See attached jpg of Rex Harvey 3H.  This well is in Penn Township Butler County, Pa.  The well pad location is behind the Gumto Greenhouse on Meridian Road.  This well is producing at somewhat less than double the output of nearby Marcellus only wells. 

Phil

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I think if you could have all strata % based on the Marcellus or Utica production,the mineral owner is in a good position.Some strata might not be as profitable for any number of reasons.

Prior to long horizontal bore development, royalty % was always 12.5% (as far as I know) for any given lease / well development.

Now / these days, for modern leases / long bore horizontal well developments, it appears a negotiable %.

Been thinking it's now negotiable primarily on account of large acreage pools.

So, if it is because of large acreage pools and a given strata royalty % is negotiated; whatever that % is, should track for all strata in the large pool.

A separate sign on bonus per strata seems to make sense however.

Seems to me anyway.

What's everyone else think ? ?

J-O,

   I don't think you can generalize on this topic. Too many variables; i.e., location, E&P, depth of strata, commodity pricing and the list goes on and on. 

BluFlame

   

Blu,

I don't believe I'm generalizing by suggesting large pooled acreage long bore horizontal well lease / sales agreements be 'strata specific' with the % royalty (negotiated) tied to the amount of acreage pooled and with a separate signing bonus per each horizontal / lateral.

Actually thinking that's pretty specific and in step with new long bore horizontal well techniques and large pooled acreage instances.

The way it could workout (for large pooled acreage developments) would be by negotiating the royalty % for any / each long bore horizontal (lateral) type well developed / constructed at an agreed to % - for the sake of discussion here call it 15% of the production value (from any / all strata developed combined); but, also with a signing bonus / up front delay rental payment for each and every strata developed by any building out of a long horizontal (lateral) bore specific to that strata.

the biggest problem is most of all the acreage is leased already so rewriting the lease is pretty hard to do ......coulda woulda shoulda

Picking up on many leases coming to term without being renewed and most probably going back on the market (via 'Affidavit of Forfeiture' recordings / 'Releases').

Maybe more coming on the market than you might think.

Doesn't hurt to be prepared should / when things open up again.

Of course I'm guessing there will be a significant number coming available and maybe you're not.

Haven't seen a statistical analysis on it - just my intuition driving my remarks.

Anybody have (and would care to share) a more educated guess on how many leases will fold up and / or how much land will be available for leasing in the next short term ? ?

Probably in order to cover all the bases the lease would be better written specifying a common % royalty but, with a 'sign on bonus / up front delay rental payment' paid for each strata a lateral would drain / assist draining and another for each lateral developed regardless of the strata it is installed in ? ?

Writing this, of course, considering it could be negotiated successfully; as the lessee / purchaser would have to find the deal agreeable as well and may instead not.

Bluflame, kudos to you for getting the Pugh Clause.

When I said Pugh Clause to the landman it was like throwing "holy water" at the devil. Scared the hell out of him.  lol

That's right.

He made sure that it covered the vertical aspect as well - keeping undeveloped strata open / available.

Great move.

Bluflame, kudos to you for getting the Pugh Clause.

When I said Pugh Clause to the landman it was like throwing "holy water" at the devil. Scared the hell out of him.  lol

FMV,  

  As much as I would like to take credit for the vertical Pugh Clause, it is truthfully a matter of being lucky rather than smart. Also, to date there has been no interest in other strata on my property. $10/MCF gas might quickly change that situation!!

BluFlame

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