Lowball Lease Offers: You've been warned!

Don't be them - Poster Landowners for the Uninformed.

 

The Beinlichs are among thousands of residents living atop the gas-rich Marcellus Shale who signed lowball leases in the years leading up to the boom in Pennsylvania. In those early days a half-decade ago, virtually no layperson had even heard of the rock formation, let alone knew that drillers had found a way to access the huge reservoir of natural gas locked inside it.

 

http://www.mercurynews.com/breaking-news/ci_18536779

 

View lease offers on GMS' sister site shalebiz.com by going here - http://www.shalebiz.com/pages.php?page=11

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Permalink Reply by jb379 on July 25, 2011 at 8:48am

Everything is relative people.  In regards to lowballing, I would have jumped to lease my property at $25/acre not too long ago (thankfully no one approached with that offer).  Now I think I would jump at the $7500/acre referenced in the article.  Would I complain when I were to become locked up at $7500 if/when offers start coming for more or will I be pleased I made the right choice if/when offers start dropping?  We need to educate ourselves, do what we feel is right for each of us, and be accountable for the decisions we make.  Best of luck to everyone!

 

JB

Permalink Reply by Keith Mauck (Site Publisher) on July 25, 2011 at 9:01am
I don't believe I would let someone pitch a tent on my property for $25/acre let alone a drilling rig. Acceptance of $25 is not only an indication of a misunderstanding on potential value, but also of the risks involved. However, as someone once told me, the reason many landowners are receiving higher offers is because many recieved nada. Such is business in any industry.
Permalink Reply by jb379 on July 26, 2011 at 2:28am

Keith,

 

Obviously $25/acre now is not in the ballpark, however, 5 years ago (not too long ago) it would have been a good offer when many leases were $5 & $10 per acre.  If you disagree with that then please let me borrow your crystal ball.

 

JB

Permalink Reply by Keith Mauck (Site Publisher) on July 26, 2011 at 3:36am

Of course, the important points in anything I read is what the article doesn't tell me?

 

When we leased our property, we had to accept the fact that we would get zero in royalties. Then the question becomes, what is an acceptable amount to allow them to come on the property and explore. If $25 covers the amount of risk you are taking then great - do it. But don't sue 5 years later over it. Be happy with the state minimum royalty and move on.

Permalink Reply by Bill anders on July 28, 2011 at 3:51am
why would you get zero in royalties?
Permalink Reply by craig on July 25, 2011 at 1:31pm

Just remember folks that  5 yrs ago the ONLY activity in Western/SouthWestern Pa, that I am aware of,  was nothing but pure speculation and all were vertical wells I believe. In Beaver County there was one outfit that gambled and they were leasing very cheaply....and rightly so because there was very little known data about what lie deep below us. This outfit got the core samples/data and assigned their leases to another company that had the ability to develop the area..... and that is why CHK is in our area today. If it hadn't been for this activity I don't believe we would be seeing what is happening now. Yes, I have one of those cheap leases....am I mad? No. We will all benefit in the near future.  

Also remember that the upfront money is nice, but arguing over $500/acre and standing your ground could very well cost you in the long run. Look at some of the units declared and you will see areas that they just went around because there is lots of drilling that needs done soon. 

Permalink Reply by Robin Jackson on July 25, 2011 at 2:27pm
I feel when the automatic extension comes up , we should be able to release at a competitive amount per acre..My grandmother was ripped, she tried to negociate and new cost and they simply said ok we'll go around you..they will and they do..If and when those rights pass to us and they will, why can't we re negociate..I didn't sign that lease, she did..they took advantage of an very old women..
Permalink Reply by mark o on July 27, 2011 at 6:55am
i own a business and i
Permalink Reply by Robin Jackson on July 27, 2011 at 7:57am

Opps..

 

Permalink Reply by craig on July 27, 2011 at 6:18pm

I feel your pain Robin, however a legally binding contract was signed and you will have to live with it. Unless there is something you can find that is illegal about it. I'm not happy with some of the landman antics myself....read and understand everything before you sign ANY legal document!!!

Believe them when they say they will go around you, unless your land is in an area that they must have, to develop it properly.

 

Permalink Reply by Bill anders on July 28, 2011 at 3:18am
The increase of the going rate for bonus payments and royalties is a direct result of the research and investment undertaken by the companies who were "low-balling" 5 years ago.  I do not see any forums discussing how unfair it is that someone bought Berkshire Hathaway when it was $1 stock, or how you could buy a house was 50% cheaper 20 years ago.  The industry has created the economic stimulus, and booms in these area's.  Without the $5, $10, or $25 leases 5 years ago none of this would be happening.  A signing bonus is one piece of the puzzle, and the landowners who have made the most money to date out of this entire thing are the one's that signed the $10 leases but are now drilled and receiving monthly royalty income and have 6 wells already.
Permalink Reply by craig on July 28, 2011 at 3:44am
The increase of the going rate for bonus payments and royalties is a direct result of the research and investment undertaken by the companies who were "low-balling" 5 years ago.

I've been posting the same thing for some time now......glad others understand this too.

There is a timeline to this, some jump onboard early, some late, some too late.....just make sure you get onboard and understand what you are signing.

 

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