How to make a deal with an oil company?

My neighbors and I have about 1500 acres of land that we would like to lease. We are waiting for the bonus and royalties to increase but we expect to deal soon. So how do we approach an oil and gas company. Has any of you done this already? I would appreciate any ideas or thoughts that you might have.

Views: 1333

▶ Reply to This

Replies to This Discussion

Permalink Reply by Dave on November 14, 2011 at 2:52pm

just wait the sharks will find you

they will not be hard to identify.....you got great bait

Permalink Reply by Jim Litwinowicz on November 14, 2011 at 4:20pm

First you didn't say where you are located.

Talk to more neighbors and see who they signed with or are dealing with. 

Ask around and see what groups are active in your area, if any. While 1500 acres is a nice chunk, it is just a little over one unit for these guys.  They like to deal with larger holdings if they can.  The larger the group you get the more leverage you will have.

Find out what E & P companies are active there. And who represents them or who are the key landmen they are using. And make sure anything a landman tells you is put in writing. Like one attorney I know says....a verbal promise is as good as the paper it is written on....

Most important, have an O & G attorney that is experienced in these new leases. not just the old shallow well leases.

Permalink Reply by craig on November 14, 2011 at 4:22pm

Like David said, don't worry about approaching them. If you are in an area of interest they will find you. Signing too early is the easy thing to do.....waiting to sign on your terms is the hard thing to do. Don't believe a word anyone says from an oil/gas company or their landman. They may/will say whatever to get you to sign.  They won't outright lie to you but they won't tell you the truth if they don't  have to. I know first hand how that works. Words mean nothing unless they are written down and signed to. 

Unless you have educated yourself in the process you need a good attorney, not just any good attorney but a established oil/gas attorney that knows the ins and outs of gas/oil lease wording.

Others will tell you to join a group. I have mixed emotions about landowner groups. For those that don't have the time or inclination to deal properly with signing a lease then maybe a group is a good fit. 

With the acreage you have together, I'd be talking straight to a company person not their farmed out landman. Patience is key. Be very thorough. If they want your land you are in the drivers seat, not the company. 

Did I mention patience?

I've leased 3 parcels. The first two we did with the landman and they turned out ok. We learned and learned again. The last one was the best lease in terms of money, royalty and language ...and was when we (an informal group) negotiated directly with the company. 

Good Luck and don't let the smell of money make you compromise your situation.

Ohh, just where is this land?

 

 

 

Permalink Reply by oildude on November 15, 2011 at 12:32am

I am located in western Washington county Ohio. Just a mile or two from the Morgan county line. From all the research I have been able to gather ( and its a hell of a lot ) I have come to believe that I am sitting on the sweet spot of the oil window. My neighbors and I have agreed to wait to see the production numbers that come out of the wells in Noble and Guernsey counties before we decide what to do. Some people around here are getting nervous and taking " chump change" for their land BUT NOT US. I really dont expect much to happen until after the holidays. 

Permalink Reply by craig on November 15, 2011 at 3:09am

Patience.....the only bad thing that can happen when waiting is that they do not find  what they want nearby you. Then all bets are off. By waiting you will give up the bonus money they are paying before they get results nearby. I don't know Ohio that well, but the chances sound slim that this will happen. Hang in there and stay connected to your situation nearby.

Good Luck!

 

Permalink Reply by Paul Martinelli on November 15, 2011 at 3:57am

I agree.....I been talking to a Company for months....I hear all kinds of stuff from them, haven't seen 1 word in writing, haven't seen one permit in ODNR for them,......I beginning to think they are just flippers too...doing whatever it takes to get you to sign.

 

Seems it may be until next year (after Holidays) before any progress is made...or a new Company comes to the table.

I have patience.......will not sign unless it is a good lease/terms

Permalink Reply by Jack Straw on November 15, 2011 at 7:00am

Looking at your other posts, I note that you are likely located in an area in Ohio where the Utica is the primary exploration target.

 

The way I see things, leasing really has two essential components: the up front

signing bonus and the potential royalties.

In exchange for the up front signing bonus you are agreeing to sell the rights to 79%-87.5% of the value of the O&G under your property (percentage depending upon the royalty rate you negotiate) – all contingent on the drilling of well(s).

