the back and forth of the lease game

I have had Land Men from different companies trying to lease my property for 3-4 years off and on, starting in the low 100s per acre, then to 250, 500, then up some more, then higher but not to what I know it's worth.  I set a depth clause and you'd have thought I had stolen the last cookie in the jar.  I got sick and tired of the "well if you do this then we may be able to do that".  Finally I decided what I wanted, set a price and a percentage and haven't heard a word since.  It's been about a month.  I was sure in some part they talk about who's got what leases going and prices etc. and we're working on this one etc. 

A little old fashioned investigating, a little time at the courthouse assessors office showed they know each other to some extent and some were even comparing lease maps right there.  I also know it's their job to get it as cheaply as possible for these companies but it was like buying a used car and knowing you weren't going to be happy in the end and I got sick of it.  Since they know each other they ensure the prices don't get too high because they won't compete beyond a certain point.  I placed an add in a couple papers to offer the O&G Lease on the acerage sort of to confirm my thoughts .  The suspicion was that I wouldn't get a single nibble from anyone not even the smaller companies, because someone has already been "working" my property.  The add didn't get anything, so I suspect I may be right.  I know the balls in their court, I know the lease is worth more than they are offering and I despise the process.  I guess I'll sell some timber in the meantime. Anybody have a similar experience?  What was the outcome.  Any advice other than wait.

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015334grltd9mPermalink Reply by 015334grltd9m on May 22, 2012 at 3:27pm

Yeah, that is what I do, sometimes I don't even care what the offer is.  If your not ready to sell , and don't need to sell.............just take it easy and sell a little timber.  Through the years I sold topsoil, used gravel from an old RR spur..........whatever a landowner does to make ends meet.

Permalink Reply by D Miller on May 22, 2012 at 4:19pm

Knowing a thing or two about gathering intel, it didn't take me long, some do more than just socially talk it's almost like salesmen selling leads about customers.  How much, how many, I don't know, is it intentional, it's for money, you guess....  Could it be proved, sure, there is always bad mixed with good.  Thing is if something happens and a few get caught scamming, pushing prices down, pressuring or flat out lying to people, the leasing company has some deniability that they didn't tell anyone to do something immoral, shady etc. they obviously did it of their own accord.   So waiting is what I have been doing, now I know I'm between two maybe three well sites and maybe in the path of a possible pipeline someday.  I'm not getting any younger and the longer they wait the more I'll want.  Further, they'll be no pipeline, rights of ways, easements, not so much as a bucket of water from the creek if theres no O&G lease first.  Anyone know a good timber company that does better than 50/50 is quick and doesn't tear up the place?  I guess my retirement fishing boat may be a  plastic John Boat with a 2 horse electric trauling motor... Thanks

Jim ShoosPermalink Reply by Jim Shoos on May 22, 2012 at 4:43pm

Well, I suppose it would certainly be a novel approach to the American business model to predicate one's actions on what their competition is doing or not doing.  I'm absolutely sure that Amazon-Kindle pays no attention to what the Apple IPad sells for, or what the other tablets/readers are offering as features. 

Really... oil and gas companies should strive to be totally oblivious to what their competitors are doing?  Of course they pay attention to what the prices are... all they have to do is surreptitiously monitor what landowners report on this site to get a real clear idea of what their competitors are offering.  Is this illegal, immoral or unfair... of course not. 

You are free to wait.  Nobody has a gun to your head and it's America... you can choose not to lease at all if that is your desire.  Just be content with the plastic boat and your egg beater tolling motor. 

Jim ShoosPermalink Reply by Jim Shoos on May 24, 2012 at 4:29pm

Nobody suggested a conspiracy among producers to limit prices.  That would be rather stupid and companies are all very well aware of price fixing issues.  That requires an agreement not to exceed a mutually acceptable level.  On the other hand, observing what your competition is doing and unilaterally choosing not to exceed an existing price per acre or a certain royalty percentage is neither illegal, immoral or unfair.  You made a quantum leap in assumptions to come to a conspiracy out of a discussion that merely recognized the right to observe what your competitors are doing.

