Current Leasing in Butler County, PA

I need some advice about leasing my property in Butler County, Pennsylvania.

In October/November of 2011 Rex and Phillips wanted to lease my property.  They were both standard 5 year contracts with a per acre price and the money up front.  They then both continued to back out due to the fall of gas prices.

Rex has now re-approached me about leasing again.  The contract is again a 5 year contract but this time they only want to pay so much per acre per year. So they say they want to give me $2,000/acre but they only give me $400/acre per year.  So the only way I get the full amount is if they dont do anything in the next five years.  If they do, then they are basically getting my minerals rights for nothing compared to what they paid for others.  Has anyone one else encountered this, and what do you think?

The thing that I am concerned about is they have a proposed well site for 2015 at my neighbors.  So that will give me two years plus possibly another year before they get royalities, so they could get my rights for $1,200/acre instead of $2,000. But I would also then be getting a royalty payment.

Knowing that they have a proposed well site for 2015 would it be a good idea to lease now or wait?  What are the risks of waiting?  Would it make my property more desirable or would they take my gas anyway and l get nothing?

Thanks for the input!

Views: 1726

▶ Reply to This

Replies to This Discussion

Permalink Reply by Samuel J. Orr on January 8, 2013 at 6:29am

 My concern would be that O&G company leases your land and at some time during the term drills a well and then shuts the well in and holds the land by production for what could be a very long time until gas prices rise to a point that gas can be sold at a profit. With the well shut in you would receive no royalties.

Permalink Reply by Tom McConnell on January 8, 2013 at 7:26am

Tori,

Rex is a decent company and clearly operates their fields in a productive manner.  Right now they are definately in HBP mode but they do produce the wells.  Unfortunately I have seen units of theirs drawn right around someone that held out for more and they left the landowner with nothing.  If you have a sizeable piece, then you might have a chance, but a small parcel will not hold up their drilling program.  Especially if they have other larger parcel leases expiring soon in the unit.  Rex has a good hold on the area they are drilling and unless you are near the fringe where another driller will pick you up if they kick you to the curb, you could easily be left out to dry.  The other thing Rex has as an advantage over you since no other drillers are trying to crowd them out is they are keeping their own lease prices down.  What they are getting out of their wells is considerable and worth alot, but without competition, they are the only game in town.  I know its not positive or diffinitive for you, but take from it what you wish and do what is best for you.

Permalink Reply by craig on January 8, 2013 at 7:46am

Proposed well sites are just that, proposed. I wouldn't put too much faith in them actually doing what they are proposing as there is just too many unknowns in your area at this time. It could happen quicker, or not at all. As I've said all along, don't listen to what they say, watch what they do.

I truly believe that they still don't know exactly what is beneath us in W Pa, only time will tell.

Obviously you have something they want or they wouldn't have come back.  In Beaver County they are trying to top lease for $200-$300/acre for 5 years which is total BS. Each individual has their own circumstances some of which would make you want to sign now.

Personally, I'd either do as Joe posted about the addendum, or wait. Of course if you only have a small parcel then I'd say sign when you can. 

My 2¢ 

Permalink Reply by ulrich on January 8, 2013 at 7:48am

Rex is only interested in what benefits them.  Do not wait for the proposed site in 2015,  a) it may not happen b) they may drill  to hold lease but not produce, therefore no royalties for some time.   They have a Bricker Unit which has been drilled for over a year and they havn't fracked it yet.  The persons in that unit are receiving zilch, but have no option.  I would hold out the for the full amount upfront.  $2,000 per acre is not unreasonable to be paid up front in full.  My personal opinion.

Permalink Reply by jeff on January 8, 2013 at 11:33am

Tori,

I believe this is where shut-in royalties come in handy. If they establish a well on you then shut it in, they have to pay a portion of what you would normally get. How a portion could be determined on a new well I don't know, but a minimum would have to be stipulated in the lease.

Don't let them push you into signing for just a few hundred/ac. This still early ih the game, and there are plenty of drillers available, even if they flip your lease to another co. Get educated about PUGH clauses, Right-of-first-refusal, etc.

J.

RSS

© 2024   Created by Keith Mauck (Site Publisher).   Powered by

Badges  |  Report an Issue  |  Terms of Service