Replies to This Discussion

Permalink Reply by mike4t on October 19, 2011 at 3:12pm

DK,

I attended the meeting last night, and I had a couple concerns that prevented me from signing up right away.

 

I agree that a group should definitely result in a higher bonus, royalty, and better lease terms but my main problem with what I heard last night was that so far, it sounded like you do not have a draft of what your lease should be in terms of wording and addendums. I'm concerned that the "target" amounts you set only give one way to go....... down.... I may be wrong since I was not able to stay for the members meeting,, but I feel that in this type of negotiation you ask for everything and then work down from there. For example, when you go to sell a car, they only want to pay $5,000 for Kia, but they'll take your Cadillac too, at the same price, and you think its OK because you won't have to pay insurance on it anymore.

 

Its tough to make an analogy but maybe you know where I'm coming from.

 

I can understand why the rep from the O&G company was interested....... he thinks/knows he is going to get a bargain.

 

Before you sign and set the standard for Northern Butler County, please reconsider. You mentioned the 33% increase over the standard Shell lease....... how much more will the increase be in just a few more months?

 

Aim high, hold fast, and drill, baby, drill!

Permalink Reply by DKinPA on October 19, 2011 at 4:09pm

Mike,  I appreciate your input and I am glad you were able to make the meeting.  I also agree whole heartedly with "Aim high, hold fast and drill baby, drill" and "a group should definitely result in a higher bonus, royalty, and better lease terms".  Thats what our group is all about!

Since you were not able to attend the members meeting you did not hear the specifics of where we are and what we are doing.......  We don't wish to disclose those items to the general public for very obvious reasons! 

I am a little confused on your analogy (certainly not the first time I have been confused) Since our goal is currently above the current offer to the group and way above the standard offer.  I love to learn and  I am open to criticism so please explain what we are doing wrong by negotiating for better terms? I have extensive experience in negotiations and whether the deal has been for a couple of thousands or several millions,  the goal is to get the other party to agree to your terms or as close to them as possible thru the use of  facts and leverage...........and that is exactly what we are doing.

As you heard last night, we won't force anyone to make any choice they don't feel is in their best interests.  We would love to have you in the group but if you feel that it is not the best thing for you that is fine too.....we are here to help our neighbors and community get a better deal with better lease terms and addendums than they would be able to get on their own, period.

 BTW, if the gas company  rep would like to give us our asking price and terms because he feels it is such a great bargain, he knows how to reach me.

Permalink Reply by Johhny Jacobs on October 20, 2011 at 7:01am

You did it Doug, you ruined a good night sleep for me, I hope you're happy. After reading your 'Update' I turned to alcohol and sleep aids...but to no avail. I actually heard their were several Landmen in the audience; which are indeed representatives of the gas company. Now to my perceived fiction.

Benefits of a landowner group

1)Working together as opposed to working as individuals. 

If you have read anything I have wrote in the past several weeks, you'll know that I am a big advocate of Individuals working with their neighbors, and a TRAINED oil and gas attorney, hammering out a land/case specific Addendum (which BCLG can't do....oil companies will accepted cumbersome Addenda on individual leases, but not a bulk flip....so you'll likely get an inferior Addendum...I digress), then waiting for a time when the individual is comfortable with a price. 

2) Increased Leverage

       That's just arrogant. Competition for areas between the big companies dictates price. Not competition for your group. From what I understand, your groups land is concentrated in an area where if you want to see production your choice is basically made up for you. Shall we review the fact that 'forced pooling' doesn't exist in Pa. So when the fine folks at BCLG sell you to China (or another company that has no land around you), saying it's not a problem because Big Oil will simply horse trade your property...wrong.

3) Sharing of information

        If the information is wrong or misleading, then I would put this in the 'disadvantage' category. 

4 Overall ability to obtain a better lease....

        When has BCLG negotiated a deal before? I searched the Law firm which represents you (advises/you solicit on behalf of) website; I did not find much about Oil and Gas experience? I didn't find anything. From a monetary standpoint there are obviously obstacles to be overcome for your group, but in the event that the group was offered $10,000 the issue of Addendum still exist. Your purporting that as a group, the Addendum you (prospectively/eventually) create will be superior to that in which an individual with a trained oil and gas attorney can achieve for their specific property.  (Mike I'd be concerned too) Also, from what I understand, your BCLG contract basically has a clause that says BCLG and it's affiliates are not legally accountable for what they negotiate. You have no legal recourse as a member? From my understanding, if you sign a Lease through BCLG, you release their 'consultants' from legal recourse if mistakes were made. Please clarify this point for me.

 

Higher Fair Value

1) There is a Horizontal well in BCLG's concentrated area?!?! Could you provide an example? Could you provide an example of production numbers? 

2) Not sure I understood that sentence. But I think it said, that there is more than one producible shale and the geology of said shales has varying desirable products. Agreed! If the objective is to wait until all producible shales are discovered and appraised, you may be here a while. Do you guys have numbers on the Rhinestreet formation? 

3)Lease values obtained in other areas? This again goes back to the price of a house in New York vs. the price of a house in West Virginia. Different markets have different variables. Infrastructure, laws (forced pooling vs. Pa), Shale product/thickness, etc. etc. It is perfectly acceptable to wait and see what 'housing' market you're in, but I'm not going to let my Realtor convince me I'm in NYC when there is a giant copper still sitting in my yard. 

4)This will remain true for the next 20 years. So I really hope this isn't the lynch pin.

5) Duh! Until we find a way to supply more land or fossil fuels (or any non-replenishable good), demand will likely increase. 

 

I don't expect answers to any questions posed above, generally, things like: forced pooling, varying markets, infrastructure, representative (consultant) qualifications, dependency on neighbors leases for production....are ignored. Any constructive feedback would be welcomed....on this or previously ignored posts.

Many Thanks,

Johhny

Permalink Reply by DKinPA on October 23, 2011 at 6:47am

An interesting article regarding Eastern Ohio, where leases are now going for $5000/acre and 19.5% royalty.

 

http://http://www.cleveland.com/business/index.ssf/2011/10/gas_comp...