Permalink Reply by Alan Pavlik on May 28, 2012 at 1:16am

I'm curious how you know exaclty what your oil/gas rights are  worth? Generally the landowner always believes his land has more oil and gas than anywhere else in the area.

My experience has never been that competing companies don't get together and set a price limit. Usually whichever company wanted the lease bad enough would generally pay more than the other.

Plain and simple, no 2nd gunman on the grassy knoll

 

Permalink Reply by craig on May 28, 2012 at 4:13am

Alan,

"Generally the landowner always believes his land has more oil and gas than anywhere else in the area."

I don't believe I've ever heard anyone say this, especially before much drilling was happening in the area. Pretty broad generalization on your part.

In some circumstances it is relatively easy to know what your oil/gas rights are worth. Talk to your neighbors, if the parcels are around the same size and location. I have one parcel in this situation. Needless to say that I got anywhere from $200 to $1650/acre more than my neighbors(same size parcels) with 2% more royalties AND a better lease, all in a small time frame. My neighbors didn't stick to their guns because they were told their property wasn't worth it (not enough acreage, but the same as mine) and would be left out.... the same thing they told me. 

As I've always said here, don't listen too much to what the companies say or post somewhere, look at what they are doing.

I don't believe there is very much collusion going on between companies, but you can rest assured that it does happen.

1w1vl8clda7t4Permalink Reply by 1w1vl8clda7t4 on May 28, 2012 at 6:05pm
"Needless to say that I got anywhere from $200 to $1650/acre more than my neighbors(same size parcels) with 2% more royalties AND a better lease, all in a small time frame."

I congratulate you on your efforts...but the price you got was what the market was willing to pay you today...not necessarily what it is worth. Both a shortage of supply and a high demand work in the favor of the landowner, and the last time I checked there're not producing anymore land.
Permalink Reply by Alan Pavlik on May 29, 2012 at 1:40am

It's a bit of a joke in the industry....a landowner could be surrounded by  dryholes near his property and he will say "well if they would have just gone deeper they would have found the mother lode. " "Or I know there is a mediterrain sea of oil underneath here!"

"alot of landowners believe that their oil and gas is worth more than it may really be worth" That's my opinion based on experience.

The part about Companies getting together to keep the prices down I do not buy. I have worked on 100's of projects and if you believe one company will abide by a price ceiling I have some swamp land in Florida I will sell you. There are snakes in the grass in every industrt]y including or especially the O/G industry.

It may appear to be a broad generalization to you but in my experience it is not too generalized.

Jim ShoosPermalink Reply by Jim Shoos on May 22, 2012 at 3:48pm

It is only mildly amusing to witness the paranoia and conspiracy theorists that willingly present their perspectives on this site.  Really... landmen that work along side each other checking records in a recorder's office are all in cahoots to screw you over???  The poor schmucks that are working for a day rate in the recorders offices have no more say so in setting lease prices than I have influence over what the FaceBook IPO was priced at. 

Is it remotely possible that you haven't gotten offered what YOU think its worth because you are the only one who thinks its worth that much?  If you had that much leverage, or it was worth what you thought it was, it would only be a matter of time before a company made an offer that met your requirements. 

You ran an advertisement... and that would have certainly reached an audience that was beyond the confines of the recorders office... and yet... no offers.  Maybe you should just pull your property off the market and wait until natural gas prices reach a point that it is economic to drill wells. 

Permalink Reply by craig on May 28, 2012 at 4:20am

I agree in part Jim,  Landmen are nothing but peons in this game. They are kept in the dark and fed... well you know what. 

It is also amusing to watch some company pundits post idiotic information that is meant to do nothing but  muddy the waters for us landholders....which only works on those landowners that don't have enough common sense to educate themselves on the subject.

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on May 22, 2012 at 4:50pm

Harold, what county are you in?

Permalink Reply by D Miller on May 24, 2012 at 3:58pm

I'm in Wetzel County.

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