MDS Energy Lease

Several family members, neighbors and I have been considering leasing with MDS Energy.  They are pooling land and claim to have 300,000 secured acres in Clarion, Elk, Armstrong, Clearfield, Jefferson Counties and they feel that it will be closer to 500,000 acres by the time it's said and done.  I live in Venango County, where the shale starts to thin out and like the idea that everyone receives the same deal, regardless of where you are located.  I am also enticed by the fact that I don't have to sign if the bidding doesn't reach $4000 per acre and they seem to think it will go much higher (rumor has it Rex Energy out of Butler County sold for 10,800/acre to a Japanese company).  The lease offers 15% royalties.  Some things that I'm not thrilled about with the lease is that it's a 10 year lease.  However, I'm young enough that I'm in no big rush for royalty payments.  Also, they take up to 20% of your bonus for their cut.  While this is high, I would still be satisfied with the bonus even after their cut (3200/acre if it sells for 4000).  I also heard (haven't substantiated it yet) that they deduct the cost of pipeline from well head to main pipe, cost of upkeep for road/wells, as well as the cost to get the well inspected from your royalty.  Anyone know more about this?  Is this a typical deduction?  Also, is there anything else in this lease that should keep me from signing this? 

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Permalink Reply by Frank on September 30, 2010 at 4:05am
MDS, Knapp, and Snyders flip leases to Equitable for far more than they offer landowners. :-)
Permalink Reply by Frank on September 30, 2010 at 11:23am
Then to Snyders.
Permalink Reply by Sinclair on October 1, 2010 at 6:06am
Kittanning, Pennsylvania-based MDS Energy, Ltd. is an independent oil and gas production company that is a wholly-owned subsidiary of MDS Associated Companies. The parent company also owns the drilling, pipelining and construction company First Class Energy. MDS specializes in developing on small acreage in residential and commercial areas,

The MDS website, accessed in August, 2010, indicates that it controls over 10,000 acres in Armstrong, Butler, Clarion, Jefferson, and Indiana counties.

A news account in August, 2010 stated that MDS had made an open invitation to landowners in its service area to join in a pool of up to 500,000 acres that could be offered for sale to a large bidder. The article mentioned that the company either already owned or else had commitments for 300,000 acres. Knapp Acquisitions and Properties was partnering with MDS on this project. Reportedly, MDS had drilled 11 Marcellus shale wells, but required support, possibly from a joint venture partner, to further develop its acreage to best advantage.

* Michael D. Snyder is President of MDS Energy and First Class Energy.
* Shawn Cogley is a MDS land agent.
* Mike Knapp of Knapp Acquisitions and Properties is contact on the MDS land pool.
Permalink Reply by Frank on October 4, 2010 at 3:29am
Natural gas prices are well below $4/mcf, the economy has flatlined, the housing market just keeps getting worse and worse, citizens are fed up with government - then why is a company throwing out $2000 plus an acre for leases????? Shallow drilling for gas is almost at a standstill, even most of the large marcellus drillers are even talking about cutting back their own drilling programs. Hmmmmm........something is going on with MDS's lease grab. I hear that Snyders did a cherry sweet deal with EQT on their acreage, and companies MDS and other companies in the Kittanning area have jumped on the gravey train with with Snyders. Lease flippers.
Permalink Reply by Frank on October 4, 2010 at 6:23am
Nope............you're hostile.
Permalink Reply by Carol on October 4, 2010 at 7:47am
I don't know about the MDS/Knapp deals, but what if a landowner signs a lease with them and they can't "flip" it? Is that landowner then stuck in a lease with no royalties? The bonus payment is nice but not much good if a producing company doesn't own the lease.
Permalink Reply by BW on October 4, 2010 at 9:21am
Carol,

I have had some one-on-one meetings with MDS - they have indicated that if they don't sell it (which they indicate they really don't anticipate) by June 30, 2011 - all individuals who signed on to the sale are free to go on their own. I think they indicated that their very bottom number to accept is $5,000 - less the 15% and possibly 5% cap on 3rd party fees would be $4,000 - They indicated they put in the $5,000 so people know it won't go for next to nothing. So the least an individual would receive would be $4,000 but with the lease sales in the past 12 months they anticipate it will be much higher than that but felt they had to put something in as a bottom number so individuals know where they stand if they sign on.

If you visit Knapp website - they have a chart on similar sales in the past 12 months - ranging from $8,000 to $14,000 per acre - the largest amount of acres in the chart is 120,000 acres. MDS/Knapp started this sale with definite commitment of 300,000 acres and have increased that amount quite a bit in the past month or so--they wouldn't give me an exact number because it is changing daily. So this anticipated sale will be enticing to a very very large company who will have deep pockets and will not sit on these acres after spending a large amount of money. I am not a gas person but if I were putting up that amount of money I would be making sure I can get a return on my investment. I realize the 15% fee is a little steep but with this enormous amount of acres the final number for such a large lease sale should more than cover this fee and should be much more than an individual could obtain on their own. I am still looking into this - just wanted to pass along what I found out in a one-on-one meeting and my personal opinion.
Permalink Reply by Interested Party on February 26, 2011 at 7:21am

Has anyone received information on when the MDS Energy land lease sale is going to market (was originally to commence on Jan 1, 2011 and then adjusted to sometime in the 1st Qtr of 2011)? 

I hope that it goes through...a economic plus for the five-county region of Armstrong, Butler, Clarion, Jefferson and Indiana.

 

Am curious on how the "market" is in western PA...slow? average? unknown? ready to ramp up?

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