Replies to This Discussion

Permalink Reply by Dexter Green on July 15, 2014 at 5:25am

I want to meet the people who are buying mineral rights in Trumbull county right now.  I have a bridge to sell them.

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Permalink Reply by Joseph-Ohio on July 15, 2014 at 5:33am

Dexter, why such a negative implication on the value of Trumbull County's Minerals.

You're playing in to the low-baller's game plan man !

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Permalink Reply by Dexter Green on July 15, 2014 at 6:03am

Scenario A:

You have $25,000,000 that you've raised, presumably from a Reg D offering.  You take that money and you travel to the hottest parts of the Utica/PP play and start buying the mineral rights to landowners who are either in a unit or are going to be in a unit, based on courthouse and ODNR filings.  You pay retail price (we'll say $10,000/ac just for a round number).  You get 2,500 high quality net acres (which could cover 10,000 gross acres) and you have spread your risk out over an area with quantifiable results.  Then you wait for the development to happen over the next 12-24 months.  Within 48 months you've made back your investment and are now on to the profit phase.  Sure, it costs more to pay for knowledge and data, but boy was it worth it.

Scenario B:

You have $25,000,000 that you've raised, presumably from a Reg D offering.  You take that money and you travel to the inactive parts of the Utica/PP play and start buying the mineral rights to landowners who are not in units and whose land is being used for nothing at the time.  You wait for BP and HK to sell their position, which would likely take 12-18 months, depending on the complexity of the offer and the level of DD that needs to be done.  At $1,000/ac you bought 25,000 acres across Trumbull county, but after 24 months you still have no idea what the development plans look like because the buyer of the HK/BP acreage is still working on their first three pilot wells and playing around with the frac formula.  Then the eureka moment happens.  They figure out how to coax the hydrocarbons out of the ground in an economical way.  Now they lay out their units for future development.  They start modestly, because there is zero takeaway capacity and all the midstream money is much further south.  It's now been three years since you spent your $25,000,000 and you've made back $0.  Because your position is so scattered across the county you'll end up in more units but it will take much longer to get an acceptable ROI.  A decade goes by and you're finally fully recapitalized.  Now it's on to the profit phase.  Except that 10 years has cost you a huge chunk of potential income, because the Fed kept pumping and investors stuck with the notion of BTFATH, so the S&P index fund that you didn't invest in has made 65% over those 10 years and you've made 0%.  Your investors have long since forgotten your name, except maybe as you haunt their dreams.  You're the guy who suckered them into buying undeveloped land, promising to get them in on the ground floor.  Problem is that you got in way too early and without any real focus.  So in the end you may end up with a paper profit, eventually, but your days of managing mineral deals are over. 

Which of those scenarios sounds more attractive?

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Permalink Reply by Sage59 on July 15, 2014 at 6:58am

Scenario C:  Stand solid, patience, stay informed, learn, don't have a knee jerk reaction to negative news. Oh, almost forgot, cautious hope. What's the harm Dexter? Thank you for your post Barry. 

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Permalink Reply by Dexter Green on July 15, 2014 at 7:00am

Scenario C is irrelevant to the conversation.  Reread what was being discussed and you'll see why.

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Permalink Reply by Joseph-Ohio on July 15, 2014 at 7:14am

I get that Dexter.
Your points were specific to 'Buying Trumbull' mine tangential.
But there are more scenarios pertaining to the northern tier than A and B.

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Permalink Reply by Sage59 on July 15, 2014 at 7:26am

Irrelevant? Perhaps irrelevant on the surface, but it is the underlying drum beat of negativity in your many replies that I meant to address. I thought that you would understand that. Why are you so interested in the northern play? If it is just to inform, thank you. We need all of the quality info - good or bad - that we can get. If it is to brow beat and manipulate, no thank you. Really, what is your purpose? I apologize in advance if I misread your intent as being more than just to inform. 

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Permalink Reply by Joseph-Ohio on July 15, 2014 at 8:11am

I pick up that negative flavor as well in many of Dexter's replies.

I'm also puzzled as to the reason why.

BTW, Dexter's Scenario B - pending speed of sale - could work better than the picture painted seems to me.

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Permalink Reply by Dexter Green on July 15, 2014 at 8:21am

Buyers are looking for profit.  Smart buyers are looking for profit with the least amount of time between investment to payout.  Anyone spending $1,000/ac in an area that is at best in an indefinite holding pattern and at worst entirely out of the picture deserves to lose their money.  That's not negativity, that's simply a factual representation of the realities of the industry. 

And as far as a negative underlying drum beat I don't know what to tell you.  I deal with facts and data, not hope and dreams.  The last time a mass of people bought into the hype of hope we ended up with a newer, more ethnically-diverse version of Jimmy carter as our leader.  So I'm going to hold off on celebrating the notion of mediocrity as merely a chance for redemption.

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Permalink Reply by Joseph-Ohio on July 15, 2014 at 8:51am

Dexter,

Personally, I see a lot of what you call facts, as hearsay uttered by those who have perhaps much to gain (at landowner expense) by painting a negative picture.

That causes me to doubt the so-called facts, and it raises the hair on the back of my neck and it actually angers me.

So, when that happens in this forum I tend to speak up with a post or reply.

I've read and heard so many things that can't be proven to be facts and deemed as facts about all of this that it's pathetic.

Look at published production reports for instance. Reports of production published by the ODNR that many use to point out the production of the northern tier as deficient when production hasn't really been established as there hasn't been much northern tier development and the few wells that exist in the north are throttled back by the developers. Developers choose where to develop, when to develop and even how much they want to produce. That's not a measure of strength of production it's only a measure of what the developers want to produce.

I don't know how anybody can see anything as factual.

I'm simply not standing for the BS.

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Permalink Reply by Dexter Green on July 15, 2014 at 8:54am

BP and HK are leaving because their wells were unmitigated disasters.  That's a fact no matter who tells it to you and no matter how much you or anyone else want it to be untrue.  None of us are in control of the geology, which is the biggest hurdle.  The more I delve into it, the more people I talk to, the more I'm convinced of where the redline is and the more I know where I wouldn't be putting my money. 

Permalink Reply by Joseph-Ohio on July 15, 2014 at 9:42am

Dexter,

BP and HK wells unmitigated disasters as stated to the landowners by BP and HK (who are the people that own the drilling rights and want to sell them to another developer or developers; which makes no sense to me on it's face). They want to SELL unmitigated disasters of wells and their position in the northern tier ? ? If that's not speaking out of both sides of the mouth nothing is. So you believe it ? ?

Who else says they are unmitigated disasters ? The ODNR production reports ? You ? Who else ?

BTW, I'm not telling you or even suggesting where I think you should put your money - that's totally up to you.

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