I signed a lease near the end of October with Chesapeake. I currently receive royalties (not much, a check every 2 to 3 months) on a well located on my neighbors property. I discussed this with the landman that came twice to the house to have me sign and he stated that the well I currently receive royalties from is, in his opinion, not producing enough to classify the well as "producing." He said he would come back a third time, if needed, to get me to sign. The current lease is with Enervest. How does all of this work? I have not heard anything bac yet. I am in Tusc County, Lawrence Twp.
If you are receiving royalties you are still held under the terms of that original lease. If that original lease had any type of depth severance you may still be in luck. If the shallow Enervest well does in fact hold all formations, the landman most likely will not be back.
Don't assume because someone is sending out a check, it does not mean the well is producing, it just means a check is being sent out. The well needs to be tested for production and the state agency needs to be contacted for the required production reporting.
Who started the saying that the 'real money' is in the royalty percentage? that the upfront bonus is just peanuts compared to the royalties?..
I think the saying should go now, 'do your best to negotiate the highest paid up bonus money and every way that payment is made for anything that the oil company does thereafter....cause more and more are talking today about 'will they ever get the right royalty percentage' or will they be able to make any monies if the well is held back ...and now 'how deep' needed to be in the contract (depth severance?). Oh my! I was just getting over reviewing the 'Lease Development ' clause.
I hope you get some help Martin...you deserve some expert advice cause you like many others came into the situation trusting that these oil companies were not trying to take advantage of your good works and your homestead.
Yours is a splendid and accurate observation, VG. I hope others benefit from your wisdom. But too many continue to believe "the money is in the royalties". With the price of NG below $3.00 and sinking like the setting sun, my royalty check continues to shrink significantly with each passing month. People who go in relying on royalties are setting themselves up for massive disappointment. Sadly, too many will simply have to "live and learn".
Now there are times (like the Utica) where people really start coming into a nice paycheck every month (so we hear)....yet the reality is that not all wells will be installed and producing within the primary term.....but the fact is ...some of these leases were done just to get the stronghold on them...knowing that they would be worth more when the pipelines were approved.
Also some of the leases like mine, were inherited and there are expenses in some states such as inheritance tax, and income tax, some are sharing with other family members, and some didn't get the sign up bonus yet inherited what their parents signed on the lease....so though we that inherited still have to face what impact these oil rigs and their procedures will do in the future to the land and environment...and what $value can be established on that after hearing so much from people here that already are experiencing things that they had no idea of expecting.
If any more wells are drilled and gas prices keep going down, then NATURAL gas may be free - get the upfront money!
You are so right! But, unfortunately for us landowners, the gas companies must continue to drill and to produce NG in order to hold leases (HBP). For those who remember the old, classic, Disney movie, it's akin to the "Sorcerer's Apprentice".
Thus, it is indeed the "upfront money" that matters . . . just exactly as you state.
Still, sadly, many landowners continue to be in denial on this issue. I wish each and every one of them well. But I fear my good wishes will be insufficient to ensure their happiness once they come to grips with this new reality, this "new normal", and must confront the consequences of having signed a lease with paltry bonus.
V.G.: I believe Martin is talking about an old shallow well paying "not much" in royalties.
And remember NGL's add alot to royalties also for those fortunate to be blessed with them.
Shell and others wouldn't be planning Cracker Plants in W.PA or Ohio or W.VA. if they weren't here.
I firmly believe bonus will pale in comparison to royalties.
Like Jack Straw has said a few times:we are still in the first moments of the 1st inning in this shale play.
Try to take inspiration from others with positive results like , for example , Little Cougar.
Her story is an inspiration to alot of us.
Patience is a virtue.
I firmly believe bonus will pale in comparison to royalties
I sure hope so Glenn...I surely do. I did see that estate sale that I gave a link to that didn't have that many acres and the house itself wasn't the price tag of the sale...they had included the royalties projected and presently receiving...and the woman who signed the lease signed an old lease with about 12percent royalty...so there is hope when you see such figures as that. I will look for that link to put here in this discussion.
and I sure do hope that the oil companies don't cheat the foreign investors...cause more and more foreigners including saudis are buying into our leases and lands and corporations. In some Islamic countries cheating under Sharia law could lead to heads off or limbs/hands removed...so this game that these small oil companies (and they were small when they started before they took advantage of some low offers on some leases and tripled and more than tripled their per acre amount by selling to some foreign investors....won't be a game if they cheat some of these foreigners.
Look at who has a big percentage of fox news...don't hear much about that cause Fox is the working partner,
by the way ...I only used that link ...I don't know who thinkprogress is. The point I am making is that America is quickly being sold out....(and these gas/oil leases are no different than the purchasing of Citigroup and Fox news, and many many others. Most of the gas stations in the US and many of the hotel chains are now owned by investors from India (if you haven't noticed) and from the Arab countries. So when I say that these oil companies thought they were taking advantage of the elderly landowners...they won't get away with cheating some of these foreign comglomerates, they will also have to face Mighty GOD (one nation under GOD, remember?) if they continue in ignoring the landowners/mineral rights owners interests in making monies also.
You have to wonder if the Syrian people are able to overthrow their government and the Saudi empire ...just who will own these shares of much of the USA corporate world? In whose hands will these leases fall to? You might say well I haven't heard of any oil companies selling to the Arab world the USA gas/oil leases....well, they have an 'assigns' clause with no limits..it could be China that sells to them or any other country that receives the 'free to assign' clause on these leases.
Excuse me Martin, for ranting a bit about my concerns in this discussion you started...but with your statement I was very concerned that we now have to figure just how deep to lease our land..and of course that isn't in my contract and most likely many others.
A litte tid-bit you need to know.... Envervest= Chesapeake. For all intents and purposes they are the same entity in Ohio deep exploration. So if Enervest already is holding your deep rights by the producing well on the neighbors (which was probably all part of one property) then essentially you are already leased to CHK.
A couple of things- you need to get a copy of the old lease. There may be a depth or strata clause, meaning they are only leasing a certain layer ( the Clinton sandstone for example). That lease also needs to be evaluated for any type of unitization claused. If your property is included in a large unit for deep drilling, it may have to be re-negotiated at that time.
I would call the landman and ask for an update, not wait on him to contact you.
Martin, I also signed a lease, because the landman said he checked on my well, and it was a domestic well. I have a clinton well that has not paid any royalty since 2001, but I still get house gas from it. The well was drilled by Atwood Resources in 1985, ownership has changed several times, and the current owner is Enervest. I have had no payment from them,but they did send me a form letter about having my furnace cleaned and checked. The lease I signed in September was denied ,the letter they sent stated I am held by production.
My land is 2 miles from the well they are drilling now in Bucks twp., and the horizontal leg points straight at my place. We should know soon what is in this area, and I'm hoping my lawyer, and the grace of God, will let me participate in all this in a good way.