Comment

Comment by RJS on June 10, 2013 at 10:39am

RoughRice - We bought the property in 1989 and the lease already was signed by the previous owner.  At least we got the mineral rights transferred to us.  It could be worse, I guess. You can read an earlier post of mine about another surprise we got in relation to the original lease signing and the deep well royalty amount.

Comment by john p halloran on June 10, 2013 at 8:57am

Yes Berk that's the one!

Comment by sldouglass on June 10, 2013 at 8:33am

BE REALISTIC IN WHAT YOU EXPECT FROM COMPANIES:

The following remark was made by the CEO of Chesapeake at the
Chesapeake Energy Corporation Institutional Investor and Analyst Meeting
Wednesday, October 13, 2010 8:00 a.m. CT  http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c...


"I don't like to buy acreage for fair price, I like to go in and put a play together where we put our army of 5,000 landman to work, and we are buying it lease by lease for a very inefficient cost average to the rest of the industry to try and replicate and we make it a transaction where there is not a public market, it's us and the landowner, and we're gonna most generally going to get the benefit of that side of the transaction, so think about again, every time we move we are buying acreage worth 5 to 10 times what we pay"

Aubrey McClendon
chief executive officer, chairman, and co-founder of Chesapeake Energy

Comment by RoughRice on June 10, 2013 at 8:03am

John H., I posted selected details from the Halcon update on the Venango board and also uploaded a copy of the press release (which has even more details). 

Comment by Berk on June 10, 2013 at 8:01am

John is this what you are referring to?  http://investors.halconresources.com/releasedetail.cfm?ReleaseID=77... Now can someone explain what it means?

Comment by RoughRice on June 10, 2013 at 8:01am

RJS, thanks for the details.  As you may be painfully aware, the 12.5 % royalty is the lowest allowed by law in Pennsylvania (that's my understanding, anyway).  Are you stuck with the 12.5% for the deeper well?  Let me point out that the average royalty based on thousands of wells (as reported by the National Association of Royalty Owners) is 18.75%.

Comment by john p halloran on June 10, 2013 at 5:47am

Website Seeking Alfa has an operations report from halcon thats sounds promising.

Comment by RJS on June 10, 2013 at 1:19am

The lease is an old lease from the 1970's and very simple 12.5% royalty allowing HBP type activity.  The royalty check with the Lippert well results also has natural gas royalties from the shallow well that held the lease by production.  It is coded as "gas".  So, I got "gas" royalties from the shallow well, sold at prices from 3.186 through 3.784 per MCF, and "oil" royalties from the deep well sold at 84.964 per barrel.  The gas from the shallow well was sold in four different months (December through March) but the oil from the deep well was only produced in February.  I expect the next check to be a little different because of regular production from the deep well since the quarter happened during the startup time for the well, but I could be wrong.

Comment by Bob Jenness on June 9, 2013 at 12:29am

Returning to the "asset value of an acre" embryonic thread, SLDouglass...

I realize full well that the time value of money is a crucial part of this issue.  For a landowner planning to lease, we need to reduce that uncertainty to an estimating methodology that will suggest a rate of return on the asset that the landowner brings to the table.  Let's remember that an unleased landowner owns ALL of that asset until he signs a lease, then he's effectively SOLD it to someone who brings a relatively smaller asset to the table (technology and capital to drill and produce it).  That, effectively makes an annuity out of the asset.

I'd like to compare the leasing revenue to the return on assets of other investments like annuity, single payment insurance, stock ownership, govt bonds, etc.  Like leasing, all those have risks and complexities, and time value of money is a key part of the decision process, but if we consider the bonus (well invested in one of the above) and a single well royalty stream for the term of the lease plus extension as middle ground, then we can consider the complexities as variation about that value.  I've never seen anybody do this for any landowner or group, and it would seem to be an interesting measure of any offered lease.  I would suggest that the estimate of the asset value is actually the key business information that both the driller and landowner should be spending effort to understand.  We know the drillers pay big bucks for geology, seismic, test wells, etc. just to get this precise information.  Landowners only have sources like this forum and our groups, so our estimate will be less precise, but we should still strive to know and refine it.

Comment by Joseph-Ohio on June 8, 2013 at 10:06am

Let's not forget that OPEC pegs the price for a barrel of oil.
That's important to remember.

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