I am in Liberty township and a few months ago got an offer to buy my royalties for 1500 to 1800 per acre, but they would do a more in-depth look if I was serious which "mite change the numbers" slightly....even tho I am not drilled or receiving any royalties ..talked to a landsman rite b4 I contacted them and he advised caution as there will be "significant" activity in my area in the "near future"....how about it, anybody else get an offer or hear anything or see any activity here in Tioga Co. ?
I heard a rumor that Shell has a buyer for The Marshlands property. Have you heard who the buyer is?
Thank you Jack
I've heard second-hand that they have a preferred bidder, but that no deal has been made yet. The Marshlands package has three sources of value: 1) the leasehold acreage, 2) the existing Marcellus gas production, and 3) the pipeline network. Some potential bidders were mainly focused on one or two of these factors, and Shell really wanted someone who could use all three and would value the asset fully. My guess is that the existing production will account for up to half of the final price, but that's just speculation. Whether the Utica will be profitable to drill in that area is the key unknown. Without more drilling (and the Marcellus there appears marginal) the pipelines have limited value, so the ultimate buyer is quite likely to be the player who gives the Utica the highest odds.
Nice summary Jack....thank you.
Question....if the Marcellus is/might be marginal (not doubting your assessment)....how could a value be assigned to the Marshlands acreage if the Utica (if present there) has not been developed to any extent?
Me thinking out loud here and trying to understand.....having the leasehold acreage and pipeline network might not have as much value if good quantities of gas just isn't there....am I missing something?
A good potion of the leasehold acreage is on undeveloped acreage in Tioga State Forest in a fairly sensitive area. I am suggesting that most companies are not willing to put up with the stricter requirements that DCNR has in their (last I knew) 77 page lease.
No, that's correct. If you can't profitably develop new gas wells on that acreage, the pipeline network won't do anything for you but move your Marcellus gas from the old wells to market. And Roy is right that the State Forest leases aren't as valuable as the private leaseholds due to their high royalty and surface use restrictions. With the Utica in that area being very speculative, anyone who buys this acreage will be taking a gamble. Trying to decide how much to pay for the acreage (how much of a gamble is justified) is the big question all the potential buyers are wrestling with.
Having said all that jack, I guess Shell took a huge $BBBB gamble.
Shell bought East assuming that the Marcellus was good all across Tioga and Potter Counties and gas prices would stay strong. If not for their Utica discovery they would have lost everything they spent. As it stands, they haven't made any money yet on the Utica, but hope to once the price of natural gas in the Northeast converges with the Henry Hub price. Which will hopefully happen in a couple years. That's when I hope to see them start drilling again.
Thank you Roy, Josie and Bob, and Jack for making this scenario clear to me.
Next question....I know, they never end.....
What type of potential buyer can Shell expect to make an offer for the Marshlands?
Seems to me the majors in the area have enough good acreage for the time being....so would one of the smaller players active in the area take a flyer on this?
That line of thinking leads me to think the 'offer' may not be sufficient for Shell to divest...they might be stuck with it.