The screen shot above is from Eclipse Resources August presentation. Check the Marcellus East numbers, they look good to me. Eclipse has primary term lease on lots of acreage in Marcellus that expires in March of 2017. Then another payment is due for the second five years. This Marcellus area has the potential for a three pay zone return--Marcellus, Utica and Rhinestreet.
Interesting that as of Friday, Sept. 5 Eclipse already has landmen/women approaching lease holders to modify their lease payment terms to accept being paid the total due NOT in a one time payment as the lease states, but divided out over five years. Interesting that Eclipse is working on this 18 months in advance of the March 2017 date. So Eclipse leaseholders be aware of what you are being asked to do.
Sounds like a really good opportunity to get more money out of the deal. In reality both can benefit from the deal. hope landowners understand that they are financing Eclipse and ask for interest on that money..
ANNE COOPER.....If you have been drulled on from that lease you are now HBP you will not be released because you are receiving royalties from that lease and your mineral rights are now held by production
PUGH clauses can be a great thing for mineral owners - essentially forces the operator to develop all depths. I presume when you say you have 2 PUGH clauses, that you have both vertical and horizontal clauses? Was all of your acreage pulled into the unit that contains the existing producing well or just a portion? If the existing well a Marcellus? Rhinestreet?
Considering the market has collapsed in the last year and many other O&G firms spent money like it grew on trees, Eclipse is trying to be responsible and not just blow millions of dollars. It gives the landowner an opportunity to make money and Eclipse able to work their drill schedule. Lets face it, we all want a well because that is where the real money is.
I would have to assume that they still could drill units given the amount of time remaining, but they may not renew leases given the current market conditions.
interesting perspective, modifying a lease to provide flexibility is great, but you certainly should get something for providing that flexibility - as in a larger total bonus amount (implied interest) or a modification fee or something along those lines. When prices come back, acreage will get drilled again and if you are unleased because the operator chose not to pay you your extension bonus, then you can sign a new lease at that time. Essentially, your extension is a free option, and you are still tying your property up for 5 years, unless they decide at some point in time over the next 5 years to stop paying the annual renewal. Not saying being flexible is a bad thing, but getting nothing for being flexible seems less than prudent as well. Depending where you are located in the play, other operators may be interested. I know I have seen Antero top leasing MHR on leases they expect MHR to not develop within the required time frame.
I have a related question. Are the scheduled bonus payments conditional on start of production, as I have seen elsewhere, or is this a true scheduled payment?
I think what you are asking is: do those payments spread out over five years stop if a well pad or unit or production beings on the property. It is my understanding that they do stop. And my thought is Eclipse will attempt to tie up as much property in a unit as possible in some form or fashion in order to get the payments stopped I think anyone accepting the payments spaced out over five years will never get the total amount and may not have a well drilled either at the end of that time. That is why this needs considered carefully and looked out by a lawyer.
We also got the same email today.
I would definitely have the amendment and modifications reviewed by an attorney or a non-company landman. Outside of the bonus payment, are they modifying anything else?
Being out and about on Saturday afternoon I heard a couple of things.
Woman working on getting the amendments says she wants to wrap this up in a couple of weeks.
Some leaseholder contacted Garrison who said don't sign the amendment.
No, Jay, this is a total Eclipse idea to change the terms of the original lease. And hey, leaseholders didn't complain about after three years they got another payment on the lease. Now they are looking forward to 2017 and the second five year term payment. Hey if Eclipse doesn't want the properties some other oil and gas company will.