Westhawk Minerals

Hello,

I signed with Shell last year.  Now I got a letter from Westhawk MInerals offering $3,000 an acre for my mineral right. I must admit it is a little bit tempting since I do not know if I am going to be in a unit or if Shell plans on drilling any time soon, and I am looking to retire.  I have 52 acres in Londonderry township in Guernsey county.  Any thoughts? 

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Permalink Reply by Ralph W. McGeary on April 11, 2013 at 9:56am

1 0wn 28 acres in S. Belmont Co. and was just offered by Westhawk 4500.00 per acre. As for retirement I agree with Billy. Plus do not forget obama taxes??????????

If you wish to discuss call Ralph 7246893035

Permalink Reply by Olive Sue on April 12, 2013 at 10:16am

We see offers everyday for buying of mineral rights.  Understand this, selling those rights are for eternity! Last deal, last dollar except for your acreage and worse yet those who own will negotitate all leases hereafter and those may be very unfriendly for the surface owner.

This is how I view selling those rights:  Unless I have no family, am leaving the area, intend to never look back, am broke and starving and death is eminent, DO NOT SELL!!!

Royalties or lease renewals can be very nice.

Permalink Reply by TM on April 11, 2013 at 7:27pm

I would never sell my minerals. I think most people forget that other formations may be produced from in the future. These amounts that are being offered per acre are peanuts compared to years of royalty money. I truly believe in the future there will be multi- formation wells all on one pad.

Permalink Reply by Oliver Perry on April 11, 2013 at 9:00pm

Drilling multiple formations from the same pad is being done right now by Shell in northwest Butler County, PA. They are targeting the Burket, Marcellus, & Utica Shales from the Halterlein Pad in Mercer Township, I attached the well plats.

I would never sell my minerals either. They have been in the family for 100 years, and I would hope they would stay in the family forever.

Attachments:
0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on April 11, 2013 at 8:49pm

Can you cite the math used to arrive at the $50,000-100,000 figure?  They're worth more than the amount offered, certainly, but that seems like a pretty unreasonable number.  

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on April 11, 2013 at 9:14pm

So what you're saying is based on a number of unquantifiable assumptions a royalty may be worth such a number?  Sorry Oliver, I live in the real world and none of this set until there in fact are multiple wells being drilled.  Further, a landowner with 10 acres isn't likely to be put into a multi-pad unit if they're already in the first well.  If someone has 300 acres?  Yeah, it's possible that someone could luck out like crazy and end up tied to a unit with three monster wells, but that's misleading to landowners.  

The Buell well was worth ~$4,000/acre based on 2011 production.  That's pretty good.  But what it isn't is an indication that the well will perform at a production rate 25x greater than its first year in order to get to that $100,000 number.  Let's say that the first reported year--which was 198 days of sales--continues unabated for the full 365 days of 2012, meaning YOY there is little decline. Production numbers are the exact same but there are more days.  In other words, less than 35% decline, which is generous.  That's still only ~$8,000/acre net to the landowner.  You'd need five more wells--performing at the same level, which mind you is untenable considering the Buell is the best gas well in Ohio's history--just to reach that $50,000/acre promise.  That's dubious math.  I'm not here to encourage anyone to do anything, but let's be straight with the numbers and not make promises that we can't keep.

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on April 11, 2013 at 9:25pm

10 years?  20% more than it's worth for three years.  Maybe.  I don't know.  What I do know is that the market place has set the price threshold based on what they have learned thus far.  These things may not last 10 years.  We have no concept of the decline and we're working off of industry-supplied numbers which I don't have to tell you are pretty fuzzy.  Look at CHK's absurd EUR numbers from the Fayetteville shale.  They moved EUR UP from 2.4 bcf to 2.6 bcf despite the fact that only 9% of their wells had done over 1bcf and NONE had been over 1.7 bcf.  Average EUR? 541 mcf.  (This as of Q2 '11 reporting.  I don't have the newest numbers saved on my laptop, sorry).  

The point is that these companies are not honest about EUR and they inflate all of their positives and bury the negatives.  

Permalink Reply by rmc on April 12, 2013 at 9:20am
Careful Marcus I don't believe that Mr Fang is you're average Joe he may be leading you somewhere you don't want to go.
0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on April 15, 2013 at 12:20am

Not sure what numbers they're working off of, Fang.  I'm sure that they have made estimates based on the thin information available.

Permalink Reply by Baldeagle on April 16, 2013 at 5:08pm

Hi Susan. I would pay you $4K for your minerals in Londonderry Twp, if you ever decide to. If not, no biggy. That area should be pretty good. 

Permalink Reply by Susan A Tippel on April 17, 2013 at 8:58am

Thanks, but I am going to hold. 

Permalink Reply by Matt N on April 16, 2013 at 10:00pm

Are you still signed with Shell?

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