Comment

Comment by Francis L. Warder, Jr. on October 8, 2010 at 10:22am

Whether a lawyer charges to negotiate a lease by the hour or by taking a percentage of the paid up bonus, or a percentage of the royalty, or by taking an ORRI, you are paying for his knowledge and ability to interpret and analyze oil and gas leases and to advise you. There is a lot more to negotiating oil and gas leases than fixing the amount of the paid up bonus and the royalty. If that is all that concerns you, negotiate your own lease, but don't go whining to a lawyer later on when things don't work out to your satisfaction.

Comment by Nate on October 6, 2010 at 8:34am

Royalties last for ever and that's where you really make your money. Why cut these lease hounds in on your gravy?

Comment by Lease Expert on October 6, 2010 at 6:54am

Pay someone based off of Royalty commission and make sure its an override above the agreed royalty that you will accept. The Energy company has to eat that cost. Then the "negotiator" doesn't get paid until the unit is drilled and producing... Guess what... The negotiator is motivated to get things done or he/she doesn't get paid. That's how I do it..

Comment by Nate on October 3, 2010 at 2:01pm

@Two Dogs. What I meant was that the way leases have been in Ohio, until I've been seeing some of the leases from these majors and their leasing arms is the Land Owner Royalty is on the gross proceeds from oil and gas sold at well head prices. Now that being said the other industry norm in Ohio for much longer than I've been in the industry, or alive for that matter, is the LOR is 1/8th of the well (12.5%). Everyone is negotiating a higher royalty for these shale leases and perhaps the costs of getting a larger piece of the pie from the producer is you're going to have to bare some of the costs too.

Dave, I think you're starting to compare apples and oranges. Produced gas is only worth what the market will pay for it. However, producers can hedge their gas and I do that with the majority of gas I produce, assuming I like the offered hedge price and think prices are going to be soft. For example I hedged half of the gas my company produces for $6/mcf a few months ago. Looking at prices now I should have done it all, oh well. The company I hedged with doesn't even touch the gas, so it doesn't matter so much where the gas was actually produced at, anymore these gas traders just trade numbers and the supply goes to the people who want it. And so what is CHK's utility arm is charging twice the price to it's end users? All utilities charge much more than well head price when they sell the gas because they have costs in running and maintaining the infrastructure that their utility is.

Comment by Nate on October 3, 2010 at 1:49pm

@ Brian: Because then the atty will eventually just want to sign any deal and not take all things into consideration because he has dollar signs in his eyes.

Comment by Brian Oram, PG on October 3, 2010 at 9:47am

I would tend to agree - if this interest include representing you in the future at not additional costs for matters related to the lease - maybe. The attorney should not have this type of vested interest.

Comment by Dave Stewart on October 2, 2010 at 2:07pm

Nathan, I understand that the advantage of Marcellus is that it's located close to the end user. Marcellus gas transportation is much lower than gas piped from the south or the Rockies. Are you certain that CHK's utility arm is not pocketing the differential between gas shipped great distances and gas shipped from PA? I am not saying that they are. Is this ever covered in leases?

Comment by Two Dogs on October 2, 2010 at 1:49pm

Nathan, if I understand you correctly, you have a cost free royalty clause that was granted in the 1930's?

Comment by Nate on October 2, 2010 at 1:41pm

Lynn, regarding what you get paid for gas. In your lease the royalty is paid at "well head price" Right now for November gas that's trading around $4. However what I think you are talking about is CHK's utility arm, which is what you would buy gas for your house at. Those prices are different because there are many factors that utilities build into them such as transmission costs etc. The price producers and landowners get paid on their gas is determined by the market (traded on Chicago Mercantile exchange). This is all very much legit. What I would caution landowners to do in their negotiations is make sure your gas royalties are of the gross money recieved. Not the net which will then let the producer take their lifting costs out of your royalty. And don't let them tell you it's industry norm, I've leased and deal with leases that are from as old as the 30's and landowners get their royalty off the top. The majors like to try and sneak the royalty on the net in there.

Comment by Oil and Gas nightmare on September 30, 2010 at 3:07pm

AAAAGGGGHHH ok I see now I thinki must be really nieve...i tought you just formed aland group and helped each other out, then you hired a lawyer or paid them a percentage to look over the lease...BUT whe i say form a land group, I am picturing myself knocking on doors asking people if they want to join, get a better deal for everyone, myself included and then only pay a lawyer to help when we go to sign. Gas compnaies would deal with a person without a landman right, so couldnt just a person thats in the group present it to all the gas companies they can find.....NO FEE CHARGED by the person in the land unit getting it together...you can do it that way right? and if it is done that way, would you support the cause then...because no one is giving up anything to organize something that will benefit everyone for the better? or is it not done that way? See I wold do it becasue I would know if I did all the work, I am getting paid inthe sense, I know they are going to drill, iam going to get a higher percentage and bonus, and then ppl around me arent keeping me on a lease becasue we all expire the same time...thats freaking payment enough... knowing I will have a unit big enough to drill and getting it done ASAP...I guess I was confused about land units...

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