Signing with Big companies vs. Small independants.... food for thought...

My experience with my acreage in SW penn and NE penn....

I have 600 acres total, divided into 2 seperate locations. I signed 1 lease with a big company and the other half with a small independant. The bigger company is still yet to pay me the initial bonus and it is hard to get in contact with them. The independent has been in contact with me throughout the process (I've gone fishing twice with a managing member, haha), and I just recieved my check. The bigger company says they might not even drill my land after all! They have hundreds of thousands of acres and my land is just a dot on their screen. What are the chances they drill my 300 acres out of the 500,000 + they have? Practically zero :-( . The smaller independent is planning 3 wells by the end of this year already and they say the royalty checks will be steady for the next 20 years. Just thought I'd give you all a first hand experience of these two cases. They're both great companies, but I'd definately go with the closer relationship with a smaller independent. Thats just my two cents though. Good luck everybody! I'm sure we'll all be fine!

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Permalink Reply by Amy Litman on June 5, 2009 at 3:53am
Thank you for the valuable information! Amy
Permalink Reply by Keith Mauck (Site Publisher) on May 29, 2009 at 7:30am
I'd sit tight and be dilligent..see Ritas post. You also want to be sure u sign with the right company. Do they have a hx of drilling good wells?
Permalink Reply by Mowing the pipeline on June 4, 2009 at 1:26am
If you have 30 acres and the average pool is 640 acres, isn't the royalty divided among the pool giving you less than 5% of the 1/8 royalty?
Permalink Reply by Rita McConnell on June 4, 2009 at 4:00am
Could be depending on how the actual lease is written. But keep in mind, five percent of 1/8 could be a lot, based on the number of wells drilled on a pad/production value of the well/exact number of acres in the well/ and so on. Five percent of 1/8 could also be a small number if the well isn't successful. Also, depending on how the pool was fomed, different contributors could have differernt royalty percentages.The truth is, its difficut to determine the actual "value" of the lease until the well(s) is drilled and completed.
Permalink Reply by Craig on July 22, 2009 at 10:30am
If you believe that the guy putting together all of the "leasing groups" is just out to help you, then you are sadly mistaken. Read his contract - he gets an override off YOUR OGM's. So what if he can get it up to 15% ot even 20%, he gets half of the amount above what you were originally offered. You can do that on your own. And then he holds all of the technical data from your lease to use as he sees fit - and believe me there are many ways to use that information to make money, and you get no cut off his using you. I am sure that up around Shinglehouse he swings a wide path, but in real Oil and Gas circles he is a bafoon, and the people signing with him are being taken advantage of. Most independent companies will work with you, even to the point of allowing you to participate in the well, if you so desire.

If the man really was what he puports himself to be, then he would be more above board with you all, and not have to be such a sales pony. Also, his enjoyment of a state posititon in which he negotiates contracts for state owned lands is an advantage to you, for sure, but is seen as a conflict of interest by most of us who have been drilling in the area for years before the rest of the country caught up.

Oops, did the animosity show through? Anyway, the smaller companies, who were doing the drilling before the bigger companies came in are now being priced out, but are much more likely to give a drilling commitment. In fact, I persanlly have signed over 1800 acres with drilling commitments - if we don't drill by a certain timeframe, you either get the land released from the contract, or a large payment and allow us to try again to meet a new commitment. The larger companies won't do that, and there are plenty of smaller companies in your area that will not deal with the man.
Permalink Reply by Mike on July 14, 2009 at 12:58pm
Amy, I have a few buddy's that drill in that area and can check with them? Would you like me to pass on your information?
Permalink Reply by Larry Lagut on June 5, 2009 at 4:04am
From what I read , this sound like it might be sound advice to sign with a small company,but within reason.
Permalink Reply by Mowing the pipeline on June 5, 2009 at 4:32am
See Alta signed 26 acres in Silver Lake, Susquehanna County, PA at $2,700/acre 7 years and 17% on 4/29/09. Anybody know Alta and the Mitchells?
Permalink Reply by Toby Rice on June 5, 2009 at 8:52am
7 year lease??? is that impressive?
Permalink Reply by terry hazlett on June 5, 2009 at 11:06am
7 yrs seems a bit long , if they're serious about drilling a well , i'd say 3yrs maybe 5 at most. with 7 yrs they could tie up your land for up to 12 yrs. with auto extensions included in most leases, before you see a penny of royaties.
Permalink Reply by Toby Rice on June 15, 2009 at 5:04am
sorry, I was being sarcastic about the 7 year lease- that's riduculously long primary. I would like to see more landowners lease their land under short term contracts that place pressure on the oil/gas company to get wells drilled and deliver the royalty checks.
Permalink Reply by Rita McConnell on June 15, 2009 at 5:35am
Just remember, under the current economic conditions, we can only drill what we can afford (contrary to popular belief, we're not all Exxon or Cheasapeake). And the regulatory process doesn't look to be getting any easier with the feds looking at the Safe Drining Water exemption. We want the rigs out there as fast as you do -- but we can only move so quck. Right now, we're looking at a year long process from siting to production.....

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