Possible Middleman Solution

I know certain things as fact. 

  1. I know that most companies are slowing down on the leasing and drilling.

  2. I know that all the majors are still leasing interests.

  3. I know that they are trying to lease at a rate not much less than before the downturn IF they want your land for one of their proposed future operations.

  4. I know that they are sometimes offering lower bonus, etc., using the downturn as an excuse.

  5. I know that there are middlemen out there still offering decent bonus/royalties. 

My question is might not it be better during this period of time to go with a middleman (flipper) for a decent bonus and royalty and then let them do the negotiations and any waiting with the majors? Yes you would be giving them a small chunk, but certainly not as much as you would lose if you accepted a majors lowball offer. You also wouldn’t have to worry about any legislation effecting your interests like you would if you waited a few years for the O & G economic situation to get better. Any thoughts?

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Permalink Reply by Dexter Green on January 19, 2015 at 6:35am

If a middleman was willing to pay you then it seems like a reasonable plan.  Most good brokers will not pay you unless they have an end-buyer.  So company X isn't going to pony up for the market rate (or a number that is discounted from that) and pay you in 90 days if they think they'll have to sit on it for six months or a year.  These guys don't keep cash lying around for that sort of expense.  Most brokers who do a turn-and-burn have enough cash to pay staff and maybe cover the cost for a few deals knowing that some sellers (or lessors) will demand payment up front.  If I were to go start a new brokerage that aimed to find unleashed people I'd be able to run it on a budget of less than $300,000 for the next year.  

Permalink Reply by Chris on January 19, 2015 at 6:58am

you wont get paid unless the middleman can get an actual producer to take the acreage.  The producer isn't going to pay anything over market value unless its thousands of contiguous acres.  If you held out this long and missed the boat, you mind as well just wait until the boat comes back around

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