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Permalink Reply by Jim Litwinowicz on July 12, 2011 at 2:10am

This doesn't make sense. First all pay royalties unless is for an outright purchase, not a lease, of oil and gas rights.  Also, they cannot take ownership of existing wells without the permission from what ever O & G or other entity owns them.  I guess they could buy the rights to any royalties based on existing wells.  But if they are purchasing rights instead of leasing, the price should be much higher.

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Permalink Reply by Elwood Woolman on July 12, 2011 at 2:13am

My thoughts were they think there is a chance that existing leases do not include deep well drilling. And they want that for little of nothing.

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Permalink Reply by Sylvester Deal on July 13, 2011 at 4:08am

Elwood,

Purchasing mineral rights is a real estate transaction not a leasing contract.  By selling the mineral rights you are severing the sub-surface minerals from the surface, also known as "split estate".  The rights to royalty from the existing lease would go to the new owner of the mineral rights.  This would not give them ownership of the existing wells, that resides with the leasee.  Now, if a deal is made with the current leasee and a horizontal Marcellus or Utica well drilled, the income interest to Chesapeake thru MC Mineral Company LLC subsidiary is much higher because it includes the mineral owner royalty.

The existing lease should be of record at the court house, get a copy, see what it says.  A lease can have a depth limit to a specific formation or to the deepest depth drilled.  Ohio considers any well drilled through 4000ft and deeper a deep well.  If the rights to deeper drilling were released, you can lease them.

 

Treat it for what it is a real estate transaction.  Agree with Jim, their offer is their first offer, negotiate for what it is worth to you.  If you want to sell!

 

SD

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Permalink Reply by 015334grltd9m on August 13, 2011 at 3:43pm

Last Wenesday I was in a meeting wherein a leased landowner with a Clinton well was sent a letter from MC Mineral to purchase their mineral rights, immediately the letter was taken of the table for an agreement by the landowner to allow Chesapeake to expand the 40 acre unit.  Old leases seem to be popping up with limited unit size to 40 acres and this seems to have the oil companies going back to the landowners to negotiate, govern yourselves accordingly.

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