Replies to This Discussion

Permalink Reply by Tyler Durden on September 3, 2011 at 5:41pm

Does this include any of Mercer County

Permalink Reply by Jim Litwinowicz on September 4, 2011 at 8:38am

yes it does, the southern townships and west up to and including Hermitage. Email me if you want more info      landownerslease@hotmail.com

Permalink Reply by sara sereday on September 9, 2011 at 11:00pm

Does anyone have  info to help me understand? In merecer county I have 96 acres

leased with National Fuel( at $2.00) an acre.I was told thaey will not allow their sister company Seneca drill because this is a storage area and will interfere with storage. Also what are

people getting now for leasing land for storage and pipelines. Can you renegotiate an old lease

or is it For Eternity. Is there such a thought as Disparity

Thank-you

Anne

 

Permalink Reply by Todd J. Scott on September 10, 2011 at 5:21am

Sara,

Based from my experiences in Tioga County, PA if you are in a storage region it doesn't bode well for you to have other formations developed by any operator.  There are regulations about drilling in or near areas being utilized for gas storage, and generally when an area is being used for storage no one is in a hurry to develop it further.   Here's a couple questions for you.  Are you, and have you been recieving payments from National Fuel for the gas storage?  If you are then I"m assuming you own the OIl and Gas rights or at least a portion of.  Read the original lease agreement and any other agreements you have, or the OGM owners have signed since.  Is it a storage lease, or an OIl and Gas lease with a storage rights provision in it?  Is there certain depths or formations mentioned in any of the agreements?  IE; 200' from the bottom of the Oriskany Sandstone to the surface.  Thanks.

Permalink Reply by MANDERSON on September 3, 2011 at 4:59am

Who is Hilcorp and whats the deal with them ?

 

Permalink Reply by Jim Litwinowicz on September 4, 2011 at 3:04am

Leasing is a very complicated process, one that is made worse by the duplicitous behavior of many of the O & G companies. Their standard leases are full of loopholes and intentionally vague.  And the situation is made worse by landmen that will say whatever it takes to close the deal. While not every landman is duplicitous, the O & G's have not reigned in those that are. It is no wonder that no one trusts these companies or their reps and now they have to deal with those consequences.

 

What you say may  be true but don't take it personally if I don't believe it. After what I have seen, heard, and experienced, I will never trust any land man. You state that only Shell will be able to produce Lawrence Co  (no one else has a chance). If that is true, why are several companies willing and even anxious to spend at least a $100 million just to lease acreage here? There are at least 5 companies other than Shell that is negotiating on these properties. Why would they be willing to throw away huge sums of money when they supposedly can't produce?

 

Perhaps they will aggregate and flip the leases.  Like you said, all companies swap leases with great regularity, including Shell. That is exactly why the lease language is so critical. One never knows who will end up owning the lease or developing one's property.  I tell people that this is more binding than a marriage because there is no possibility of divorce. Worse, you have no idea of who you will be in bed with because they swap these like kids swap baseball cards. The only protection one has is a strong lease.

 

As for Shell, you say they raised the offer to $3000 in July just to be fair since they were offering similar rates in Butler Co.  O&G companies always have offers specific to counties or even townships and they vary greatly across borders as a standard business practice so the fairness issue doesn't hold water. Did you go back to all those people that leased in May and June at $1500/acre and bump them up to $3000/acre" just to be fair"? Call me skeptical but I doubt it.

 

Shell, as did other companies, waited until after the May deadline for the Mt Jackson agreement to expire, hoping that the group would fall apart. Instead, they decided to stay the course and started to get solid offers by the end of June. Shell doubled their offer in July, not going up in increments of $500 like is usually done. When CHK signed a large deal in Beaver Co through Co-eXprise, the other companies got real serious with their offers.

 

Perhaps you are right. Maybe this company will be forced to flip the lease to Shell.  Thats ok and maybe even preferable since Shell is already active in this area. But if they do, Shell will have to abide by the terms of the lease, including the royalty payments and all the landowner protections contained within the lease.  I will feel more comfortable dealing with Shell with a much stronger lease. And if it takes a year or two longer, thats ok as long as my property and my rights are protected.

