Wetzel, WV Lease Question

We have received a lease packet from American Energy-Marcellus LLC.  They are offering us a 10 year term at $2500 per acre and 12.5% royalty on produced minerals for property owned in Wetzel County, WV.  We are complete novice to this.  We just found out we inherited this property and do not know if this offer is a) legitimate or b) a fair offer or c) how we go about determining what would be reasonable expectations of monthly income from this lease. Is there a process out there that would provide historical data of output production for this geographic area and or is there a recognized method that would assist us in trying to calculate this revenue information?  Any help you can give would be appreciated.

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Mike MurphyPermalink Reply by Mike Murphy on October 7, 2014 at 8:24pm

you are also in the utica and upper devonian along with the rome trough  and who knows what below that 

Permalink Reply by LBaker on October 8, 2014 at 3:42am

Rome trough...whew...that's a new one to me...I have some more reading to do!  Yikes!  This is like a full time job, just understanding all this!

Permalink Reply by jason irvine on October 6, 2014 at 1:11pm
Pete. If you wouldn't mind telling. Who was that offer from?
Permalink Reply by PETE on October 6, 2014 at 1:29pm

fossil creek was at 3000 and 18% and the latest was from a larkspur land group llc
can`t remember who they were representing--been so many since about march of this year

Permalink Reply by jason irvine on October 7, 2014 at 11:59am
I think fossil is gulfport. Someone please correct me if I'm wrong. There is the devonian layer which they say is similar in btu as marcellus. If you wet in one your probably both. They haven't touched it much in marcellus but it appears to be a little less in production but we really don't know. If it's wet then it would be economical all by itself. I think it will produced on avg in wetzel 4 to 5 mil with 20 to 30 % liquid.
Permalink Reply by PETE on October 7, 2014 at 11:27pm

yes fossil is working for gulf port heres a little tid bit on one in the Utica--
Gastar Exploration unveiled what its CEO Russell Porter called potentially “one of the most productive wells to date in the dry gas Utica play,” in the Simms U-5H well in Marshall County, West Virginia which debuted at 29,400 Mcf/d of gas. 

Permalink Reply by jason irvine on October 7, 2014 at 12:02pm
I think our county is setting in a sweet spot. I think the only thing that is really slowing things down is the lack of infrastructure and large well maintained roads and bridges. Mine is a hunting camp. It was chosen for a reason...ever heard of the term "in the sticks".
Permalink Reply by jett on October 7, 2014 at 4:26am

We went with Jeff Rokisky in West Virginia. He and his group really worked hard on our lease. We got an excellent lease with great protections and good money. We're in Jefferson County Ohio. We feel they were very knowledgeable about how to get the best for us.

Having an attorney you like lined up gives you someone to refer the landmen to and they learn pretty quick that they have to come up to par before you lease.

Permalink Reply by LBaker on October 7, 2014 at 5:14am

Thanks, Jett.  Rokisky's firm is one that we are considering!  Good to know someone has good things to say.

Mike MurphyPermalink Reply by Mike Murphy on October 8, 2014 at 4:09am

Lbaker a good site to go to is ....uticashalemaps.com .........loads of info there ....latest news on the sidebar .....here is an example

The Utica shale formation has consistently been overshadowed by the Marcellus shale formation, which lies above it. But it is time the Utica started receiving some real attention for the incredible growth that has taken place over the last two to three years.  

Utica Shale extent mapUtica Cross Section
Source: Geology.com

The Utica lies beneath the Marcellus and expands both north and west. It is thicker than the Marcellus, averaging 300 feet, and more porous, but the total organic carbon (TOC) is generally lower. The source rock is about 100 million years older than the Marcellus and often deeper by 3,000 to 7,000 feet. The greater depth leads to higher drilling costs, but the hydrocarbons are estimated to be more pressurized, resulting in better production.

Related: Why U.S. Should Be Cautious About LNG Exports

The surge in Utica gas production is so recent that the formation was only added to the Energy Information Agency’s Monthly Drilling Report this past August. Since January 2012, production has increased from 155 million cubic feet per day (MMcf/d) to approximately 1.3 billion cubic feet per day (Bcf/d). Utica’s production per rig has also steadily improved.  

Utica mcf/d 
Source: EIA

Chesapeake Energy was one of the first major players with a bullish outlook for the Utica. Former CEO Aubrey McClendon called it the “biggest things to hit Ohio since maybe the plow.” McClendon also said that the Utica is “pound for pound, the best gas rock in the U.S.” Shell, Consol, and Chevron are among about a dozen producers now looking to add acreage and expedite their drilling activity.

Related: Larger Than Expected Natural Gas Inventories Spells Trouble for Producers

The old adage that producers will always go after the “lower hanging fruit” rings true as companies decide whether to drill for Marcellus or Utica gas. In many ways, the Marcellus is the low hanging fruit, but the Utica’s offerings are beginning to look more appealing. The Utica producers are now taking advantage of the above-ground infrastructure built to develop the Marcellus. Utica wells drilled today are often stationed on existing Marcellus well pads and connected by roads and pipes that were built for Marcellus takeaway.

Even with these cost saving methods, drilling costs remain expensive. EQT has reported drill costs of $15 million per well, while Fossil Creek Energy announced a $22 million well, about three times the cost of drilling in the Marcellus. Chesapeake Energy is bucking the trend, significantly lowering its drilling cost year over year.

Drill days
Source: Chesapeake Energy Investor Presentation, September 3, 2014

To find a market for both Marcellus and Utica gas production, existing pipelines are finding creative ways to move growing sources of gas, while new pipelines are proposed to take larger quantities of gas from large interstate pipelines such as the TRANSCO line. Williams’ new “Atlantic Sunrise” pipeline will connect Marcellus and Utica gas from its TRANSCO line. Sabal Trail LLC, a JV of Spectra and NextEra Energy have proposed to build the “Sabal Trail” pipeline, which would connect with TRANSCO. With the Federal Energy Regulatory Commission’s recent approval of the Cove Point LNG plant, it is not farfetched to imagine India or Japan producing electricity from Utica gas by the end of the decade.

Permalink Reply by LBaker on October 8, 2014 at 11:14am

What a great site, Mike.  Thank you!

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