The royalties essentially pay you for the remaining 12.5-21% of the O&G you retained – payment made over the production life of the well(s).

 

You wish to negotiate a lease which will maximize both the up front signing bonus and the potential royalties.

 

My thoughts/suggestions would be as follows:

There are many entities which lease up blocks of acreage and then “flip” that acreage to the “big boys” who have the “deep pockets” required to drill and produce. It is my opinion that these “middlemen” are best avoided; try to find out which “big boys” are interested in your geographical area – try to get in contact with them.

Try to determine which companies are actively permitting and drilling wells in your area. Try to find out who are leasing in your township.

The up front bonus payment is the “teaser”, ideally you want to deal with someone who are prepared to drill (sooner, rather than later).

Use resources (such as this site) to find out which companies have the best reputation for keeping their promises. A complication arises in that the “big boys” have been buying out smaller companies and may be operating under the old names of theses former companies (now subsidiaries of the “big boys”).

Examples: Chevron bought Atlas (so Atlas is Chevron); likewise, Marathon bought out a smaller company, Shell bought out a smaller company, Consol bought out a Dominion’s acreage.

 

The lease you will initially be presented with is a lease prepared by the company’s lawyers; it will almost certainly contain clauses that you should wish to alter or delete. And, it is likely that there are clauses which you will wish to have incorporated in the lease.

 

To protect your interests, you truly need to consult with an Attorney in your County that has O&G experience (very important that they have O&G experience).

You are entering into a contract that could potentially be in force for generations.

 

Verbal communications/promises/assurances from a landman are meaningless unless and until they are in writing. Most landmen are ethical, but not all are – and the landman’s boss may not be prepared to honor the landman’s promises.

 

I would suggest that you might benefit from finding some quiet time to go over the many thousands of posts in the more that 1000 Discussions, taking notes of what you consider important/valuable. There is a wealth of information/knowledge that you can glean from the experiences (good and bad) of others.

 

Good Luck.

Please keep us posted, so that we can learn from your experiences.

 

All in my humble opinion.

One size fits most.

Consider this information worth every penny you paid for it.

 

JS

Permalink Reply by Paul Martinelli on November 15, 2011 at 7:20am

I agree 100% and have been doing just that.

 

I was in ALOV....group B..CHK dropped me due to existing HBP leases on majority of acreage,

I was not upset, i understand the process they went through, leases and bonuses were on the rise since then so i was indifferent with the outcome.

The company that seems to be most interested in the local area is Sierra Buckeye....I have been in talks with them....Hi folks, I know you read this site! But I see no progress on their efforts to drill....

hence my comment that perhaps they are looking to flip the acreage.....

 

In any case....life goes on.....

Permalink Reply by Jack Straw on November 15, 2011 at 12:06pm

Paul,

        Your post got me thinking. I started a new Discussion that I just now posted.

Although I have headed off on a tangent, you might find it to be of interest.

“At what point in the exploration/exploitation cycle might it be the best time for a landowner to lease?”

 

JS

Permalink Reply by oildude on November 15, 2011 at 12:01pm
Paul. What general area are you located in? In my area we have heard offers of at least $ 4000- 5000 bonus and 18.5 - 20 % royalty. Has Sierra Buckeye met these numbers? I understand if you cant say anything about the deals you are negotiating. Any info is good info.
Permalink Reply by Paul Martinelli on November 16, 2011 at 3:00am

I am in Eastern Tusc.  county.....

I am looking to negotiate a package deal that covers  the leasing of  open acreage, and the changes  required to make the HBP acres usable (160 acre pooling limit exists).  It will take some serious digging to determine what is HBP and what is not....the parcels have "evolved" over the years.

01xfqv4bcdqh6Permalink Reply by 01xfqv4bcdqh6 on November 18, 2011 at 6:34am

I am in a similar situation with 2000 acres and have been working with both aggregators and E&P's directly I'd be glad to share information with you. Give me a call 216-533-2190 or e-mail rgrodin@gmail.com.

RSS

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

Badges  |  Report an Issue  |  Terms of Service