Replies to This Discussion

Permalink Reply by george namie on February 28, 2010 at 10:30am

heys guys- first of all 2000-2500 w/18-21% is a good starting point.But the MOST important thing on that contract is about time-not money.I,ve heard from people in the land brokering biz that chesapeak is moving from the 5 year leases to 5 yesrs with an option for an additional 5-same price.The thing to look at is the scope of this project in acreage and time.Chesapeake has a problem-they have millions of acres leased, and the number of rigs it would take to drill them all in 5 years-is more rigs than exist on the planet-let alone the crews to man them.Chesapeake is going to roll alot of leases over to small, more local operations at a huge profit .But that still doesnt solve the time-space-equipment problem.Add to that the states regulations and the other politcal/environmental "crap" and 5 years gets even shorter for them.That is NOT to say the environmental issues aren't important-just talking time eaters here.But anyway-if you sign at the numbers I mentioned above or even a little lower on the royalties-MAKE SURE NOT to give them the 5 year option at the same price-it will probably be hidden in the lease-along with the agreement to let them drill on your land and pipeline right of ways-which without further compensation give them the rights to do those things to your property-5 years down the road- they probably will not have "made hole" anywhere close to you yet- the odds of this are in your favor-due to the reasons I stated above So you can get paid now and get paid later too-watch out for that 5 year option-or you will be kicking yourself later.Read the lease without the landman standing over your shoulder.

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Permalink Reply by paleface on February 17, 2010 at 1:33pm

Now that japanese Mitsui & co. bought 32.5% of anadarko petroleum just recently,we might start to get better lease offers?

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Permalink Reply by terry hazlett on March 11, 2010 at 8:52am

Mike, I own land in western pa. I'm not greedy, so what do you think an acre of marcellus shale ,plus numerous other formations is worth? since you're a local operator you should be able to give a ball park number, without being greedy, as you seem to be saying all us western pa landowners are. just a ball park number mind you.

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Permalink Reply by terry hazlett on March 11, 2010 at 12:43pm

So do the landowners that have been paying taxes on their land forever, then miss a year or so and then their land goes up for sheriff sale! some people are counting on the bonus money to pay they're taxes, or they're kids college tuition! you local operators have been making a killing at the uneducated landowners expense for the last 50-100 yrs ! $ 10 /acre bonus's , you got to be kidding me. To me it sounds like now that people are getting educated about what OUR land is worth and are'nt taking the bogus offers of past, it seems to me like somebody else is doing the whining and it isn't the landowners! If you don't want to pay the price of leasing now days, move out of the way because 5 other companies will fill your shoes ,no problem

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Permalink Reply by terry hazlett on March 12, 2010 at 2:06am

Keep spewing your propaganda Mike it might work for awhile, but as more & more people get organized and educated it isn'nt going to work forever! you're doing the same thing they did in eastern pa, you're lease is only worth this much, take it or you'll be left out, you should feel privledged we want to drill on you're property, the bonus isn't as important as the royalty. what if they lease for peanuts then seismic is done & the propert is condenmed? pidly bonus, no well, you're screwd! and by the way, ignorance is what they call it when you screw uneducated, unsuspecting landowners that are'nt equipted with the information due to the law of withholding results for 5 yrs!

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Permalink Reply by terry hazlett on March 12, 2010 at 4:37am

Mike, are you from snyder bros? And i don't expect a $3000-5000/acre , but i don't expect $ 100/acre either, like the last fair local co offered me.

Permalink Reply by terry hazlett on March 12, 2010 at 6:39am

Mike, WHAT % royalty are you offering at this point? and i don't think a couple of hundred would cut it at this point, maybe $ 1000-$2000 but for numerous formations besides the marcellus, and god only knows what they'll find in 10 yrs besides the marcellus, with all the technology that will be discovered by then.

Permalink Reply by roy jones on March 12, 2010 at 7:22am

I agree with Mike, and also Terry to some degree. Mike, the shallow game is over. The production from shallow zones might give you a total value of a few thousand dollars per acre that is drilled. So, a lease of 10-250/acre is reasonable when you factor in the risk these companies are taking. Scale that up to the marcellus which could have a value of $20,000 per acre after its drilled - you cant expect those leases to be at anything but in the 1,000's of dollars.

To your defense Mike, in no way do I think that the energy companies are making a killing. They are risking millions of dollars to drill these wells, and since the play is so large basically everything is unproven. I 100% agree with you Mike, in that I find it somewhat ridiculous for landowners to all expect the same 4k/acre lease. That is just greed. They are delusional. In certain proven areas, sure why not. But central penn? or in other undeveloped areas? No way. That shale isn't as good and it hasn't really been drilled (for a reason).

