Replies to This Discussion

Permalink Reply by Utica Shale on January 30, 2012 at 2:46am

Bill,

 

 " ... How many o these might be thinking of  possible lease money and being unable to do anything. I wonder how many of these leases will be tied  up in larger units with no production to speak of? Looks like a lot of wealth will not be in the making for quite a few in Muskingum County ..."

 

 How does this transfer affect any of the terms of the orginal lease with the original landowner?

 How were these landowners going to get lease money prior to this transfer?

 What "wealth will not be in the making" ?

 

 

 

Permalink Reply by Billy Park Whyde on January 30, 2012 at 5:38am

 It depends upon the lease and how it was written of course. These are possibilities

  Say for an example I own 250 acres and in my lease I blindly signed  to AJAX drilling it gave them the right to unitize. Your my neighbor with say 15 acres with a marginal producing Berea well with Dudeit drilling but in your lease it gives them the right to unitize. Mega company buys your Berea well and gets my lease flipped into their possession.  They unitize both the properties into one. Of course I will get a royalty as a result but I will not cash in on big lease money and will probably be stuck at 12.5%. Meanwhile Mega Company possibly saved $750,000 in not having to lease my land while the Berea well on the other hand on only 15 acres was probably  bought for close to a salvage price and minimal value as only being 15 acres say $35,000. Of course Mega may drill on me but since I was unitized I will only get 12.5% . Mega saved $715,000 in the lease plus will get  the  7.5% difference in the royalty that may have been mine had they not acquired acquired the lease in the flip.

 Here is a part of a lease language that I came across in a extension of lease term " and as long therafter as oil or gas (including casing head gas) is or can be produced from any well(s) on the lands covered by the Lease (EXCEPTION to the previous lease conditions went on to say.  I am no attorney but can be is a very loose term that a mega company could use to say that plugged well can be produced as it does not stipulate "in Paying quantities" another rather loose term. 

 The possibilities are endless as leases are not all the same, length of the term also varies.

Here is a Lease I pulled for the heck of it.  see http://contracts.onecle.com/icop/oil.lease.shtml it has loopholes big enough to drive a truck through. 

  What we do know is that the MEGA company employees attorneys to seek every loophole they can to save MEGA dollars, we on the other hand can not for the most part counter this.

  I gave a example,  it showed where the lease terms of the original lease could be utilized to profit Mega Company. Say Company Ajax has a 5 year term lease 2 years ago leases of say $100 per acre were hot stuff they can flip it and it gives Mega 3 years to formulate what they could do with that land. Mega company could in theory depending upon the lease conditions tie up thousands of acres of landowners in a single drilling unit.  Hold out landowners would be free to wheel  and deal of course but the flipping gives Mega the chance to have a major advantage in not having to pay lord only knows how many land owners in the acquisition of large connecting lands even if by only 20 feet of connection.

 Ok there it is BS if you want to call it that but I threw out possibilities, the goal of Mega is to make money not happy landowners

  

Permalink Reply by Billy Park Whyde on January 30, 2012 at 6:12am

  Don't get me wrong. I myself would like to be part of a unit that where we as neighbors can gain from it.  It would be nice for Mega to say hey look we want to drill a well here. We will pay $2,500 per acre up front money after a say two week deed and lease search for the unit members. We will deposit $3000 per acre into a escrow account for each unit member under their name, If a well, a multi well drilled horizontal well is not put into production and must be kept into production thereafter ( with limits set for  maintenance ect) within 1 year of the payment of the $2000 initial lease payment, the $3,000 in you escrow account will be yours with the lease terminated if  a producing well has not been accomplished. In the advent of a dry hole the $3000 will not be paid and the lease will expire.

  A land owner gets $2,000 up front money regardlesss and it gives the driller a bit of a incentive to get Rdone.

 Call it  a set up like a performance bond to hopefully get results not fertilizer.

  A idea and we all have ideas right, wrong, dumb, or smart. 

Permalink Reply by Utica Shale on January 30, 2012 at 7:20am

Billy,

 

 Issue #1

  Ajax could have drilled a Berea Well and held your land with a marginally producing well just like you claim that Mega will. Nothing has changed with this issue before or after the sale except the name of the driller.

 

 Issue #2

  Ajax did not owe you any new Signing Bonus / Lease money. So, why does Mega now owe you any new Signing Bonus or Lease money?  Nothing has changed with this issue before or after the sale except the name of the driller.

 

 Issue #3

 Ajax could hire lawyers to exploit all of the loop holes in your lease agreement just like Mega will hire lawyers to exploit all of the loop holes in the lease. Nothing has changed with this issue before or after the sale except the name of the driller.

 

 Every issue that you bring up could have been exploited by Ajax before the sale in a similar fashion that Mega can exploit the loop holes after the sale. All of the loopholes were already there when the original landowner signed the lease.

 

  The real problem is ...

  Someone signed an O&G lease with bad terms for only $100 per acre and now the landowner sees new O&G leases with awesome terms for the landowners with mineral rights now selling for $3,000 / acre and the old landower with the bad lease wants wells drilled with the new terms and new lease signing bonus money. I don't see happening unless, for some reason,  you can re-negotiate the terms of the original lease.

 

 The goal of the landowner is to make a profit.

 The goal of Ajax is to make profit.

 The goal of Mega is to make profit.

Permalink Reply by Billy Park Whyde on January 30, 2012 at 8:10am

Issue #1

  Ajax could have drilled a Berea Well and held your land with a marginally producing well just like you claim that Mega will. Nothing has changed with this issue before or after the sale except the name of the driller.

 1.Yes but Ajax was a flipper with no interest in drilling.

 2.  Mega is not drilling a well to hold my 250 acres they bought your 15 acre lease and Berea well then unitized it to my 250 acres giving them 265acres that are now tied to older lease provisions. 

    Question would you buy the 15 acres with well at say $35,000 in a effort to unitize it into a 250 acre lease that you received in a flip at say $1500 per acre and avoid paying a higher royalty percentage and lease fee if the 250 acre lease was to be voided due to no well being drilled.  I think so.

 Issue #2

  Ajax did not owe you any new Signing Bonus / Lease money. So, why does Mega now owe you any new Signing Bonus or Lease money?  Nothing has changed with this issue before or after the sale except the name of the driller.

1. Ajax paid me the lease fee (minimal at the time)  but the lease would expire as they did not plan on drilling to begin with. Thus  Mega would have to negotiate a new lease to keep the lease with no well having been drilled but the unitization  saved them from it.

 Issue #3

 Ajax could hire lawyers to exploit all of the loop holes in your lease agreement just like Mega will hire lawyers to exploit all of the loop holes in the lease. Nothing has changed with this issue before or after the sale except the name of the driller.

!. Ajax could have yes but they are flippers with lease and flip, they bail out money in hand. 

 The point is MEGA is as you say out to make money, and they will anyway they can.

 The real problem is, your right on it.

But what I am saying  is MEGA avoided the possibilty of that re-negotiating thus the land owner is not going to see that possibility of better terms or even a new well.

I hope this makes sense if others see this lol