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!
These signings are often the beginning of long term relationships. And like any relationship anyone enters into for a long time, you need a partner who fits you -- anyone who leases the opportunity to develop their o&g rights to a drilling company should do homework, and be comfortable with that organization's practices and operations.
I am new to the Marcellus Shale Play...I was just approached a few weeks ago by PC Explorations out of PA. They want to drill on my small 30 acres. I dont know what the going rate per acre is where I live (they offered 25.00 per) and I suppose the 1/8 royalty is standard from what I have been reading and free unlimited gas. I was also approached a husband of a friend. He works for a local drilling company but has not got back to me yet with their offer. My concerns are that if I sign and then they dont drill and some other company does want to drill I have already commited to the first. Is is possible to get a confirmation from these places on a drilling date? F.Y. I. I am right on the Ohio River located on State Route 7 Clarington, OH just North of Ormet Aluminum Plant. Any infor would be great! Amy
I would ask around about prices. While offerings have dropped considerably since the "big rush," and you are located in Ohio, which is near the edge of the formation, I would think you can do better than $25 and 1/8. Thats what people were being offered before news of the Marcellus really broke. Go to your local court house and ask to see leases that have been filed in the last month or two, and see what kinds of rates they were getting. You can probably also see what PC has been giving others. Look at the other company as well.
You're not going to get a confirmation date on drilling. So many things can impact drilling schedules that no one would nail down a date for you in advance. The way to deal with that concern is in negotiating the length of the lease. You can ask for an annual rental delay -- the company pays you annually to hold the land -- then when the year is up, if you want to sign with someone else you can if nothing has been drilled. Or you can ask for a paid up three or five year lease -- the company gives you the rental for that period up front or pays it out quarterly, and they have three or five years to drill.
Considering that you have 30 acres, if there are no large land masses leased to the same company adjacent to yours, this well will either be more shallow, or tap the Marcellus vertically. Horizontal wells take a little more acreage to drill. Before you sign, do some soul searching -- make sure you can live with a major construction project on your land. The rig will run 24/7 -- and it will be noisy. But it goes away -- and relatively quickly in a vertical situation. The company should completely reclaim your land. Make sure any water wells are properly vented and make it a provision of your lease that they test it prior to work and provide you with the results.There will be some equipment -- a tank, Christmas tree and some other items that remain for well tending. But its pretty limited. Maybe an acre of ground at best. The process is somewhat inconvenient, but it does end and is remediated. And royalty checks keep coming if you have a good well.
25 dollars an acre seems a bit low.... Acreage prices have plummeted from last summer, but still, you might want to check what the going rate is in your area. I would say at least 100 is more reasonable. I checked out your acreage area and there is some activity around there, but your acreage isnt really in the hot spot of the play - as of now. The shale in that area is of good quality, but it isnt as thick, and it isnt buried as deeply, both of which decrease the value of the land. But, it is still a good spot to drill and it is worth putting a well down because the wells should be successful in that area... Now, as I've mentioned on a few other posts, youre going to make your money on whether or not your company will actually drill a well on your land. You recognize this which is great. I would find out the drilling schedule and acreage position of this company before signing anything. Since you probably wont make much money on the lease bonus alone, you should target a company that will commit to drilling a well on your property. If it's a big company, I would be weary about signing a long term lease (5 years) because they have 1,000,000 acres to choose from. These companies want to develop acreage blocks where they can drill 25-50 wells or so in the area. If the company leased areas around you, then they might actually plan to develop your land and the surrounding blocks. But, if they arent active in that area at all yet (maybe theyre just focused on Penn for now), it might be a while before they finish up there, and then target your area. For a smaller company, a 30 acre block, mixed in with a few other blocks in your area, it would be a nice little spot for them to develop. You can think of these guys as the scavengers. Developing a small area and only putting down 5-10 wells is just fine with them and you would get the same royalties on their wells as compared to a big company. These companies usually move quicker, and because they have a smaller budget, they wont waste money on buying acreage theyre not going to drill.
So, if you want to go with a bigger company, I'd make a shorter timed lease, or put some kind of drilling commiment in the agreement. If they can't commit, if their drilling program isnt in your area, or they dont plan to move into your area in the next year or so, then Id hold out. Since youre not really giving up a huge lease bonus ($700-ish) I dont think you'll regret holding out a bit. Unless a company is willing to get in there and drill, then I'd hold out. In a year or so, development might move more into your area, proving it up, and increasing the value. You'd get more money for your bonus, but more importantly, companies would be more inclined to sign a short term lease, and commit to drill, which is what you want. Bottom line, you need a company that will drill on your land in a timely manner. Clear this up with them before you sign the lease and you'll be fine!
Our family has 46 acres of mineral rights in Upshur Co W.V. and was offered $10.00 an acre from Mountain V. They have promised at least one Marcellus vertical well and possibly one Devonian well. What is a Devonian well? There is already a road on this 46 acres from a previous well that was drilled in the 70's, that was plugged in 1988. That would save them some money not having to put a road in. Chesapeake offered us 200.00 and acre 5 year paid up lease, but said they had to have 640 acres to put a Marcellus Horizontal well on there. The land man said they only do Horizontal wells. He said he cannot promise a well on there within that five years if ever at all. I have been told that there were other companies working in that are and that they will never get those companies to sale out to them. I doubt that we will go with Chesapeake's offer, but it was a blow when Mountain V only offered us 10.00 an acre. Also by the advice from our lawyer we ask Mountain V to give us well head price, and he said no that they cannot give us what they themselves haven't produce. Any advice?
By "devonian well" Mtn V is referring to the conventional shallow well (typically production is found at 1000-4000 ft deep, called devonian because this rock too, is of devonian age). I do not believe this company is taking advantage of this person. In Upshur county, the Marcellus is going to be found shallower (w/ less pressure-> less gas) and it is not the same animal as what everyone is excited about in some parts of PA. There have only been a few marcellus wells drilled in Upshur- and guess who had the courage to drill them- Mountain V. So, the way I see it, this company chooses to spend their money on drilling- which requires a large capital commitment- AND makes everyone more money in the long run. go shorter term on the lease, add a depth clause (which will prevent you from being held by a shallow well)- if you feel its necessary. the goal is to get a marcellus royalty check, in this area, these guys are legit.
Here's a message I got back from Moutain V concerning these wells. Can someone please respond to this message and let me know what you think. Thanks! G.P.
Yes that is the direction our company can go. A Devonian well is a broad term because there are three sections to this horizon, Upper, Middle, and Lower Devonian. The Benson Sand, which is considered by today’s terms “shallow” well, is in the upper Devonian, and the Marcellus, which is considered “deep”, is in the Middle Devonian. You are getting into a very complex discussion which would be better suited for a face to face conversation, it’s hard to explain if you don’t understand Geology. I hope that helps your understanding, thank you for your response and I look forward to working with you in the future. If anytime you need to contact me feel free to do so.
What makes this site so great? Well, I think it's the fact that, quite frankly, we all have a lot at stake in this thing they call shale. But beyond that, this site is made up of individuals who have worked hard for that little yard we call home. Or, that farm on which blood, sweat and tears have fallen.[ Read More ]