Replies to This Discussion

Permalink Reply by Jon Henderson on August 12, 2011 at 5:19am

There is a well in Harrison County near Cadiz, OH that is supposed to be producing 17million MCF per day and 2500 BLs per day. Don't know if its totally true but I think it's in the ballpark. It's the only PRODUCING Horizontal (Utica) that has been drilled around here so far. It's a CHK well.

Permalink Reply by scott peterson on August 12, 2011 at 5:51am

Is that the one by Kimbolton you are talking about?

Permalink Reply by Jon Henderson on August 12, 2011 at 6:44am

No the one is Kimbolton is just now being drilled.

Permalink Reply by scott peterson on August 12, 2011 at 7:10am

Where is Wheeling Twp ?

Permalink Reply by Jon Henderson on August 12, 2011 at 2:55pm

Scott,

Wheeling Twp is in the northwest corner of Guernsey county. Liberty Twp is right below it or beside it.

Permalink Reply by Farmhouse on August 13, 2011 at 2:45am

Keep in mind that renewals are extremely rare. I'm leased in PA and I remember back in 05-06 when the Marcellus was getting started, people were saying "yeah we'll sign now and renew in 5 years and get paid twice etc." The reality is that most likely, will not happen. I've been following this site for a while now and have never read about someone renewing.

First, most leases will have at least a 1 year option term at the end of the primary. The early marcellus leases were 5 plus 5. 

Second, the lease will likely have language that says as long as the company is engaged in operations "actively conducted on the leasehold in the exploration of oil and gas..." Which can be interpreted as a whole bunch of different things including simply surveying or seismic testing. Of course every lease will be different. The point is these O&G companies will very, very rarely allow their substantial investment to just expire.

We've been fortunate to get unitized and get some wells drilled. Not completed yet, but still it's taken 4 years to get this far. The bonus $ in the area has not changed much in the 4 years. As a matter of fact the guy with 10 or 20 acres who is not leased 5-6 years after the rush is now searching for a leasing company and not the other way around. 

I STRONGLY disagree with the notion that a landowner group is a bad thing. Research the "Friendsville Group" which negotiated one of the highest bonus, royalty % and landowner-friendly terms leases to date in the Marcellus. Susquehanna or Bradford Co. I think. We were part of a different, smaller group that worked out a very good lease. We essentially presented the Company with a contiguous block of land that was basically "production-ready". Thus 1 year into the lease they initiated production.

Remember the goal is to be produced. Sorry Manderson, you started a good thread here and you make some excellent points but the notion that a landowner group is "a scam" is just not accurate. Thousands of landowners at this point have joined a group and negotiated from a position of strength to their great benefit. I would suggest that joining a group is the single most important move you can make second only to good legal counsel when beginning the lease process.

Keep in mind that the reason the terms are so much higher in the Barnett and Haynesville is because those plays pre-date the rush into the Marcellus and certainly the Utica. Supply and demand issue. Look, I completely agree that $50 or even $1500 is lowball, and I would not even consider a lease under 18%. How high the Utica goes remains to be seen. I do agree with you that it will be more valuable than the Marcellus because of the oil. But that may or may not equate to higher lease bonus. The royalty % is the key. If I had to do it over again I would have held out for a higher %. That's where the money is made.

Permalink Reply by Steven Gardner on August 13, 2011 at 4:49am

Like Jon said .. the only producing horz Utica well in Ohio is the Buell well in Harrison Co and what has that done to lease terms in Harrison Co ??  They appear to be about the same as Guernsey, Belmont & Jefferson. I heard that well is doing 1000 barrels per day but who knows? .. sounds like a good one either way. The Kimbolton well has not been completed to date but when it is I expect the same effect on leasing as the Buell well had.

