Drilling interest in Allegheny County, PA

I was going to post this at the Allegheny County board but there isn't much activity there. But a property of ours in northern Allegheny County has drawn some interest from a drilling outfit that has already entered into agreements with other landowners in the area. Their current offer to us is $500/acre up front, plus 15% royalty on our share of the total monthly take for the full acreage involved in this group (2-year offer, I believe). My initial thought was that the up-front offer seemed a bit low, and maybe even the royalty is slightly lower than it should be, but I haven't been paying close attention to offers in that part of the state since it seemed like there wasn't much activity of late.

So, is the above a fair offer for a parcel that is slightly over 10 acres? Not a huge piece of land, I realize, but it may be one of the larger ones involved in this group since the area is not all that rural anymore.

Thanks. 

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Permalink Reply by Philip Thackray on February 7, 2014 at 3:30pm

NYPA,

See my analysis of deductions starting on this page:

http://gomarcellusshale.com/forum/topics/what-s-going-on-with-middl...

IN THE PAST, H&H has been viewed as a leasing arm of Range Resources,  I cannot speak to their status today.  A no deduction lease would be very desirable but not very obtainable.  In PA, they can put a horizontal right next to your property border.  So for smaller tracts of land the driller/operator/producer can avoid small tracts of land that have not been leased.

As bad as deductions look 15.5% and 2000 is probably an OK offer DEPENDING UPON YOUR LOCATION (and I am not qualified to evaluate a location).

Call Range and see if H&H is representing them or is Range separately interested.

Phil

Permalink Reply by NYPAShale on February 7, 2014 at 6:16pm

OK, Philip. I don't really have any way to know if the location is OK. I think it is the Deer Lake Park area that we are a part of (I'm not the one talking to the landman so not 100% sure on this) since that isn't too far away from our property. Here's a recent article related to that - http://triblive.com/news/allegheny/5265546-74/county-park-drilling#...

Based on what I'm reading in that article, the 15.5% and $2000 might be the best we can do. They offered more to the county, but the county is providing a much larger parcel of land than we have, although our parcel is probably one of the larger ones outside of the county land (although honestly, I'm not sure why that would make any difference since they are grouping everything together).

I'll check with Range Resources on Monday, but the article seems to indicate that RR and H&H are working on this together, so that part of things seems legit, I guess. I guess our deadline is next Friday and not today or Monday, so a little time to do some due diligence. 

Permalink Reply by Philip Thackray on February 7, 2014 at 6:39pm

NYPA,

I posted an article on the Deer Lakes / Range deal earlier in this discussion.  Range is a good operator - producer.  They had to pay the Parks big bucks for political reasons (Allegheny is anti-fracking at least until they see enough money!).  For 10 acres that sounds like a good deal to me.  No deductions is unheard of now unless you could actually stop the drilling.

Phil 

Permalink Reply by NYPAShale on February 7, 2014 at 8:38pm

OK, Philip, thanks for the input. We'll see how things turn out.

Permalink Reply by NYPAShale on February 12, 2014 at 1:40pm

Looks like the best we can get is $2K/acre and 15% on Marcellus and Utica, and this would be net, not gross. They won't budge on this, it seems, and we don't really have enough time to find out what others were offered since we are apparenty the last property that they want (or need) to add, but they'll walk if we don't sign on.

As far as net vs. gross is concerned, how big a difference does this make for a 10-acre parcel? Also, with net, does the possibility exist that the royalty payment could be greatly eaten up by expenses passed on to the lessor (they wouldn't budge on those, either)?

Permalink Reply by Philip Thackray on February 12, 2014 at 2:20pm

See my link to Go Marcellus Discussion at the top of this page.  Basically, the deductions will reduce your royalty by 20%.  So the 15% will actually be 12%.  Should not be parcel size dependent.

Phil

Permalink Reply by NYPAShale on February 12, 2014 at 3:02pm

I did look at that thread, Philip, so thanks.

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