Replies to This Discussion

Permalink Reply by Sam Douglass on July 18, 2012 at 3:00pm

You are not "promised" anything.  In fact some big companies make you sign something saying you are only promised $1 and the lessee can walk away for any reason or no reason.  And often the lessee does walk away leaving you hold the bag on your expenses as a negotiating ploy so you will not spend money for advice reviewing the next draft on lower terms.  When you sign and deliver the document insist on some money for your time and trouble - and send the landman away if there is no agreement on this.

And if they are asking 1280 acre units, they are telling you you will not see much production for a long time.

Permalink Reply by Jim Litwinowicz on July 19, 2012 at 6:44am

While having a larger unit does allow more land to be HBPd, it is not necessarily the reason for asking for 1280 acre units. Companies are asking for 1280 units because it is a lot more efficient. They can set up a single pad in the center of the unit and drill the entire 1280 acres from that single pad.  This reduces cost for the company and also leaves a smaller footprint on the surface reducing the environmental impact and reducing the land lost for farmers and foresters.

Shell is currently drilling its third well in a year's time in Enon Valley and they have permits for two more off the same pad.  They could have done a single well and moved on. How many wells are drilled are based a lot of issues like availability of pipelines, the price of gas and constituents, what constituents are found and in what quantities, the amount of land under lease, operating capitol,  and more.

As for the point of the original post, you need to read the lease.  Unless it specifically states they must pay as long as the parcel(s) clear title work, they have the right to not pay for any reason. Make sure that clause is added. And it is best to sign directly with an E & P company instead of a flipper or land aggregator. There are many companies that are signing people to leases and then attempting to sell them at a substantial profit or walk away if the fail to find a buyer.

Permalink Reply by Sam Douglass on July 22, 2012 at 4:07pm

The only reason for such large units is so the Lessee can drill one or two wells on them and hold the remaining acreage indefinitely as reserves without drilling maybe 30 more wells until the market justifies it.

Admittedly, the companies need such reserves to serve future needs, but landowners should not expect a big stream of royalty income immediately - perhaps it will not come in the current owner's lifetime.  It is highly unlikely that Lessees will give a drilling commitment and a schedule.

Permalink Reply by Sam Douglass on September 1, 2012 at 1:39pm

How much do do you think they will pay if they get around to drilling and find production anything like the Buel well in Harrison County??

http://businessjournaldaily.com/drilling-down/gulfport-well-outperf...

Permalink Reply by Berk on March 26, 2013 at 11:29pm

Anyone know the outcome of this offer? It was in the area shopper last fall. Did anyone sign? Did anyone get paid?