WOULD YOU SIGN ON THIS LEASE?

  I posted this in the Licking / Muskingum County Group but am calling on the experts here that have been through the lease process for their opinion on it, the good the bad or ugly. The lease is there in the attachment. Better yet Let it ride here and I will copy and past from here over to there as this should be educational for all to evaluate. 

REQUESTING COMMENTS UPON THIS LEASE:

  I saw where J.Smith put in a post about a dead line for joining the Muskingum Valley Landowners Group which was started by the Law Firm of Graham and Graham of Zanesville. 

   As stated I am not promoting any group over another here as I believe they the groups will stand upon their own in what they may offer a land owner. As Such I am posting the Muskingum Valley Land Owners Group Join document as well as the lease that they are utilizing.

  Many here in GOMS have already been through the leasing process, some with regret some highly satisfied. I call upon them to make comments about this lease in what they view as the good the bad or ugly. From there you can decide. 

  As in any case when dealing with lease matters seek legal advice from an attorney that has experience in Oil and Gas. 

  For ease in use try to maintain replies to a given topic within the lease or terms. 

http://gomarcellusshale.com/forum/topics/lease-information-and-ques...

Views: 1632

Attachments:

▶ Reply to This

Replies to This Discussion

Permalink Reply by Billy Park Whyde on March 3, 2012 at 7:14pm

Below is the Groups joining document. From what I see they want a 10 year lease that could be for as little as $7000 per acre. 

Attachments:
Permalink Reply by Billy Park Whyde on March 4, 2012 at 4:27am

Minimum of $3,500/acre at 16%  with G&G getting a 7.5% upon the final paid by the lessee. How does that compare?

Permalink Reply by Billy Park Whyde on March 4, 2012 at 4:23am

I guess no one has seen this yet?

Permalink Reply by Billy Park Whyde on March 4, 2012 at 4:29am

A 10 year term with a max lease bonus of perhaps $7000/acre at 16% royalty, rather low I believe.

Permalink Reply by Billy Park Whyde on March 4, 2012 at 4:36am

A drill pads of up to 10 acres for $25,000 with $3, 000 per net  acre for other surface installations and damages including but not limited to easements or right of ways.  One BIG PAD!   A cheap compressor station on road frontage perhaps? 

Ruled out on the compressor in the No Compression on Leasehold item.

Permalink Reply by Billy Park Whyde on March 4, 2012 at 4:45am

Pipeline Any pipelines constructed pursuant to the terms of this lease shall be for the transporting of oil and/or gas from a well(s) drilled on the leased premises or lands pooled therewith.  If Lessee and Lessor mutually agree otherwise, said terms shall be contained in a separately signed agreement. 

Question by the use of the term pooled it does not state properties adjacent could say 40 or 50 well sites be called a pooled production of an area, meaning a main transmission pipe line?

Permalink Reply by Billy Park Whyde on March 4, 2012 at 5:54am

From what I see Jodi they can do that cherry picking.

Jim ShoosPermalink Reply by Jim Shoos on March 4, 2012 at 5:21am

I wouldn't recommend signing this lease.

Permalink Reply by Billy Park Whyde on March 4, 2012 at 5:33am

Hi Jim could you elaborate a bit. The  good points , or the bad perhaps?

Jim ShoosPermalink Reply by Jim Shoos on March 4, 2012 at 6:22am

...where to start.  Confusing and contradictory for starters.  From a lessor perspective, granting somebody an option at a predetermined price is about as useful as having a sixth toe.  If the going price for new leases is $5,000/acre and the option you granted can be exercised at $2,000/acre then assuming the lessee wants the acreage of course he is going to jump on the option.  On the other hand if his option price and the true value were reversed he will simply advise you he isn't interested in exercising the option... but, oh by the way, I might take a new lease for the lower price.  Why even have an option in there?

Moving on... Having a one size fits all surface damage settlement is not a great idea.  Not all property is created equal.  If you happen to have land across the road from a toxic land fill and your property is devoid of any valuable resources such as timber, you might think the fixed price for a pad is pretty generous.  But if you are the landowner group member who has a piece of property that has commercial or residential possibilities you are going to get shortchanged with the fixed price.

The horizontal drilling and production commitment is confusing for me (and I have read and drafted thousands of these clauses).  How the heck do you square a sentence that says "This lease shall not be extended beyond the primary term or any extension thereof by the drilling of or production from a vertical well"... when the very next sentence says exactly the opposite...that the vertical well will hold the minimum acreage required by the spacing laws of Ohio.  No doubt the drafter meant to have this last sentence apply to instances where there was a horizontal well in existence after the primary term that ceases to produce, but they used the word "OR" meaning that either situation works to extend the lease.  Had they used the word "AND" instead of "OR, then it would make sense.  As is...its contradictory.

Shut in wells... 48 months is a heck of a long time to sit there waiting for something to happen.

The limitation on pooled units is perhaps the most abstract and impossible to quantify and you might as well just let them have 1,280 units.  To say that a unit can be 1,280 acres if the horizontal lateral extends beyond the boundary is nothing short of goofy.  For example, assume you have laterals that for geological reasons require North-South orientation.  Then assume the operator has a 640 acre unit that only runs 500 feet in a North to South direction, but runs East West for 4 miles (an obvious exaggeration only to illustrate the point)...well guess what... that lateral won't fit in his unit and thus he automatically gets his 1,280 acre unit.  Maybe your operator is a good guy and wouldn't create a unit with such an obtuse shape simply to be able to have a larger unit... any maybe he isn't such a good guy.

From a lessor perspective I'm not a fan of the Market Enhancement Clause.  With no more definition than this one has you might as well not have even put in the first paragraph entitled No Post Production Expense Clause.  Short of dehydration and compression almost everything else could fit into the category of making the product more valuable and thus deductible.  This includes gathering and transportation expenses... if you can't sell the gas if it can't reach a market then by definition it becomes more valuable to construct a line or pay somebody to move your gas to a point where a buyer will purchase the gas.

Just my two cents

Permalink Reply by Billy Park Whyde on March 4, 2012 at 6:53am

Thank ya Jim for the insight.

Permalink Reply by Billy Park Whyde on March 4, 2012 at 5:36pm

Anyone else have a opinion on this lease? 

RSS

© 2024   Created by Keith Mauck (Site Publisher).   Powered by

Badges  |  Report an Issue  |  Terms of Service