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Permalink Reply by mark o on February 25, 2012 at 7:30am

no,no,no,no......you will got alot if different answers but the answer is no...do your homework!!!!  mark

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Permalink Reply by craig on February 25, 2012 at 7:34am

Here's my 2¢:

This all revolves around a few factors:

Do you really need the income now or in the near future?

Does the amendment include a top lease so that the lease will be longer than the original?

Signing the amendment can result in the following possibilities, at least the ones i can think of right now.

They drill all the wells they can (6 or more) for the unit in a timely fashion.

If so, then you will receive lots more royalties/acre, earlier in the life span of the wells.

If they drill only one well (which is what they are doing in Beaver County Pa) you will receive paltry royalties (especially if it is dry gas with the low price now \) because of the dilution of the large acreage in the unit. They then can drill the next well anytime in the future, albeit near future or distant future. This can go on for many years.

The price of gas and related NGLs, among other things like lack of infrastructure to market the gas, may help determine when they drill additional wells in the unit. With the price of gas so low, do you really want them drilling all the wells right away? Of course if there's oil in the area, then maybe you do want all the wells drilled. A real conundrum is what you have.

If you don't sign the amendment it is hard to tell what might happen. Larger type acreage leases expiring will get leased again i believe, but small acreage parcels could possibly be drilled around.

IF you do decide to sign the amendment:

Make sure you have a strong pugh clause in the original lease so that you can re-lease the part of your property that isn't in the production unit after the primary term is up. Or make them add a pugh clause at the same time they get their amendment. I believe in the philosophy that if you are going to give the gas co something they want, then they need to give you something in return. Some folks don't feel that way, especially those with smaller acreage( which I agree with if you have a few acres only).

When does your lease expire?

How many acres do you have leased?

I signed an amendment on one of my smaller parcels , because I want them to drill. I didn't get anything in return. Another parcel I have, as well as some neighbors, are not signing an amendment and won't sign one because they want to give anything in return and these leases expire in the next 12 months or less. We plan on re-leasing this acreage at a much better price than was received 6 yrs ago...in less they still drill and make smaller units just to tie up the acreage. 

I haven't covered all the bases on this topic, but it is more a personal decision. You are doing the right thing, get educated before signing anything. Don't believe any one thing any of us post as gospel, without further due diligence on the subject. Read much and ask many questions... and make an educated decision.

Good luck and keep us posted!

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Permalink Reply by Lisa Johnston on February 25, 2012 at 9:43am

We have only 35 acres and a little less than two years with an 2nd 4 year option. We thought we might find some knowledge on here since we know very little about leasing. We dont want to make a mistake, miss out on an opportunity or get ripped off. Thanks for you help.

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Permalink Reply by craig on February 25, 2012 at 10:39am

Only 35 acres... Thats a fair amount, don't cut yourself short.

Another thing I might add.....

Gas Cos typically don't like to re-up a lease. They hate paying twice for the same thing. Of course if you have a cheap $/acre lease they will re-up more readily. 

I'd say they want to drill, but can't do it they way that is most advantageous to them. Thus the amendment.

Just don't be in a hurry, regardless of what they tell you.

Again, my opinion only.

 

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Permalink Reply by craig on February 25, 2012 at 10:56am

Forgot this part of your post....

HBP or Hold By Production is a term used to describe various situations depending upon the wording of your lease. A usual meaning would be that once a well pad or well has been started AND your land, or part of your land, is included in the declared Unit then IF they can not market the gas/oil for various reasons, they can hold your lease as active (producing, when it isn't) almost forever(it seems). So being HBP you will not be collecting royalties and you will not be paid again for re-upping your primary term lease because it will not expire. Nor can you re-lease with someone else after the primary term. 

Now a good lease will have some of these things covered, at least to some extent.

And as I always say, anything that is verbally communicated to you will not stand in our legal system. You are signing a document, make sure you understand what it REALLY says not what a landman or company man told you.

Be careful what you sign!

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Permalink Reply by 0l1a6laz7smpf on February 25, 2012 at 4:32pm

has anyone ever did a study on whether the oil company invests more monies and drilling and production in those areas where they have the largest units?   In my area the first pads to show up were where the landowners signed in ignorance mostly about unit size and consequently the units are over 1100acres.  So has anyone ever done research to see if they work those areas more as their investment is much lower.

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