Permalink Reply by JoKlause on September 4, 2011 at 3:29am

Well said Jim

Permalink Reply by Harold John Pitzer on September 6, 2011 at 12:44am

Jim very well put, I am also a member of the Mt. Jackson group and not only are the current bonus and royalty terms good, but the lease terms can not be matched by anyone. This was only possible by the group not folding under the pressures of the gas company laymen.

 

John

 

Permalink Reply by Todd J. Scott on September 6, 2011 at 7:36am

Jim -- first off I want to hand it to you, this was a well thought out response by a landowner that is paying attention to what is going on around him.    I can't disagree with your statement about duplicitous OIl and Gas companies or duplicitous landmen as I know they exist, however I think there is a stark contrast between the prudent operators that actually drill Oil and Gas wells and those that give the elusion they do but never actually do.  Those "flip" companies march to the beat of a different drum and their business model is all about aquiring the acres in a short time frame to make a buck.  From my experiences those are the companies that most landowners take issue with.  To this point, in Lawrence County that is what most of the landowners there have dealt with, so it's what most people know.  I can see now that I'm going to have a difficult time convincing landowners otherwise but I'll fight the good fight. 

If we're categorizing "those duplicitous companies" and "those duplicitous landmen", I think it's only fair to acknowledge a new kind of landman as well.  Those being the "certain" lawyers and group representatives that advertise themselves as being on the landowners side to aide them through this difficult process to negotiate for better terms and get a fair contract.  They fill the landowners with fear telling the duplicitous landman stories, further exploiting stories covered in the media, and convince landowners that they can't do it themselves because its too difficult.   For this they only charge a "small fee".  This is either a set fee, or a percentage of the landowner's royalty and/or bonus consideration, but once you add all that up it's a considerable amount of money, enough money to make a seemingly honest man duplicitous. 

I have experience in working with landowner groups and it seems to depend on the chairman of the group.  If that chairman understands Oil and Gas and is devoting 100% of his/her time to completely understanding the environment, each particular landowner's property location, and what each drilling company can bring to the table it's usually favorable, but if they are doing this as a side business and not putting in the time, or just focused on how much money they can make by adding more people to the group regardless of the location of that landowners property, or just selling the leases they aggregated to the highest bidder it's generally not favorable.  If I can recognize that there are good and bad landmen, then landowners need to recognize that there are good and bad lawyers and good and bad groups as well.

In response to your question about why companies are willing to spend 100's of millions of dollars on acreage in Lawrence County if they don't stand a chance to produce it I would say it's because they have not had time to research and map what leases already exist in Lawrence County.  Again... this is just my opinion but I have seen it happen before.  Based on the limited activity in the Lawrence County courthouse I have to believe they just don't know yet.

I still stand by my comments regarding why the offer was raised to $3000/acre and honestly don't know too much about what is happening in other counties with other companies because I'm not working there.  I'm staying focused on what is happening in Lawrence County.   I don't think it's fair to compare Shell's "fairness" about having the same offer to people in Butler and Lawrence Counties on a go forward basis with what people signed for in the past.  The offer was changed almost overnight and the people that signed for $1,500 got an offer they agreed to.  To my knowledge, no company has ever gone back and offered a landowner that has already leased the difference of what they signed for and what's being paid now.   

Overall I line up with what you are saying about educating yourself, negotiating for a good lease, and biding your time.  I personally think that landowners are capable of negotiating a good lease for themselves if they put some effort in to it and I think that Shell has been accomodating with the terms they have approved in their leases.  If you want to group together, just be sure to choose your representation wisely.

I want to close by saying that I'm enjoying the conversation back and forth within this discussion.  It's hard to sense people's tones contained within just text on a page but I want everyone reading this to know that I am not taking any of this personal, nor am I upset with anyone and I hope noone is upset with me.  I'm just sharing some of my personal thoughts and experiences I've had in this business.

Permalink Reply by Bill Broker on September 9, 2011 at 5:20pm

I know the landman on this site are not going to like my post but, here it is.

If you are looking at signing a lease you should consult a lawyer who is an EXPERT in OGM leasing.

I beleive land owner groups also serve a very good purpose. I have clients that have hundreds and thousands of acres. Some of them have joined land owner groups eventhough they have negotiated  their leases in the past and done quite well. There is power in numbers.

