Leasing different geological formations.

We are in the beginning stages of negotiating a lease for exploration in the knox formation which is below the Utica in our area. It will be 5-10 years before any interest will be shown in the Utica shale in our area.

We are wondering if anybody has any experience with having a lease in one formation and then leasing a different formation on the same property?

Did you lease with the same company?
If not, did you have any problems leasing the other formation?

Any comments or suggestions would be appreciated.

Thanks.

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Permalink Reply by gary SWF on November 2, 2013 at 2:58pm

Where are you located....state, county, township....it may help people help you...

Permalink Reply by Tim Hawk on November 3, 2013 at 3:19pm
I am in Akron Ohio.
Permalink Reply by James Vanderink on November 3, 2013 at 3:33pm
What company are you negotiating with?
Permalink Reply by James Vanderink on November 3, 2013 at 2:37am
Let me Guess......Artex?
Perry, Morgan, Licking, Knox or Fairfield?

"It will be 5-10 years before any interest will be shown in the Utica shale in our area."
Remember: Landmen were telling people in Carroll County they were in the Poor Marcellus back in 2009-2010 and leasing for $5-10 an acre.
Permalink Reply by Tim Hawk on November 3, 2013 at 3:38pm
No it,s not Artex. We are in Akron, Ohio. (summit county). We know that Utica is there. But there is zero interest right now in our area. From what I read on this site and other publications there will limited interest for quite some time. All the big activity is east and south of us.

That being said, we are talking to cutter oil about drilling a vertical well In the Knox formation far below the Utica.

Thus my inquiry about leasing 2 different formations. If you lease one formation, does it hurt your chances of leasing or the value of the lease of the other formations?

I would be interested in talking to someone who has done that already.
Permalink Reply by James Vanderink on November 4, 2013 at 12:23am
Cutter Oil? Like the TV show?
http://dsc.discovery.com/tv-shows/blood-and-oil
Wow, that's one bad television show.
Permalink Reply by Tim Hawk on November 4, 2013 at 3:22pm

No doubt the show was terrible. 90% scripted BS and 10% reality. It deserved to be cancelled.

As I said, we are just in the beginning negotiations. We will take a good hard long look before we go any further.

 

Permalink Reply by Jim Litwinowicz on November 3, 2013 at 4:28pm

Tim; first, never believe a landman.  There is no way to predict when your area will be become active, if ever. From what I understand, your area has oil that is harder to extract because it is heavier and there is not enough gas to push it. Porosity is also tighter.  But that doesn't mean that it will not be a hot spot any time soon.

Companies are always working on new techniques. It could be that something is developed that will make your area boom in a couple of years. this industry is rapidly developing new techniques which makes it hard to predict. Its also possible that other areas may become the next hot spot drawing attention away from Ohio. Could be decades away.

As for leasing separate strata. It can be done and is done. You need to be very specific in the lease addendum that you are leasing just the targeted strata and the company has no claim to any other, even ones that they have drilled through to get to a deeper one. And you need to include a clause stating they must cooperate with other E & Ps that lease other strata.Make sure to use a good O & G attorney experienced in doing just what you need.  Ask to see other leases they have negotiated and be sure that these leases do what you need.

Be advised that some companies hesitate to get involved in multiple operators due to liability issues.....who is responsible if a water well goes bad? And having multiple operators may result in duplicate pads, pipelines, access roads and other surface disturbances. Cooperation in roads and ROWs is one way to limit additional surface damages.

Good luck

Permalink Reply by Tim Hawk on November 4, 2013 at 3:22pm

Jim; Thanks for the info. This is first I've heard that Summit County's Utica isn't easily extracted.

Where might I find more about that kind of information?

 

You make a good point about the roads, ROWs and liablilities. Something that I hadn't concidered.

I know enough that I don't know what I'm doing. Absolutley an O & G attorney. Anybody who is his own attorney has a fool for a client.

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