Guidance for the Greenhorn

Hello, I am new here, and new to the oil and gas business. I wish I would have found this site a few years ago, here is my situation. I live in southeastern Geauga county about a mile from the Trumbull co line. There has been a lot of drilling activity in the area since about 2007, I had a lease with Wilkes Energy and they actually had a permit to drill in 2008 (permitted well site no. 21997 on the ODNR map) but never drilled a well. The lease was sold to Range Resources who I sign a two year extension with, still no well, then it was sold to Enervest about a year ago. The lease ended on 07/07/2011. Last week Enervest contacted me to extend the lease for 5 years. They are amending the amount of delay rental from $100 to $150 per acre and consider the lease "paid-up". I do not really understand what this means. The remainder of the lease is still in effect.

Also a company did seismic testing 2 years ago down my road (RT 608 south of Middlefield) and it looks like they are going to do it again, the road is all marked up the same way as before. They marked it up last Sunday so it is going to happen soon.

I am very confused as what to do, should I hold off on the lease extension and see if this area is going to get more activity or just be glad to already have a lease in place and sign the extension for 5 years.

Any guidance  would be deeply appreciated.

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Permalink Reply by Jim Litwinowicz on August 3, 2011 at 4:57am

Greenhorn;  Spend a few days reading posts from this and other sites. p*************    naturalgaspa.com  Search the Texas Railroad commssion.  http://www.tlma.org/oilgasleasechecklist.pdf

 

$150 sounds way to low to me.  Ask around the neighborhood. Check out local diners, talk to local government types. See what other peolpe are getting.

 

Most of all....be patient and learn as much as you can. And use a good attorney that is schooled in O & G leases.

 

good luck

Permalink Reply by Ron Whiting on August 3, 2011 at 2:03pm
Thank You
Permalink Reply by Bill anders on August 3, 2011 at 5:16am
do not sign the extension, it was most likely a bad lease to begin with and they are not even within the ballpark on price.
Permalink Reply by Ron Whiting on August 3, 2011 at 2:07pm
Thank You
Janice Lanphere HancharickPermalink Reply by Janice Lanphere Hancharick on August 3, 2011 at 10:00am

Chances are if the company wants to renew, it already knows that what you have is worth more than $150.  If seisminc is being done again, it's to fine tune what is already known ... except by you and other OGM owners in the area.  All this costs $$ and companies don't throw it around w/o reason.  One seismic test is exploring.  Two tests is setting the path.

When your lease expires, request a letter of surrender for your own future well-being.  What's around the corner is unknown.  Having the "surrender" is being pro-active.

I suggest looking Enervest up on-line @ various sources.  What are they telling prospective investors.  I'll bet they're not poor-mouthing themselves or their OGM holdings.

Janice L. Hancharick

4-County Leasing Group

Permalink Reply by Ron Whiting on August 3, 2011 at 2:19pm
Wow, thank you very much.
Permalink Reply by Robin Jackson on August 3, 2011 at 3:20pm

I agree, way to low and they are wanting to extend a lease that ended..Go for it Ron, we get 2,500 plus an acre here in Tioga Co..Bradford is buzzing much higher and those late bloomers are even higher..15-18% Royalties lots of good ammendments..GET A LAWYER ASAP

 

Permalink Reply by John Hippely on August 3, 2011 at 9:09pm

As I grew up in Munson twp and my parents now live in middlefield, I am very familiar with the area you are in. youur "paid up" amount is the up front money the O&G company is paying you for the right to drill. I will tell you the offer of 150.00 per acre is below a lowball offer. I live a few miles north of newton falls and recently signed with CHK for over 10 times what you were offered per ace with royalties over 15%. royalties % dictate the gross amount of you cut from the sale of the resource collected. out of that you must deduct the cost that the O&G company spent to get the product to market. That said the state mandated min is I belive 1/8th or 12.5%. However getting a royalty over 20% depends on a lot of factors but consider the lease with the O&G company you choose as a partnership... you want them to drill so having som things in the lease favorable to them is not totally a bad thing. consider facts from this ODNR site pdf.  about the Utica shale.. http://www.dnr.state.oh.us/portals/10/energy/Marcellus_Utica_presen...

what stood out to me is the Utica shale play has been going on in Quebec since 2007 with wells testing as high as 12 million cubic feet per DAY!!! and that does not take into consideration wet gas and crude oil which only drives the value up. tradional vertical wells would love to get 12 million cubic feet of production in a month, much less a day. bottom line... do your reseaarch then decide, this play in Ohio has only just begun so dont forget they came to you.

Permalink Reply by Ron Whiting on August 4, 2011 at 4:56am
Thank you very much John, the info and the link to the odnr website is a great help to me. I am starting to get a better idea of what is going on now.

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