WET UTICA Worth $35k PER ACRE ??

Since the New Production #'s Are Out From The Wet Utica Wells..The Trend Is Showing That The Utica Acerage Is Headed Upwards Of 25k-35k Per Acre! It is being compared to the Eagle Ford In Texas. What Are your Thoughts And Opinions??  Some Texas Leases Were $30k Per Acre!

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Permalink Reply by Shower Bath on June 2, 2012 at 11:47am

Value of Eagleford and Utica acreage from the most recent investor presentation (which is on their website) is referenced in this article about Chesapeake. And, like the article states, the landowner will not get this amount. However, when JVs are formed or large tracts are sold by one company to another, these numbers are valid. See the link...

http://www.theintelligencer.net/page/content.detail/id/570571.html

Randy

Permalink Reply by Joseph-Ohio on June 3, 2012 at 12:53am

Randy,

Looks to me like business as usual - s.o.p. !

Buy low sell high is the name of the game.

Landowners need to get as much as they can for their leaseholds - don't let the landmen buffalo us !

Thanks and good luck to us all.

Permalink Reply by Jim Litwinowicz on June 3, 2012 at 4:19am

What happens is that people see deals that Company A sold acreage to Company B for a said amount.  People do the math of dividing the dollar value by the acreage and then complain that the deal was for some high value like $20,000 acre while the landowner only several thousand.  But this is folly to compare because these deals are done after an area has been proven and includes producing wells, pipelines, and supporting infrastructure. The land has been aggregated and the titles certified. All this adds great value to the O & G rights.

Think of it this way....for $100,000 dollars you can buy everything you need to build a house....lumber, blocks, shingles, windows, drywall, electrical, plumbing, heating, and much much more.  But without the skills, tools, equipment, and work to put it all together all you have are large piles of material. After the house is built, the same materials are now worth $200,000 as a finished house.

That is much the same as comparing what an individual landowner with 75 acres gets in a lease as compared to a company selling a large, leased, and proven oil/gas field with existing infrastructure.

015334grltd9mPermalink Reply by 015334grltd9m on June 3, 2012 at 4:29am

Jim,

I believe the argument and facts show these values are for raw undeveloped acreage in the Utica.

How you doing BTW?

Permalink Reply by Joseph-Ohio on June 3, 2012 at 4:45am

Agreed.

There is major difference between leasehold dollars per acre and the sell price company 'a' makes with company 'b'.

And it's good to have an idea of what that difference is.

Would it be better business to not know ?

I don't think so Jim.

It makes no difference to what I've already written; and still stand by and write once again 'don't let the landmen buffalo us !'

Landowners should get the most they can for their leaseholds.  The land and resources belong to the landowner until he bargains them away.  

If a landowner can garner a higher leasehold price more power to him.

All that will do is cause company 'a' to sell to company 'b' at greater sell price.

So what.

The money the landowner earns with his leasehold is all that really matters to the landowner.

Also, for info., I've been informed that in Texas for instance 25%  landowner royalty payments are common.

Landowners - go for the bucks !

 

Permalink Reply by Patricia Patterson on June 3, 2012 at 7:36am

The individual land owner that has enough continious land  or more to make a unit should lease for the big money then.  or the land owners that all get together and have allot of continiuous acreage should lease for big money as well. 

Permalink Reply by Jim Litwinowicz on June 3, 2012 at 9:29am

Ron; doing very well, thanks. I don't think that this is raw acreage.  First it has been aggregated at substantial cost.  Landmen and their support staff aren't cheap.  And every time a landowner asks for an addendum, or even a one word change, it has to be approved by the legal division adding more cost. Seismic has been done on most of it for millions of dollars. Old well logs have been researched. A few wells have been drilled and some lines put in place adding value and helping prove the play. Contracts have been entered into with midstream companies to transport and process the product. I am sure there are other considerations that I am unaware of.


Joesph-Ohio;  I fully agree that the landowner should do his/her best to get every penny they can. The companies don't always play fair and they have the upper hand. I'm just pointing out that the selling price paid out is higher for good reason. Landowners need to know what constitutes value and how that affects them.

I hope every landowner get the best deal possible.  But don't let a good deal go by because of chasing unattainable numbers.

Permalink Reply by Joseph-Ohio on June 3, 2012 at 9:55am

Jim,

Agreed - all except the 'good reason' part.

I'm not so sure at all about the inflated costs affecting any transfer between a company 'a' and a company 'b' happens for anything that I would call a 'good reason' at all.

However, having said that, it doesn't matter how I interpret things.  It all will just keep happening anyway; and we as landowners have to make the best of the situation for all of our own 'good reasons'.

Good luck to us all.

 

Permalink Reply by Jim Litwinowicz on June 3, 2012 at 10:32am

So if there is no "good reason" why prices are "inflated" between company a and company b then why is company b willing to pay so much more for the same land?

Permalink Reply by Joseph-Ohio on June 3, 2012 at 10:52am

They really don't care how much they have to pay.

What's the phrase....'market driven' ?

They want it for as little as possible but, when push comes to shove and they want the resource they'll buy it anyway.  I interpret it as a 'domestic cartel'.

That's why gasoline prices keep going up.

They really don't care.

It all comes out of the consumer's hide in the final analysis - they will make sure that it does.

The only thing that will change it is a complete collapse of the market and that's not likely to happen - another bailout or numerous bailouts will happen 1st - too big to fail ring any bells ?

So in this vicious environment why shouldn't the landowner go for the gold ?

The answer is, that the landowner should, by all means, go for the gold and as much of it as he can get.

The landowner gets one shot at it.

Like I say, good luck to us all.

Permalink Reply by Joseph-Ohio on June 3, 2012 at 12:10pm

You know.....I want to add something else.

Seems to me that the 'Too Big To Fail' philosophy applies to both Dems and Reps.

I think that's been proven with both the Bush and the Obama Administrations' bailout policy.

There's only one party in reality.

The name of the party is 'The Politicians'.

It stinks but, that's the way I see it.

I keep saying it and writing it - good luck to us all - we need it.

Permalink Reply by Jim Litwinowicz on June 3, 2012 at 1:29pm

If you truly believe "they really don't care" how much they pay for leasing rights, then there is no use continuing this discussion.

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