Utica Shale Signing bonus

I will soon be receiving my lease with Shell Oil.  They are looking at giving us $5K per acre and 20% royalties (9 acres).  We will be incorporated with a group of other land owners.  What type of bonus payment can I expect?  Could Shell pay the entire 5 year lease up front?...$225K.

 

any assistance from you obviously very smart landowners would greatly be appreciated.  Merry Christmas!

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Permalink Reply by James Kerns on December 22, 2011 at 2:17pm

I think you got your answer, my question to you, would you give us state, county, and township you are located in please?

Permalink Reply by Lionel Jerome Wise on December 22, 2011 at 2:54pm

James thanks for the reply. 

 

Ohio, Cambridge Township, Guernsey County. I'm still waiting to see what the lease actually states.  I should be receiving in a few days. 

Permalink Reply by James Kerns on December 22, 2011 at 2:56pm

OH real good, Congrats, how long ago did you sign?

Permalink Reply by Lionel Jerome Wise on December 22, 2011 at 3:01pm

I received a phone call on Monday (19 Dec) and they are sending my lease, offering me $5k per acre with 20% royalties.   So if the lease states $5k per acre per year for a 5 year primary term that's a big payday for the lease?

Permalink Reply by dr j on December 22, 2011 at 4:33pm

Not to rain on your parade Lionel- but I haven't seen a lease yet that is per acre/per year.  Not that it won't happen but the leases to this point have as Utica Shale suggested above......5k/acre for the 5 year term of the lease. They are usually "paid up" leases which means they will pay you the full amt now.  IF it was not "paid up" they would divide the payment by 5- and pay you 9k/year for 5 years.  Paid up will pay you 45K NOW for the 5 year term of the lease.... which in essence is 1000/acre/year if you want to think of it that way.

Your lease will spell it out exactly in dollars and cents.  

Permalink Reply by Lionel Jerome Wise on December 22, 2011 at 3:03pm

I believe so...holland services (shell oil) is working with me.  They said they are accepting my 9 acres and incorporating them into a landowners group.

Permalink Reply by James Kerns on December 22, 2011 at 3:45pm

Thank You for sharing information, Good Luck

Permalink Reply by Lionel Jerome Wise on December 23, 2011 at 2:49pm

Thanks James...one more question.  What is the best option for royalties..gross or net? 

Permalink Reply by James Kerns on December 23, 2011 at 5:21pm

Gross, better in few leases will it be spelled out so simply. In some leases it may say gross, then in a later paragraph it may say market enhancement costs, trasnsportation costs, or some other such costs will be deducted or even shared on a pro-rated basis. They are wholey in control of such costs and can manipulate the costs to reduce the royalty's amount's paid. The devils in the details.

Permalink Reply by Lionel Jerome Wise on January 3, 2012 at 2:38pm

James...Happy New Year.  I have a question in regards to mineral rights.  We signed our lease and will receive a draft with the designated amount.  Were told that Shell Oil has 120 days to pay on that lease amount or determine if we have the mineral rights to the sub-surface elements.  Question:  If we don't own the mineral rights, what is the next process?  I was told by a neighbor that he had the same issue, however, the mineral rights were under another company which existed in the 1920's.  No activity since the early to late '20's.  He attempted to contact the company, placed an notice in the local paper and gave the 90 days to respond to a certified letter.  No response was received.  Your assistance and guidance is greatly appreciated.

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