.  If those fine landowners up there can extract that much cash from someone then God, Buddha, Allah and Yaweh bless them.

Permalink Reply by DJM on January 7, 2013 at 11:26am

What are your thoughts on the Noble,Monroe, and Washington Co. areas?I have heard of up to $6,000 an acre with 20%.royalty.Thanks for your posts I love reading these strings,from people that know alot more about the O&G biz. than me. Thanks again.

Permalink Reply by David Perotto on January 7, 2013 at 11:35am
Marcus,
I don't think it is far fetched. While not in the wet gas zone, it has positives. TOC carbon has rated as good to very good, total Utica thickness is good and the vitrinite reflectance suggests it to be in the oil phase. Much remains to reveal it's true value, but I wouldn't say for certain that it lacks potential. It may not rival a Gulfport gusher, but it will have value.
Dave
Permalink Reply by Raf22 on January 7, 2013 at 1:15pm

i had friends in Southern Monroe/Noble (and maybe northern Washington) who got $6k/acre and 19% from a broker representing Antero.  others i heard in central and northern Washington County are getting 4k and up.

Permalink Reply by DJM on January 7, 2013 at 4:25pm

Do you think Antero will be leasing more land it that area? Can you tell me why southern Monroe/Noble is getting more than central and northern Washington Co.? If it is not in the"wet gas" zone why are they paying such a high price?     thanks guys    I am not realy trying to butt in but it seems to be a pretty high price.

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on January 9, 2013 at 3:46am

"If it is not in the"wet gas" zone why are they paying such a high price?"

For the same reason that CHK paid north of $30,000/acre for leases in the Barnett: companies are often very, very bad at assessing risk and often have an inflated sense of what a potential asset is worth.

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on January 8, 2013 at 4:16am

Dave,

The value of the black oil part of the play is significantly lower than the wet gas or volatile oil windows.  If a company cannot economically extract it then there is no value.  Maybe within a few years prices move up and technology costs come down, but the truth is that most shale wells that get drilled are marginal at best.  Very, very few sweet spots exist.

Permalink Reply by Larry Moore on January 10, 2013 at 9:19am

HUH ??? !!!   "truth is that most shale wells that get drilled are marginal at best."

I have led some fairly large business's in my career.  At no point in my career have I invested in a single dollar in a business that is "marginal at best".  To invest $5million or more in a single well, my expectations would be for results significantly better than "marginal at best".  (And, yes, a million dollars is just as valuable to a large corporation as it is to a small one.)

Where in the world does this statement come from:  "truth is that most shale wells that get drilled are marginal at best."  ????

Permalink Reply by bo boboski on January 10, 2013 at 10:23am

tell that to gulfport!

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on January 10, 2013 at 11:22am

"At no point in my career have I invested in a single dollar in a business that is "marginal at best"."

Then you would not do well in the oil and gas industry.  Or more accurately, you would not do well in the business of private equity that funds the oil and gas industry.  Do you have any idea how many fund managers and Masters of the Universe have sunk billions into shale development and have gotten absolutely clobbered?  Know how many wells have drilled in the Barnett?  It's over 14,500.  The play encompasses, on the low end, ~4 million acres.  Of that there has been real, commercial, viable production from approximately 610,000 acres.  All of the other stuff?  Duds.  Marginal at best.  EURs are off by original estimates by nearly 50%.  You would do very, very poorly in the oil and gas industry if you were unwilling to invest someone else's money into marginal wells.  Hell, that's pretty much how CHK got where they are today.

"Where in the world does this statement come from:  "truth is that most shale wells that get drilled are marginal at best.""

Numbers--actual numbers and not lofty estimates by snake oil salesmen--don't lie.  The numbers for shale plays are bad.  Luckily, we're sitting on a liquids rich play which has much better potential than the straight gas plays.  Sadly, that still means there will be a pile of marginal wells drilled outside the core areas.  Be as angry as you want about, it will not change the facts.

Read this.  It will give you some insight into the way that shale plays actually work:http://www.nytimes.com/2012/10/21/business/energy-environment/in-a-...

Permalink Reply by DJM on January 10, 2013 at 1:40pm

Wow, one heck of an article,Thanks for the link. 

 

" Sadly, that still means there will be a pile of marginal wells drilled outside the core areas.  Be as angry as you want about, it will not change the facts."

 

What do you consider to be "the core areas"?  Dan

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