Recent leasing activity?

What is the current leasing status in the NW PA/SW NY areas? With many companies rescinding offers is there anyone active out there leasing? If so, what is being offered?

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Permalink Reply by Rita McConnell on May 21, 2009 at 4:12am
All good points Terry. Lets hope the market helps us out this summer.
Permalink Reply by hunter777 on May 21, 2009 at 5:44am
Here's a thought about the low gas price forcing wells to be shut-in.

The completed wells in the Dimock, Pa area have only been shut-in because Cabot's allowable limit into the Tennessee Gas Pipeline was reached! They still need to pay their bills and recoup their drilling costs. I haven't heard of any Marcellus wells being shut-in because of price. It could be that any successful wells need to be "proved" to support future drilling.

My two cents...
Permalink Reply by roy jones on May 21, 2009 at 7:04am
completely true. there is not a single well in PA that is shut in because of "low" gas prices. These wells are so economic they won't be shut in until natural gas prices fall below $3 mcf.... which won't happen. Like hunter said, the only reason theyre being shut in is because the pipelines cant hold the ridiculous amount of gas being produced. If a pipeline can only transport 50 mmcf a day, and 10 wells are flowing at 7 mmcf per day, the limiting factor is the pipeline capacity.... not gas prices. They'll choke the wells back so they squeeze out 50 mmcf per day instead of their 70 mmcf per day. Companies are making huge progress on increasing their daily capacity rates into pipe... So, this is NOT a natural gas price issue at all... These are obstacles solely related with pipeline capacity. Companies are upgrading pipelines and building new connections to larger existing pipelines. Dont worry, natural gas prices at todays price still makes this play the most economical unconventional gas shale in the world. Yes, the world. Natural gas will steady out at $5 mcf this year, and will hit 7 by year end next year, double what its at at todays price. We're good, nat prices arent the limiting factor, it's pipeline - which is being worked out.
Permalink Reply by Mmmarkkk on June 22, 2009 at 2:50am
Gas prices in the Marcellus are still much higher than in other areas of the oil/gas patch. So, Marcellus wells would be the last ones to be shut in barring other unforeseen issues (those not related to economics, but can't think of any at this point).

Lots of wells being shut in over in Oklahoma/Texas and some in the Rockies. In the Barnett Shale, there are a lot of wells being drilling but not completed. Just waiting on prices to improve.

I'd agree with most that your money will come from the Royalties, not as much from the bonus payment. You'll attract a lot more interest if you offer a longer term lease; some companies will be willing to give you that 18-20% royalty for a 10 year lease. Look at it as a 3-way negotiation with all three "knobs" being turnable: bonus payment, royalty rate, primary term. You won't get a max bonus asking for a 20% royalty and then offer a 3 year term. You gotta give a little to get a little. Good luck!
Permalink Reply by Brian on July 20, 2009 at 1:32am
Hi Terry,
I live in Washington County and have just been called by a gas compnay. I only have a couple of acres, but still want to be careful. Compared to what others have written here, I've been offered a fair amount upfront, but only 12% royalty. Should I get an attorney to negotiate the lease for me? I have no idea what to expect as far as what I might see per month from royalties, so its tough for me to judge what I should be pushing for.
Many Thanks,
Brian
Permalink Reply by Mmmarkkk on July 20, 2009 at 6:10am
The value of the royalty is based on a lot of outcomes. Here are some rough calculations and assumptions that go with them:

Assume a successful well with a EUR of 3.5 BCF.
Look at just the first 3 years of an industry average decline curve.

First case, assume a well is drilled into a 640 acre unit and any further downspacing will occur later than the 3 years.

At a 12% royalty and $5 gas, you'd net $2,000 for your 2 acres over the first 3 years, not including bonus. At a 20% royalty, that would go to $3000.

Jack the gas price to $6, the 12% royalty gets you $4,000 and the 20% royalty gets you $5000.

My model rounded off to the nearest thousand, so sorry about the lack of precision.

If you had one well per 80 acres, which is the eventual spacing but that could take 5 years or more, then those numbers above go up substantially. $19,000 and $23,000 for the $5 case, and $32,000 and $38,000 for the $6 case.
Permalink Reply by Chris Becker on June 21, 2009 at 3:00am
Back in March 09 Alta was offering $2700 per acre in the SilverLake, PA. area. If you jumped on that, was it a great deal? or too soon to dive on in? Time will tell.
Permalink Reply by John Sorensen on July 14, 2009 at 11:00pm
Does anyone know how the lease money is taxed? Is it just ordinary income?
Permalink Reply by John Sorensen on July 15, 2009 at 11:41am
Thank you, Ruby, for your assistance. I'm new to this.
Permalink Reply by terry hazlett on July 15, 2009 at 8:15am
James, was the offer worth consideration? i know chessie been giving low ball offers lately.
Permalink Reply by roy jones on July 15, 2009 at 3:39pm
What was their offer and on how many acres?
Permalink Reply by Brian on July 20, 2009 at 1:42am
Me too. Where do you live James?

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