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Permalink Reply by Patrick VanO on May 27, 2010 at 6:53am

It's worth noting that the article went on to say that if an operator leases for $5,000 an acre, that operator needs $5.20 gas to make a reasonable return (we're at $4.25 as I write this). That makes me think Pinkerton is exaggerating. Further, if he really believed this acreage was worth leasing for $50,000+ an acre (or even $10K+!!), they would have driven lease prices up to substantially higher rates than we're seeing now: they'd be crazy not to. I'd like to see the quote in its full context.

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Permalink Reply by Robin Fehrenbach Scala on June 4, 2010 at 3:36am

Similar comments have been made during Chesapeake meetings and are aimed at shareholders and investors, to keep them happy.
While it is true to some extent that much of the acreage leased by Range or Chesapeake etc is worth far more than what they paid, several times more in some cases, that does not mean the companies would pay the landowners these amounts and still be able to profit.
It means that the companies could sell to another company at a higher rate if needed, and make up for some of the bad investments. Chesapeake has done this multiple times to keep themselves out of the hole.
Range seems to be more conservative and focused with their leasing and should give their leasehold acreage a higher value. But that value isn't the amount they would ever pay the landowner!
That's the way I am reading it.

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Permalink Reply by Hank zhao on July 27, 2010 at 8:55am

You are absolutely right.

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Permalink Reply by Star Gazer on June 14, 2010 at 1:40pm

Are you saying that the drilling company can take production costs out of the landowners royalty payments? 12.5% is the state minimum, however it would be significantly lower if they could do this. New to the forum. (first post) does it show?

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