Penn Virginia lease about to expire. Land men have come knocking but...

   

    We bought a farm in 2012 and are aware that KLMJ bought the Penn Virginia lease that is on our property. It is about to expire July 2, 2015. KLMJ said everything is in place for the lease to be released upon expiration.

  We had a land man (Colonial) come knocking last November (2014) offering $1,500 an acre, 12 /12% royalty for 10 years. He said when our lease expired to call him if we were interested.

  A month ago another offer came from a land man who said KLMJ may be interested and he offered $2,200 an acre, 15% royalty for 5 years.

   We are totally ogm illiterate to all of this and wonder, should we wait? What's the chances a better offer will come along? We do not know how much the former owner got for the lease that is expiring but we do know it was for a considerable amount more than $2,200 and acre. We were told to use that as a bargaining chip. Does it matter that our land has a pipeline right-of-way that runs through it?

  We are in Bingham Township, Potter County and have 43 acres. Any thoughts?

Thanks in advance

Lori

Views: 3053

▶ Reply to This

Replies to This Discussion

Permalink Reply by Jack Young on July 4, 2015 at 3:56pm

Thanks, Gringo. If their property is inside a potential JKLM unit Lori may do fine, but they are paying far less now (or not leasing at all) in many areas where they were active just a couple months ago. I'm hoping for the best here. We have a lot of acreage in Bingham Township and it's a good bit further north than most of the JKLM leasing activity. So I'd love to see them at least try a test well there.

I've heard that Dominion may offer the Utica rights under the Harrison Storage Field for farm-out soon, and that would allow a little more room for development in Bingham Township. Right now the two storage fields there are essentially off-limits, and that kept leasing activity down a bit even during the peak months.

Permalink Reply by Lori Wood on July 4, 2015 at 5:12pm

Thanks so much, I greatly appreciate your info and advice. I check in with this board often to read any new news posted. We have never done anything like this so we are clueless. This is a great place to come to help understand it all.

Thanks again

~Lori

Permalink Reply by Lori Wood on July 6, 2015 at 9:13am

The landman called today. He needs our tax map and parcel number so he can see if JKLM is interested. If they are interested he said $2,200 12 1/2% for 5 years, no deductions, no option to extend. (the royalities went down, they were 15% the first time he contacted us)

At this point if KLMJ does want a lease, all we are looking for is a draft copy to take to our lawyer so we can get her advice on what to do.

(not sure if it matters ~ although we are in Bingham Township, we have a Ulysses address and are close to the Ulysses township)

Permalink Reply by Lori Wood on July 7, 2015 at 7:44pm

Jack (and David)~ I was sent an attachment today from the landman. He requested
that we give him the tax and parcel number so he can ask JKLM if they are
interested and he wanted us to sign a "fair chase Potter County Commitment
letter" at least that was the name of the attachment. I forwarded it straight to
our lawyer. We aren't signing anything right away. We're in no hurry, especially
if what Jack said may happen with  Utica rights under the Harrison Storage Field
and we did wonder what about the pipeline right-of-way? It runs right through
the middle of our hayfield/pasture and woods.

 
   Meanwhile my Mother-in-law passed away last month and we have inherited her land in Westfield PA. She did a 5 year lease for it in January with Travis Peak. As I have said, we don't really understand all this OGM stuff, so we'll take that lease to our lawyer as well so it can be explained to us.
As always, thanks so much for your time and advice!
~Lori
Permalink Reply by David Morgan on July 7, 2015 at 10:38pm

  There are many pitfalls you should avoid with leases..  Just a wake up call,but here's another..If you sign a regular lease and 2 years down the road want to sell your property you may have a problem selling it because the company your dealing with may have taken a loan out and used your land as collateral ..  Even if you wanted to take a home equity loan...  This is just another one of those unexpected and I was unawre of things that may come back to haunt you..  This is big business your dealing with and they regularly take a year to have their lawyers hack out a deal with another company and 50 lawyers to do it..Your lawyer should be up on Oil and Gas leases because he could miss these little thing that turn out to be nightmares... He is human after all and probably just a family lawyer that you have dealt with for years ...  Good luck

Permalink Reply by Jack Young on July 8, 2015 at 3:49am

They can only use their lease as collateral since that's all they own. I've never heard of this being a problem for a bank unless it's an Ithaca bank who wants an excuse to make the gas industry look bad!

Permalink Reply by Jack Young on July 8, 2015 at 3:57am

I would contact JKLM directly to see whether they're interested in your property and at what price. If it does turn out that all they'll pay in that area is $300/acre you won't want to spend too much on lawyers and other representation finding that out. Just give JKLM the tax map number and they should be able to get you an answer pretty quickly.

Your property is closer to the Ellisburg Storage Field than Harrison, and so won't really be impacted if the deep rights under Harrison get farmed out. So I would expect that whatever JKLM offers will be the only offer on the table for a significant period of time. If you don't like that offer, you can always sit tight and hope that prices and drilling results eventually work in your favor. If enough gas is there, it will eventually be developed,

Permalink Reply by David Morgan on July 7, 2015 at 11:33am

  If your land has a right of way and they are interested especially in this glut environment then your a valuable asset that they need and you have the advantage  .1. I would tell them you will think it over as you have had multiple offers... 2.  GET A LAWYER!!! that's familiar with oil and gas leases.. 3..Never sign a company lease.... 4 . Be aware that if they put anything on your property that it could be taxed as a business ..That's a new one I have heard and it's not being taken lightly... 5 ..See #2 ...  Be patient don't rush into anything and don't let the initial money go to your head...

Permalink Reply by Dennis DiBello on July 8, 2015 at 12:40am

"Does it matter that our land has a pipeline right-of-way that runs through it?"

YES!  You have a premium location.  Hold out for more.

Permalink Reply by Jack Young on July 8, 2015 at 1:46am

It doesn't help if it's a storage-related pipeline. Those typically aren't available for gas produced locally as the operators have to keep their capacity free for injecting and withdrawing storage gas under various firm contracts they've signed. They can't allow a third party producer to restrict their operational flexibility. Many things you would assume are straightforward elsewhere don't apply in or near a storage area.

Permalink Reply by Lori Wood on July 14, 2015 at 2:48am

So much for that.

1. We were offered 1,500/acre 15% royalities for 10 years in November 2014 (Colonial Landman)

2. We were offered $2,200/acre 15% rolayities for 5 years in June 2105 (KLJM Landman)

3. The same offer was reduced in royalites to 12 1/2% in July 2015 and rather than an offer it was IF KLJM was interested.

4. Made an appointment with a lawyer to go over the lease draft.

5. A day before our appointment, the landman wrote and said the offer in Bingham Township was $300/acre.

6. We're going to just wait.

Shoot

 

Mike MurphyPermalink Reply by Mike Murphy on July 14, 2015 at 4:33am

Hold out for a lot more they think they got a sucker on the line If it was 2200 @ 15%  ask for 2500 and 17.5%the gas in oil is the same under u today as it was 2 months ago    landman will use scare tactics on you see what your neighbors leases are and get a real oil and gas attorney to  deal with them so all bases are covered   no 10 year lease 5/5 is more like it protect your surface rights

too    and you want the bonus money up front.........some companies are trying to spread bonus in 5 payments over the  life of the lease and if your drilled the bonus money stops if the royalties your payed exceeds the bonus payment  just a sample of way u need a good OIL AND GAS attorney  not just the neighborhood family lawyer  

RSS

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

Badges  |  Report an Issue  |  Terms of Service