Have WPa Bonus and Royalties Peaked?

 

We're still waiting to sign and have lease offers in the wings....... should we wait a few more months or sign now? Will the $$$ go up? Has the interest moved to the Utica in Ohio and away from PA?

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Permalink Reply by Bob Moran on March 2, 2012 at 12:03pm

William  -  Do you know who the school district signed with & how many acres they  leased?  Thanks

Permalink Reply by warjr on March 2, 2012 at 4:47pm

I would have to go back and look to see who it was.  I don't have it wth me this evening.  I have to go back and look for the article. 

Permalink Reply by Chris Farabaugh on December 14, 2011 at 4:56am

Isnt the situation that wet gas is now more appealing because of current market prices for the by-products?  Other than that, isnt dry gas more desirable due to the fact that it does not take as much processing to ship it in the pipeline?

 

Im going to agree that this is currently like a game of musical chairs, the music (leasing) is going to stop soon either being market or government dictated, and quite a few people are going to be left standing, not so much permanently, but might be quite a few years until the situation changes.  I just cant see these companies dumping such an enormous amount of money to bring 3.00 gas out of the ground.  All of these domestic and foriegn interests investing in this acreage are going to want a return, and ill have to believe they are first priority before picking up more leases. 

Permalink Reply by SBRW on December 14, 2011 at 6:38am

Don't look for the $3 gas to last - look who is buying up all the gas (big oil).  They control the oil market and soon with infrastructure and time they will control the gas.  Also with time will come for ways for them to steal the gas, oil etc... from you.  These bonus numbers are nothing for the $1million/acre of gas thats under your ground.  While 3-4k is ok it's by no means great - however a well and it's royalties are- so the sooner you lease the sooner you could get a well or be up for a renewal.  I hope they just are fair and honest to most.

 

Permalink Reply by Mike Knapp on December 15, 2011 at 11:16am

Most wet gas areas see a $3 to $4 premium per MCF because of the NGLs.  This is a nice bonus when it raises your price from $10/mcf to $13/mcf. 

But when the price is $3, you can more than double your income by drilling in wet areas as opposed to dry. 

Permalink Reply by Dave on December 15, 2011 at 2:21pm

new york will be lifting the ban in 2012 the rush to the utica with the promise of wet gas and the gold rush attitude in ohio is going to curtail pa activity in the dry gas @ sub $4.00 mark. Look @ the futures market for dry gas it is not all gloom and doom

joint venture partners and speculators are going to dictate what happens next

In pa where there is no infrastucture if you signed a lease in dry gas area(and got paid) consider yourself lucky

wet gas area hold on and hope for infrastructure soon

With the shortage of rigs the potential to drill for wet or dry where would you put your assets if you want need a return to shareholders /investors ?

I am sure the large landowner groups will soothe the non signers in southern areas with assurances of wait wait wait it will come

It probably will but till the infrastructure is there it will be awhile. If you can wait good for you.

good luck to us all

drill baby drill

Permalink Reply by frank sparacino on February 3, 2012 at 6:13pm

there IS infrastructure occurring in NE PA.

they are actually in a hurry laying/connecting pipelines so they can drill/produce more gas.

this is what "our" gas co. said (WPX) AND they are doing from what i've seen.

as a country we HAVE to use more Nat. gas!

luck to all…

Permalink Reply by DKinPA on December 14, 2011 at 7:15am

I don't believe the numbers have peaked at all.....I see alot of upside yet!

  1. The gas companies did not become multibillion dollar companies by looking at today or tomorrow.  They got that way by looking and planning 20-30 years ahead.  NG may be relatively low now but it won't remain that way, demand will increase through the increase in CNG vehicles (some countries use almost exclusively CNG vehicles) exports http://www.bloomberg.com/news/2011-12-07/shell-says-exports-truck-f... and NG fired electricity.  Yes, supply will increase as well, but the key is revenue and with increased consumption combined with low production costs (capital expentures already will have occured) there will come an  increase in revenue and profits for many, many years to come.  This is an opportunity they will not pass on, especially not in effort to save a few hundred dollars in bonus and a percent or two of royalty.
  2. You can't really compare Ohio and W.Pa Utica shale.....different products, liquid rich vs. mostly dry.  There will be long term demand for each but there will be a greater increase in demand for plan old NG that is present in W.Pa for the reason stated above.  See: http://http://www.dnr.state.oh.us/geosurvey/tabid/23014/Default.aspx  under Utica organic content.
  3.  Plus you can't forget that W. Pa also has the Marcellus and Upper Devonian, both of which are wet whereas Ohio really only has the Utica and they are offering $5000 and 20% for unleased acreage.
  4. n Ohio most of the land is already leased due to the fact that they were able to acquire many of the old HBP leases thru the use of JV's.  So the need by stockholders to fullfill long term outlook and assets they need to lease more land and that is why they are pushing so hard here in N.Butler County because they want to get it secured now at a low price.
  5. It is not that the gas companies want to lease ALL of the acreage in Buter but rather they have to lease it ALL.  That is what they have done elsewhere and will do here.....The value of the gas under each acre is too great to leave behind and they won't!  Again it is supply and demand....we have the supply and they demand it but for what price?  Well that is up to the landowners, if we all give in low where it is now then so be it.  But if everyone recongnizes that the fair value is higher, then that is what we will get.  People will panic and give in for a variety of reasons but I believe the facts state that we are being low balled right now and there is alot of unleased land which will force the offers upward.
2s72s0k9mm8gdPermalink Reply by 2s72s0k9mm8gd on December 14, 2011 at 8:01am

Royalties outweigh bonus a thousandfold. Can't get royalties til you're drilled ; Can't get drilled til you're leased. Too much emphasis  , IMO , on bonus money...Fair addenda and a decent royalty % is where it's at.

Too bad alot of folks can't see past the appetizer to see the huge slab of fillet that's waiting in the kitchen.

Please don't confuse logical thinking with panic. Some of us are perfectly able to think for ourselves.

Permalink Reply by DKinPA on December 14, 2011 at 8:19am

Glenn, you said you already signed....do you mind my asking what you signed for?

Permalink Reply by DKinPA on December 14, 2011 at 9:00am

Glenn,  thanks for sharing.... alot of people won't share what they signed for.  You did good there is nothing wrong with $3000 and 15% and it was a deal that obviously you are happy with. 

I can't agree with you more that royalty is by far more important and with it at 18% since Oct with no deductions is good, I believe that it should be and will be at 20% the way it is in Ohio.  The utica has been compared to the Eagle Ford Shale and they are paying 25% there.....each percentage point yields a significant amount of money for the landowner over the next 30-50 to who knows how long.  My recomendation to  our group members and to Mike is to be patient and wait a while....the numbers are not going to go down but there is a lot of potential for increase!

Regarding first signed first drilled?  Unfortunately it does not work like that, they will drill in one area and if that is good move over one production unit.  If it is not good they will try another area but they don't drill in order of lease signing they drill based on production potential.  We have people in our area that have been signed for more than a year and probably won't see a well fro several years....while others will see some this next year.

2s72s0k9mm8gdPermalink Reply by 2s72s0k9mm8gd on December 14, 2011 at 9:31am

Your welcome DkinPA. Wasn't long after I signed that the numbers went up , but , yes, I'm happy with what I got.

I hope you are right about the ceiling being yet a little higher. Would be welcome news for all not yet signed!

Best Wishes

Glenn

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