 

Joining a landowner group in my opinion is the best thing you can do. It keeps you in touch with your neighbors and it gives you an opportunity to negotiate for a better lease.  If you go directly to the producer you will get their standard lease and may be lucky enough to get some addendums attached .. then you have the old standard lease with some bandaids.. not a good modern lease

Then there is the greed factor.. a lot of the acreage around here had been selling for around  $2K per acre.. now you can get that+ for the oil and gas alone.. doubled over night. Like the prior poster said people in Pa that held out and did not lease early are trying to now without any luck.

As far as renewals go.. a good well written lease will not allow them to park equipment on the property to keep the lease active or other non production scams. A good PUGH clause will allow you to lease what is not included in a production unit. I would think the 5 year term would be hitting in Pa but not in Ohio yet. I don't see how they could possibly produce all the leased ground in 5 years .. even with the renewals.

As to the producers knowing about this shale play for years .. I thought it all started in 2007-2008 with the updated report on the know reserves in the Appalachain basin.

Its just like the stock market .. though some claim to know what it will do tomorrow .. none know.  A good lease, $3K bonus and 18% gross sounds pretty good to me...

Permalink Reply by Jon Henderson on August 13, 2011 at 5:18am

I agree with you Steven. We must get a GOOD lease with a good signing bonus. $3-$4K  with 18%-20% royaltywould be fine by me.

Permalink Reply by Oil and Gas nightmare on August 21, 2011 at 3:25am

I agree 100%, i am in PA also... you can have them sign a separate lease for the utica and the marcellus, that's one way to make sure you get the value of both in there.  AND oh YES so many people are trapped in leases well after they expire unless you have them say in the lease, commencement of productions means: drilling a freaking well and nothing else...which i did get in my lease and they also took out the option to extend as well.  I hope some smaller companies are going to get involved in Ohio becasue the big companies make so many promises but rarely deliver or they have sooooo much land that they cant get a well up on all of it.  Ohio people study the crap out of the PA pages on this blog and you will hear from people that have worked with all of these companies and get their take....Please do your homework, make sure you do not pay a lawyer a percentage to review your lease, BUT get a lawyer to protect you, for the future as well..and remember the big dogs can throw down more cash up front but more than likely thats all you'll get....NOT ALL but in most cases...

Permalink Reply by Oil and Gas nightmare on August 21, 2011 at 3:13am

 Hi.. i am from PA and I just wanted to say i waited for like a year thinking the big bonus thing..But then I realized, getting a well up and putting some favorable things toward the company(like taking a little less bonus for example), I could negotiate different things that mean something to me..a lot of people will tell you, that you cant  get a commitment to drill by a certain date..true in a sense but you can get a commitment to drill by a certain year of the lease OR they will have to pay more $ per acre..so you could actually get a well started by year X or you'll get another bonus... either way, from what I have learned it beats getting a big $$$ for a 5 year lease that wont be drilled on and that depending on th language of the lease can hold you beyond those 5 years for a long long time and you get nothing but time spent waiting.  research the companies, see if they are drilling , look for permits, etc etc...its better to take less(but fair) and get a well then to get more upfront but let that be the end of your windfall...If you dont believe me, look at my older post...its horrible how much I ranted about the signing bonus and do not get me wrong, you shouldn't get screwed by some  company becasue you think they are the only dog in this fight BUT, my opinion has changed since my earlier post...A good company, a smaller company that doesn't have 1.2 million acres to chose from that they can drill, a commitment for some sort of action in X amount of years, is worth way more than a huge bonus, now if you can get both..DO IT!!!! :) but just giving you my experience here :)

Permalink Reply by jb379 on August 18, 2011 at 3:15am

I certainly hope you are close with your optimism, however, I know of several individuals here in PA that missed the boat on million dollar leases when they felt 4k/acre was too low.  When the landowners had a change of heart and later approached the company they passed on, the company was no longer interested in their land and wished them well.  It is a difficult game to play that is for sure.  Good luck!

 

JB

• ‹ Previous
• 1
• 2
• Next ›
• Page