Just curious...

     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. ?

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After discussing OGM offers with a number of people, including my attorney, a couple or offering companies and a landman I know here's some of the info I've put together.

In initial offers will depend on multiple factors.

  • If you're leased or unleased. If leased, what the roaylty rate is
  • Unitized or not and % of acreage unitized, & Royalty Rate
  • Pugh Clause
  • What percentage of interest you are willing to sell. They generally what surface to basement but will take 25%-100% interest

It was put to me like this. Offers are made based on about 25% to 50% of the overall potential that the purchaser could make back off the investment. There is no sure thing for you as the seller or them as the buyer that the full potential will be recovered.

If you are leased with a 15-20% royalty your OGM's are more valuable than a 12.5%. The language of your lease is important when negotiating. Not just the original leas but to sell OGM's.  If leased and unitized that value potentially increases. These companies base offers on actual production numbers and are not blindly sending them out. If you're property is partially unitized but the well hasn't been completed like many in Tioga don't think that information isn't available to someone making you an offer. 

I've been told that offers in Bradford County are less than in Tioga because of the success of the Utica. Remember this is a buyers market. Gas is low. Offers to lease are low. No one is doing anything really in the Oil and Gas business because the prices stink. It may not change for a decade. These OGM offers are made by groups that are making a long term investment. It may work for them but the way things are pointing in 10-20 years its just as possible that this country could outright out law the fracking process and none of this gas will be produced. 

There is even more beyond money to think about and consider. Say you sell your OGM's, you are also selling a degree of control over the development of those OGM because within that Deed you will be conveying the right to develop those OGM's. As the surface owner a company will have to do s separate surface use contract with you if they have to access from your lands but if you decide you won't agree and are sued you will lose because you can not deny access. A reputable company most likely would do everything they can to avoid this but if developed you could have what remains of your property turned into a pad that you'd be getting nothing more from.

My personal opinion if selling in Tioga and your lease has no deductions and a 15% royalty and not pooled $4-5k per acre is probably ball park for the best offer you'd get currently. Unleased maybe you could get up to $8-9K. Just a guess though.  

Try 3k in good area if good Royalty %. Marginal area no buyers. HBP'ed leases could be many years until you get more than the 5 per acre shut-in per year. Unleased in good area add 1-1.5k. Unleased in marginal area is going to stay unleased for long while. There are OGM's for sale with local realtors for 2-3k. I am sorry to have say this but this is the reality of the situation. Last months Swepi Royalty $1.46 per MCF. Anyone willing to pay 8-9k per acre I happily will sell unleased OGM's in Multiple townships of Tioga Co.

What OGM's are worth and what an asking price or offer may come in at I suppose will always be a revolving door. With all the proven gas reserves here in the North East (Marcellus, TBR, Utica ect) you'd think these right would be worth a small fortune but all this gas is a double edged sword because of supply and demand.

I remember the first offer I ever received to lease was for $10/acre. 4-5 years ago I was juggling offers of around $3k/acre from 2 companies to lease not even to buy. Now folks are getting offers of $2-3K to buy all their rights. I'll never sell my OGM's but the chaos of it all intrigues me,. 

Remember that when you buy you're using post-tax dollars, whereas the money you get for leasing is pre-tax. I'd say that the premium for quality unleased OGMs is only about $500/acre right now since you will only keep about 1/2 of the $1,000/acre Shell is likely to pay you after taxes. And old leases often have higher royalties than anyone offers now, and in that case the premium shrinks further. Otherwise, I agree with your opinion on this completely. It's a true buyers market at present.

"Kinder Morgan shelves $3 billion pipeline project"
"The energy giant Kinder Morgan Inc. has pulled the plug on its controversial natural gas pipeline proposed through parts of Massachusetts and Southern New Hampshire, after failing to sign up enough utility customers and facing stiff consumer and political opposition.
Kinder Morgan said on Wednesday that its Northeast Energy Direct project didn’t receive the commitments from big customers that it needed to proceed with the $3.3 billion plan, which would involve building a 188-mile pipeline from a point west of Albany, N.Y., to Dracut. ..."

Yet another project that - in the end - was called off because of lack of financing.
"New York State Department of Environment Conservation Denies Water Quality Certificate Required for Constitution Pipeline"
"The Constitution proposal involved construction of approximately 124 miles of new interstate natural gas piping in northeastern Pennsylvania, proceeding into New York State through Broome, Chenango, Delaware, and Schoharie Counties, terminating at the existing Wright Compressor Station in Schoharie County. ...
DEC had repeatedly requested that Constitution provide a comprehensive and site-specific analysis of depth for pipeline burial to mitigate the project's environmental impact - but the company refused - providing only a limited analysis of burial depth for 21 of the 250 New York streams. ...
Additionally DEC received reports that landowners, possibly with Constitution's knowledge, clear cut old-growth trees along the right-of-way for the pipeline, including trees near streams and water bodies, even after the Federal Energy Regulatory Commission ruled that Constitution could not cut trees in the right-of-way. ..."

"Re: Joint Application: DEC Permit# 0-9999-00181/00024 Water Quality Certification/Notice of Denial"
[819kb pdf]
Josie, for Marcellus around mainesburg (tioga) I see average of about 5,800 vertical feet for horizontal turn on Delaney wells. Not sure if smith well is purely vertical, depth is 8,300. I do not have any Utica well names to look up in ShaleCast site. Depth is in well reference area of site.
21H, 23H, 25H drilling permits applied for 4/18.

Ann, I live in Blossburg but in Hamilton twp. Talisman has 2 wells right near me, Fredrick and Olsen. They told me in Feb that their budget was slashed 50% and the well we are supposed to be on ( Jones) is on hold. I found out that they are now going to drill a well closer to Morris Run which is away from my house. I don't know what is going on.

Repsol (the company that bought Talisman) did have a recent set-back. They have an LNG import termanal (Canaport) in Canada and had gotten permits to add export capability.  But the plan has been put on hold because of inability to find (enough)  outside investors and customers.   Plus, LNG is approaching "excess" status.  
On the plus side, Repsol has a reputation of being a well run company, unlikely to do something reckless. 

I saw that article before and now it makes sense. They are supposed to put a pipeline through the property this year too, I guess that is gonna get scrapped too. I wonder what their next play will be.

Application to PA PUC:
"Petition of UGI Utilities, Inc.—Gas Division for a Waiver of the Distribution System Improvement Charge Cap of 5% of Billed Distribution Revenues and Approval to Increase the Maximum Allowable Distribution System Improvement Charge to 10% of Billed Distribution Revenues" PA Bulletin - April 30, 2016


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