VIDEO: $20,000 PER ACRE LEASE............LET THE PLAY DEVELOP

Pimm Fox interview with Nicholas Atencio, chief executive officer of Mainland Resources Inc.
Lease cost discussion starts at about the 1:30 mark in the video.

http://www.bloomberg.com/video/65507056/

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Permalink Reply by wadea william saad on December 24, 2010 at 11:56am
I  totaly agree with you. he said 2000 or below to lease , after drilling , they flip it at or above 20,000 an acre , is that the value of the gas under one acre , on the average , I understand the variables from location to various shalles under the ground , to the thickness and the total hydrocarbones...etc..,but landowners are in no position to know for sure what they have , so how do the landowner leverage all these findings before the lease if he does not have any facts  to put on the table , a land owner is in the dark before the land is developed and a proven well is on hand 20,000 smackaroos ?BOY  i  WANT TO LEARN HOW TO ASK FOR THAT MUCH ,  i m with you
Permalink Reply by gasoholic on December 24, 2010 at 2:07pm
Actually, when you have 640+ acres being leased at $20,000 per, the actual value under an acre is much, much more than that. As for what one really has, if they are drilling horizontals all around your area, well, you pretty much have it. They just don't drill multi-million dollar wells for the piddly stuff. So, you just have to be patient and let it develop. Being in a group has increased the offers for many, but you will see that even the individual mineral owner, who understands the situation and all that is going on around them will be able to tap into as big a lease offer as any group. One of the biggest keys is for WV and PA mineral owners to keep ''Forced Pooling'' out of the equation.  
Permalink Reply by wadea william saad on December 24, 2010 at 2:20pm
I AGREE  FORCED POOLING IS TO THE COMPANY ADVANTAGE , THE FORCED LAND OWNER WILL TAKE WHATEVER THE COMPANY PUTS ON THE TABLE AS A STANDARD ROYALTY FOR EXAMPLE , THE PART  I DONT UNDERSTAND FULLY IS WHEN A COMPANY FLIPS THE LEASED LAND TO ANOTHER AT 20,000 AN ACRE OR MORE OR BIT LESS , ARE NT THEY GIVING AWAY PROVEN MINERAL ACRES AT 20, 000 USD  DIREGARDING THE VALUE ON THE LONG RUN ,
Permalink Reply by gasoholic on December 24, 2010 at 2:39pm

What happens is there are a lot of companies out there who do not drill and only snatch up leases for lets say $5.00 to $1,500 per acre and 12.5 % royalty. Then, go and sell this acreage for $5,000....$10,000.......$20,000 ect. On top of that, they may also add extra royalty on top of the 12.5 and anything over the 12.5 they negotiate, well, you guessed it, they pocket. As they sell off acreage at a hugh profit, they then take the money and buy more. When the wells come in, they are sitting pretty with that 7 to 12.5 % royalty they've added on top of the mineral owners 12.5%

Permalink Reply by wadea william saad on December 25, 2010 at 5:36am

to continue the build up of this conversation, you outlined the company business approach properly , as a land owner drafting a lease with the company ,  I  would add a clause that is only fair to all , the gas company should pay so much as % of the price in case they turn over the land and the lease to another company , in other words if they paying me 1500 to make initial lease 5 years term to drill , if they decide to sell their leases to another company at 20,000 /acre , i should stipulate as addendum , to get a % of the high price , other wise the lease should be written as exclusive to this particular company without the benifit of flipping over the land to some one else , and that s how you get more for your land ,  i read this advice some4 years ago , important to remember the good legal advices you read , so in time you can have the best contract ever

Permalink Reply by paleface on December 25, 2010 at 11:56am
 That addendum would come under (assignments) very important how that is described it can leave alot of doors open to the gas companys.
Permalink Reply by Mike Knapp on December 27, 2010 at 3:17am

Gasoholic,

 

I'm sorry, but your figures are way off.  Again, this looks like a case of people comparing Marcellus with plays like Barnett and Haynesville.  There is no one out there leasing for $5.00 and flipping for $20,000.   There's no one leasing and flipping for even 1/4th of that.   And to speculate what is going to happen when the play has "matured" is nonsense, not to mention that this play "maturing" is at least 10 years off.  

 

-Mike

 

Permalink Reply by gasoholic on December 27, 2010 at 4:52am

Mike, you know as well as I that companies have sold off acreage for more than $10,000 per acre in the Marcellus.

Permalink Reply by Mike Knapp on December 27, 2010 at 10:20am

Gasoholic,

 

You (should) know as well as I do that there is HUGE, HUGE difference between the value of blocks of HBP ground vs. John Q. Landowner and his 100 acres that is free to lease.   The highest I have ever heard offered was $5,750 per acre up in NEPA, and that was for a large landowner group, and that was during a MUCH hotter time for leasing than now. 

 

Look at the many groups that have put together sizable chunks of acreage and are getting ZERO interest from companies.   The only reason that my company was able to offer the deal that it was is because it was piggybacking 400K of nearly contiguous HBP land.   And we would be very happy with HALF of the $20,000 per acre number that is being thrown around.  

 

Of course it's possible that in 5-10 years there may be some company that really needs your piece to finish a unit, and gas is $15 per MCF, and there's a 36" line that runs right through your property, and Jupiter aligns with Mars perfectly, and you get a $20K per acre offer.   But if you do, you will be the exception, not the rule.  A much more likely scenario is that you hold out and get force pooled or otherwise surrounded by a company, you lose all leverage, and then end up signing for next to nothing.  

 

It's not sustainable, it's not that competitive.  It's not going to happen.   People need to stop using gas co to gas co pricing, and pricing from other shale plays  when evaluating the leasing market.  

 

I agree with Mr. Saad though, which is why if you signed up with the firm I own, you would be receiving 80% of the money realized from the flipping of your lease!

 

 

Permalink Reply by gasoholic on December 27, 2010 at 1:09pm

Mike, maybe you don't know the latest.  You can take the time to search out the news stories yourself.

Someone, ''John Q. Landowner'' signed over his share of 100+ acres for $8,000 per acre and 20% in PA.

I have also heard of $10,000 per acre awhile back and just recently $14,000 per acre and these are ''John Q. Landowner'' also.

As for groups getting no offers, well, when it's their time they will.

Good luck on getting people to talk and offer up their individual offers and agreements.

We will worry about forced pooling after it is enacted, if that ever comes to be.

 

Permalink Reply by Mike Knapp on December 28, 2010 at 4:32am

Gas,

 

I hear lots and lots of stories.   As always, I believe half of what I see and none of what I hear.   I find it awfully hard to believe that there are companies running around paying double to triple the going rate to random landowners for no apparent reason.  If there ARE people that received those numbers, I'm sure there is a very specific situation that got them that much higher rate or there is more to the story than meets the eye.  

 

 

 

 

Permalink Reply by wadea william saad on December 27, 2010 at 4:14pm
who says valuable assets ?this is an easement , like right of way . bought on the cheap ,about 10 dollars per linear foot  from what I  read over and over , the pipe could be 4 inches in diameter , but to place the pipe the company needs a clearing  equal to a tow way street in width so their trucks can come and go to place the pipes and periodicaly to maintain the pipes , and you get paid once , but the easement become a wound on your property , who wants to pay for land that have eternal right of way ,  I  think they ought to pay you by the square foot , at least

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