SO...NOW I HAVE NO MORALS?!

As I sat this morning...barely awake and sleepy eyed, I inhale my second mug of coffee.  WKYC news (channel 3 in my area) is on...not really listening at this point, then I see the headline on the screen.....MONEY OR MORALS?  This news segment was about the Utica shale drilling in Ohio and the decision that landowners face regarding to lease or not lease.  They interviewed a gentleman who owned 10 acres and has yet decided to lease or not, due to the possible environmental concerns.  It was your typical news segment on the pros and cons for a landowner, but what REALLY ticked me off was that headline! My family calls me a tree hugger...I feed every stray animal that wanders into my woods, I help the injured, I do nature photography, I donate to charities when I can.  I've paid for food for strangers and I've taken the chance to intervene on certain outright immoral situations when I saw them unfold...BUT, since I HAVE leased with an oil/gas company...I have no morals?!  Of course it couldn't possibly be that I have done enormous amounts of research on the pros/cons of this type of drilling, spent quite a bit of time sorting this all out in my mind and have made an informed decision?!  I have great hope and faith in the overall safety of this type of drilling.  Nothing like adding 'fuel' to the fire!  I'm done venting.

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Permalink Reply by dr j on December 13, 2011 at 11:01am

Schnoozie, 

The transaction/JV to be completed this month between CHK and their yet to be named international BIG OIL company ( rumored to be Total from France)  gave consideration at a price of 15k/acre of CHK Ohio Utica acreage.    No you cannot expect to get 14.5K/acre even though your acres are considered at 15k- takes more than few million to "realize" that potential.  In fact it takes so much you have to find a partner with deep pockets.  

Will find you a link.  Google is your friend.  

Permalink Reply by dr j on December 13, 2011 at 11:04am
Permalink Reply by Finnbear on December 14, 2011 at 5:23pm

That deal has been public information for a few weeks now. They are in a JV with an unnamed company and the deal sets the value of CHK's Utica acreage at $15,000/acre. That is a retail value that oil and gas companies trade amongst each other at and landowners will likely never see that much money.

Permalink Reply by Schnoozie on December 14, 2011 at 9:05am

That means there is $68,000,000 of something, oil-gas-both, who knows under my 136 acres.

it's hard to fathom.

Permalink Reply by Kim D on December 14, 2011 at 3:32pm

Seems I don't need to worry if anyone thinks I'm immoral for signing a lease after all.  My husband was notified by Rex Energy today that we are bound by some old lease from years ago which we had no idea of.  

Permalink Reply by Jim Litwinowicz on December 14, 2011 at 3:58pm

Kim; get a copy of the lease and check it out carefully.

Permalink Reply by Finnbear on December 14, 2011 at 5:20pm

If you had no idea of it, I'd assume you are not receiving royalties from it and it may not be enforceable. You need a GOOD oil and gas attorney ASAP.  Get a copy of that lease and see if an attorney can get you out from under it.

Permalink Reply by dr j on December 14, 2011 at 6:18pm

Kim  - do you have an idea the "chain of title" of your property?  You need to obtain a copy of that lease - and any and all other document pertaining to your property.  YOu might be suprised at what you find.   Our property was assumed to be under a lease - I did my own title search- wasn't hard- and found not only a release of the original lease but a document in which the company forfeited all drilling rights.   No one has more interest in your property than you do.

Also- that old lease- who "has" it now?  Dollars to doughnuts being where you are- SOMEONE is holding that lease through a deal done or soon to be done.  Depending on what that lease says- there is a very good chance they are going to have to come to you and re-negotitate the details to put you in a unit.  

And of course.... a good oil and gas attorney ASAP.

 

 

  

 

Permalink Reply by KFS on February 14, 2012 at 4:58am

I found that a previous owner went down to the courthouse and recorded something that basically said there had been no mining/well activity on our property for a period of so many years prior. I further saw that a neighbor filed that same affidavit last year (his property is split from ours) I'm thinking and hoping that it won't cause us problems and that whatever needs to be done to get us clear is already taken care of but Kim's experience is my fear. I'm a pessimist of the "if it sounds too good to be true" and "if something can go wrong it will" variety.

3uq96odaochmjPermalink Reply by 3uq96odaochmj on December 13, 2011 at 11:08am

Hey all..............what I mean by the "little guys" are the traditional oil and gas operators that have drilled shallow wells in the basin for the past 150 years.  NOT the BIG SHALE companies.  You see the wellheads and tanks all over the place.  These companies are being put out of business.

Permalink Reply by dr j on December 13, 2011 at 11:53am

Might be true Jasper- but there are a bunch of them that have been able to "flip" the deep rights to the leases they were holding by production into some serious cash.   RIghts for assets they have no way to develop.  I am sure some of them were smart enough to reserve their shallow rights - ie- they have lost nothing and made a heap of money.    

Permalink Reply by Steven A Joliat on December 16, 2011 at 10:05am

There are plenty of little guys still operating in places like Texas and Oklahoma, so I don't believe having the big boys coming to play in eastern Ohio will bankrupt them either.  While it is true that the local operators may find it difficult in the short run to find the capital and technology to drill horizontal wells, a clever operator will leverage his land position held by production.  They could also offer creative lease terms to landowners.  There is nothing holy about an upfront bonus payment, why not offer the landowner more participation in a successful well?  They could offer a smaller bonus and increase the royalty rate to the landowner after the well covers its expenses.  The reported Chesapeake wells will likely recover their drilling and completion costs in a few months of production.  The little guys are just as capable of thinking outside the box as the large companies if they have the will.  As time goes by, the technology will become more widely available and less costly, the production rates will decline, and the majors will leave Ohio again.  The little guys will be the last ones standing as before.

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