The landman does not like the groups because the group is by-passing them.

I have looked at hundreds of leases currently in effect in Pennslyvania. I do feel sorry for many of the land owners who signed before 2010. Some of the leases boarder on what I beleive would be considered criminal as to the loop holes and fees that are going to be deducted on the land owners royalties if and when there is production. I truely beleive the landman should be licensed. I hear the same thing  time and time again. The landman tells the land owner " if you don't sign we will SUCK the gas from under your property anyway". Heard that one to many times for it to be an isolated case. The landmans job is to sign as many acres as cheaply as he can get them done. I am sure there are good ethical landman out there but, they do not have any agency, regulations, board of ethics. etc to make sure that they are. There are many, and will be many many more, law suites popping up because the landowner feels they did not get a far shake. You have to remember the landman works for the gas/oil company or leasing company. They do not work for the land owner.

I am not an attorney nor do I work for any land owner group. If you are considering signing a lease make sure you have it reviewed by an attorney. The land groups are formed to make money for the people who started the group. Most have attorneys. The land groups use the same standard lease for all. Which from what I have seen seem to be very good at getting the biggest bang for the buck and protecting the land owners rights. You could hold out and get more but, then again you may get nothing. No reward without risk. Whatever you do talk to an expert first.

Permalink Reply by Todd J. Scott on September 10, 2011 at 5:50am

Bill,

I'm a landman and I actually like your post.  You're saying make an educated decision.   That's what I'm saying too.

I agree there is power in numbers.  I don't mind working with groups.  I think like anything, you need to choose your representation wisely.  Understand there is good and bad information out there too, and it's up to the individual to filter it. 

I don't necessarily disagree with your statement about landman should be licensed, but Lawyers have to be licensed and there are still bad ones out there.  Broker companies, Land Service providers, like the one I work for just need to be more careful about who they are putting out there to represent their clients.  There should be more training offered at local colleges and maybe we should start offering classes in high schools or trade schools as there should be jobs in land services in Pennsylvania for years to come.  The States make it tough to train these folks because they are contractors and we are forever being scrutinized how we treat them.  We have to be careful not to violate the employee/contractor definitions.   We do have a AAPL code of ethics that we adhere to, and most of us do belong to an association called N.A.L.A. (North American Landman's Association) that was formed in 2004 (I was there for the first ever meeting) and we meet regularly and have guest speakers and informative, interactive, work sessions, but all of this is done on a voluntary basis. 

 I personally take care of this for our company and take pride in the crew I have in Lawrence County.  We all learn something new every day, and it's tough to please everyone but most of the landmen/landwomen I have out there are local people with 3 or more years of Oil and Gas experience.

 

You're right, there is no reward without risk, and there is risk in just about everything.  I have a hard time feeling bad for most folks that signed any agreement.  It was their decision to sign.  If you don't know what you are reading then you should have it looked at.  I too am guilty of this.  I just recently bought a different truck at a dealer and can't believe all the stuff you have to sign now.  It's crazy... I asked a lot of questions before I signed anything, but I didn't read it as thoroughly as I would have liked to. 

 If you sign a lease early enough in the play, you might get another chance to get lease money again.  Most folks don't think about that.  Some of the folks that signed back in 2006 are coming up for renewal leases this year while the rest of the people never got any of that "free money".  Who is smarter?   Just make sure of what you are signing, and be comfortable with it.  Nobody likes it when a landowner is upset about a lease agreement they signed... especially me, because the landman is always tasked with going to see that disgruntled landowner.

 

 

Permalink Reply by JoKlause on September 6, 2011 at 8:04am

Todd, I just don't understand your take on the Lawrence Co. group.  For MONTH'S this group waited and waited for someone to take interest.  And for month's we watched as all around us, other landowners and counties were reaping the benefits of being "in a hot area".  Shell didn't want to work with this group, as I said before they wanted to pick and choose. 

Now that we have a company that is truly interested enough to sign, Shell wants to cry foul??  Are you kidding me??  As far as I am concerned Shell had their chance and they sat on their heels.

I researched Hilcorp and found nothing to raise an eyebrow over.  They are having a meet and greet barbeque tonight for all the landowner's in the group that want to attend.  I will be there, and I will be asking questions.  We'll see if they have the right answers.

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