eCorps Proposal to Tioga County NY Landowners Group

I attended the Kick-off meeting last night, April 12, 2012, during which the eCorps offer was presented to the landowners. While there is much clarification still outstanding on how the "lease deal" will be structured, the offer, as I understand it, is for the landowners to receive the NY State minimum 12.5% royalty share of all minerals plus a 2/3 share of a new LLC company that will own the remaining 87.5% of the royalties with the other 1/3 share will be owned by eCorps for which eCorps will "developed" the land to establish what gas reserves are available so the land can be marketed to perspective buyers like Chesapeake, Exxon, Shell etc..

A scenario was given that after exploration and gas reserves are proven, the mineral rights can be possibly sold for $3,000 an acre out of which the land owners, with 2/3 share of the new LLC, would receive $2000 and eCorps would receive $1,000. Obviously the scenario is just that and not the actual future outcome.

Bottom line is that the land owners are being asked to accept 12.5% royalties which is the state minimum which by now everyone should know that the state minimum is a rip off with some states considering legislation to set the minimum at 15% or higher. Yes natural gas prices are at a recent all time low but as demand picks up from industry to take advantage of the low prices, higher price will follow and again get to the expected $4 plus in the next few years.

The royalty that landowners should be insisting on is what the two year ago offer was, 20% in nearby Little Meadow PA and 21% in Herrick Center PA, and both of these offers were backed by a signup bonus and not a carrot into the future that might never materialize. While the current market is not supporting the signup bonus of $5,500 received by Friendsville Coalition and even higher for coalitions in the Scranton and other areas, non-the-less, once the NY State DEC completes its review of the Environmental Impact Statement and issues guidelines, the offers experienced in PA a few years ago will be also return to the Southern Tier.

Gas wells are not being drilled and depleted in a few yearsand all gas reserves sold at the $2 recent price, the life of the well goes on for 30 plus years and if one considers formations other than the Marcellus, like the Utica and Trenton Black River, the land owner is looking at a legacy of royalty on their mineral rights that can be handed down to generations. Why give your mineral rights away for pennies on a dollar. Gas will not stay at this low level for ever. The cure for low gas prices is "LOW GAS PRICES", that is what will provide industry and the consumer to incentive to increase consumption.

Do not accept 12.5%, it's too low and a rip off, and insist on upfront bonus payments not promises.

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Permalink Reply by Schnoozie on April 12, 2012 at 4:51am

Now I think I have heard it all. This can't be possible.

Sign here, no deal in hand and maybe never. But sign here. Accept the 12.5%. by buying into the pie in the sky story.

This sounds like a familiar deal from a group of volunteer un-paid cotract employees who are not landmen.

I wonder what the comitment is once you sign, someone please put up a contract and terms. How is the LLC structured? what if you want to sell your share? can you? who can buy the other portion.

This makes me sick. 

Permalink Reply by Brian V. on April 14, 2012 at 4:03pm

It amazes me that this deal is structured this way. I have a feeling that who ever is steering this group could be positioning himself or herself for a nice piece of this ultimate pie. A lot more details need to be revealed but I can tell you right not that Tioga County NY sits just north of Bradford County PA which is one of the more proven counties in all of PA. Sure there will be some differences in shale thickness as you head north but not enough to justify 12.5%.

 

The state of NY has ruined this for it's own citizens and property owners. First of, the speculation based and competition driven bonus numbers and royalty numbers are gone. Second the market is a a 10 year low and will stay that way for at least the next five years. There is already an estimated surpluss of 5-7 years currently and some 500+ drilled wells in PA are not even on line yet. The NIMBY's will get what they want in NY. There is no need to even drill NY at this time.

Permalink Reply by Jim Litwinowicz on April 14, 2012 at 4:26pm

If I am reading this right...and it is posted correctly.... there is a serious misdirection being played here. It starts out by discussing the royalty of 12.5%  and then throws in some higher math for the remaining amounts just to impress and bedazzle people.  But in the second paragraph, it states that the rights can be sold, not leased, for $3000/acre. No one of right mind would sell their rights for the same price that leases are going for. And I am betting that when the rights are sold, it will be to a subsidiary or affiliate of the same company or people.

It talks about "marketing the rights to prospective buyers" like CHK and Exxon but these firms lease and do not buy. And "developed" could be any thing unless it is defined. Aggregation, title work, mapping may all be considered developed enough to fulfill any contractual obligation.

Banaci; Was this how it was presented or did you incorrectly insert "buyers" and "sell" when you meant "lessors" and "lease"?

Permalink Reply by Banaci on April 15, 2012 at 5:43am

Contract not yet finalized and therefore not yet available to landowner members. Steering Comity members are working on contract that steers landowner members to slaughter of their mineral rights.

What is really being peddled is to permanently lock the landowners to the state minimum of 12.5%. eCorps proposal, as worked out with the Steering Comity, will start development, as in drilling as in getting permanently contractually obligated to the contract conditions which will be 12.5% royalty. After some wells are drilled and reserves proven, which there is no need since the Marcellus as well as other formations are under everyone’s land ( yes the depth and thickness as well as other factors vary), the land will be grouped in sections of approximately 25,0000 acres will be sold off to high bidder.

Once eCorps drills the first well, all members in the 25,000 acres parcel are forever committed to the 12.5% royalty and stuck with all the contractual conditions into perpetuity. If that’s not bad enough, 2/3 of all expenses for “development “will be paid for by the land owners.

What are the Comity members thinking?

Permalink Reply by Brian V. on April 15, 2012 at 2:29pm

I have a question. Is this all being set up to take advantage of NY's Compulsory Integration options. Namely the non-participating royalty owner where instead of buying into a well the landowners take a minimum royalty until a well or unit recovers a 300% operating cost? Basically the well has to pay for the cost of drilling and production and every other cost 3 times then the royalty owner receives a full interest for their share. I know that Chris Denton, who is involved in all of this, has always been trying to get this ass the ultimate option chosen by landowners in NY. This or buy into the well. I'm sure it is all far more complicated that what has been discribed so far. 

Permalink Reply by Banaci on April 15, 2012 at 3:19pm

All the facts are not out yet but the information provided to date points to landowners getting rolled. One would think that the time to sell mineral rights is when the value is at the high yet eCorps was presenting the present low price as an opportunity for the land owners. It’s an opportunity for eCorps to come in and take advantage of the landowners. Chris Denton was not present during the first meeting when the Steering Comity and eCorps gave the presentation. I would think that Chris would restrict his expertise to the contract end and not if it was a good deal for the land owner but time will tell as Chris is due to speak at the next meeting.

Would anyone out there today take a 12.5% New York State minimum and very little if any bonus money? I hope not.

Permalink Reply by Jim Litwinowicz on April 15, 2012 at 3:25pm

Again you said "sell mineral rights"  Is this for a sale or a lease?  What does the contract language say?

Permalink Reply by Banaci on April 15, 2012 at 10:13pm
Contract is being prepared and not yet available. What has been presented so far is that, once the landowners enter into contract, eCorps will start "development" of reserves. Once drilling operations commence, the landowner is for ever held by the lease to 12.5% royalty interest. The "selling" of mineral rights in lieu of "leasing" occurs at the time land owner enters into contract to develope. There is no way the mineral rights are being leased for a time period that will expire because once eCorps initiates operations, the obligation to the 12.5% royalty will be in place for ever.
You might are probably correct that irigardles of the contrat terms the mineral rights are being leased and not sold, but it's a permanant lease at thhe 12.5%.

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