Mike, loved your response to Terry's seismic comment. Really shows the thought-process of some of these landowners which is "I'm the only one who has something riding on the Marcellus". I was nervous as hell when they shot seismic over me, haven't heard the results, but it's not a "I lose" situation if it is bad. Speaking as a landowner myself - if these results come back negative (praying its not), I'm not going to say "I lost". The correct response should be "I didnt lose anything, but I sure as hell didnt win." The energy companies on the other hand are the ones that lose. They put all their money up and lost their ass, I put up nothing and merely didnt win.

-rj

Permalink Reply by Jean Michel LeTennier on March 12, 2010 at 4:25pm

Exxon, does not invest 41 Billion dollars with out a very good reason, and Mitsui just paid 14,000 an acre in the fairway as well as chesapeake has paid up to 30,000 and acre on some properties...
this I know for a fact...
The NY area has at least several layers of shale, giving the gas company's access to over 3000 feet of drillable shale and northern PA, has over 1000 feet of UTICA, and the first few production test wells in th utica are producing at a rate of over 6 mcf/d and more
4000 an acre is cheap , very cheap for this area
sorry

Permalink Reply by Jean Michel LeTennier on April 3, 2010 at 5:17am

"Reasonable" is what the Market wil Bare and that is changing every day as new player come into the area...

Permalink Reply by george namie on April 3, 2010 at 1:20am

Mike-i can sympathise with the smaller companies,but Chesapeake is still trying to screw landowners.They are buying,or trying to buy , properties at less than 1K/acre from uneducated landowners,and they have to be doing it so they can "flip" the land to the smaller cos. at a considerable profit.There aren't enough rigs or crews on the planet to drill the land they already have under lease.Seismic has already been done in my area,so risk has been reduced-at least to a degree.I am not trying to condemn the entire industry,but when an offer of $850/acre(this offer came with a "take it or leave it",and,"if you dont sign we will drill under you anyway") is made to my female friend,and within 3 minutes of idle chitchat with me the price went to 2500/acre(and this is before ANY haggling)something's wrong.Maybe its just my nature,but I'd have a hell of a time trusting these very same people to accurately and honestly monitor and distribute my royalty money down the road.Also these contracts basically give your land to the drilling cos.-there are provisions that allow them to do anything they want(drill on-site,dig holding ponds,run underground or above ground pipes,and just about anything they like-for eternity-if they kick up 850-2500 again if they need you after 5 years.If you think I'm saying anything just to be inflammatory,I would be happy to send you a copy of the contracts.Mike, we both know that the bigger cos. are not paying out this money without knowing the risk factors exactly ,and that they are going to make a hefty profit(which they are entitled to if landowners are properly compensated).After all ,If they were running around indiscriminately handing out money, they wouldn't be in business for long.I've been involved in various very risky venture businesses for almost 30 years,and while I'm not the size of Chesapeake,I've always known every contingency and detail BEFORE a dollar came out of my personal or my investors pockets,and there's nothing anyone is going to tell me that would make me believe that big drillers/leasers dont do the same.Again,I'm not trying to be down on you,but the sleazy tactics I described earlier is making everyone and everything about this play worthy of suspicion IMO.Perhaps a contract like you described earlier would be more in order,something that allows the smaller guys to play with the big boys,but also protects the landowner

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Permalink Reply by justin clouse on March 25, 2010 at 7:17pm

Its all about location... If you have the production numbers to match on the land next door it drives lease values up.... Some #'s to think about Chesapeake upped the Ultimately Recoverable Gas to 4.25 BCFE per well in the Marcellus recently. 4,250,000,000 cf/1000 X $5.00gas/mcf= $21,250,000 per well with approximately 50% of that coming in the first 2 years. If the well cost $4,000,000 to drill and the well covers 80 acres( 1000ft well spacing and 2,500 ft laterals) $21,250,000-$4,000,000=$17,250,000 divided by 80 acres = $215,625 per acre with 50% coming in the 1st two years of the decline curve.... I could settle this problem fairly right now..... No bonus money up front with a 50% Royalty that doesn't kick in until well cost are recovered..... Minimal risk for Gas Producers.... Everyone is Happy!!! That is Why they call it BIGGG OIL not little OIL... Oh yeah, they are also drilling on 3-4 separate Horizons out Here in Bradford and Susquehanna Counties with the Upper Marcellus, The Purcell Limestone, The Lower Marcellus, And the Trenton Black River Shale....So they can drill 3-4 more horizontals on the same 80 acres..... Look before you lease, and If nothing sounds good....wait wait and wait some more

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