Replies to This Discussion

Permalink Reply by Brian Woodcock on October 10, 2014 at 9:49pm

The one thing you need to have changed if nothing else, is to have it  state NO DEDUCTIONS.

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Permalink Reply by Frank Walker on October 11, 2014 at 3:41am

Hi Richie, welcome:

That offer is somewhere near the current ballpark given where your property is located.  So you're looking in the vicinity of thirty grand BEFORE TAXES if you sign with Chief.  That's not a trifling sum of dough; not at all.  Regardless, only if you need the money desperately should you go ahead and sign.  Otherwise, I would await developments.

Be aware there is reasonable likelihood of Utica gas beneath your Gillett property.  As documented recently here on this forum, Talisman is JVing with Shell not that far from you, over in Jackson Township, NE Tioga County, on an exploratory Utica well.  Utica gas might take off like gangbusters in NW Bradford in these upcoming years.  Utica there now is like where Marcellus was circa 2006-2007;  it's very early in the (Utica) play and the eventual outcome is not yet known.  If you have Utica gas your property should eventually lease for more per acre.  But "eventually" could easily be measured in years, not in weeks or months.

I sincerely hope you are not pressed for the money and can wait.  Course you need to be young enough, too, for waiting to make sense.  The Marcellus thing, and now the Utica play, too, are both very long term considerations.

Finally, deductions suck.  Your 15% royalty fraction could easily shrink to 12% or less in the face of deductions.  When you sign a lease allowing deductions, you really have scant little control over your actual royalty fraction.  It's sort of a joke, a sick joke for us landowners.  But the only way out, only chance to avoid being forced to agree to deductions, is to sign a lease during a Lessor's market, when the gas companies desperately are seeking to lease land.  It is, regrettably, not a Lessor's market now where you are.  

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Permalink Reply by richie hughes on October 12, 2014 at 3:24am

I really appreciate the great advice.  Everything said make so much sense.

I'm at the older end of the spectrum and, you're right, that does fit in to the equation. And I'm thinking that maybe the deductions are not as bad as I think.  The deductions are rendered after the gas is rendered marketable for costs to enhance the value.... whatever that means.   There are supposedly no deductions for producing, gathering, storing, separating, treating, dehydrating, compressing, processing, transporting, and marketing the produced products to transform the product into marketable form. etc.  

I also wonder just how much better off I'd be to wait it out.  I would think I would do a little better than 15%. And probably, if I was in a powerful landowner group controlling mucho acres, the bonus money would be better. And the lease language would be more landowner friendly. 

On the other hand, I hear stories about how landowner group leases (like Friendsville)

get sold to companies that won't comply to the terms; if the landowner wants to be unitized, he must make concessions to the new company.  

IMO  It seems like the luck-factor is huge when it comes to leasing. 

 

 

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Permalink Reply by Frank Walker on October 13, 2014 at 1:34am

Your point about leases changing hands is very well taken.  It's not an issue adequately ventilated here, IMO.  Let me put it this way:

Landowners today have some idea which gas companies are the "good guys" and which ones are the skunks.  So we might think, when dealing with a "good guy" company, that looser lease language is somehow less threatening to our interests.  But that's not true.  As you point out:

Leases change hands, including from "good guys" to skunks and vice versa.  If you sign a loose lease with a "good guy" company you'll likely still be OK.  But if and when that same lease is sold to a skunk . . well . . the hot water can close in really fast!!

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Permalink Reply by Nancy Mosley on October 13, 2014 at 3:30am

Very well put. Very very important information.

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Permalink Reply by John F McClelland on October 17, 2014 at 6:41am

Hi Richie,

The Mosherville Alliance, a group of landowners in NW Bradford county, is conversing with Chief and other companies with the goal of getting better gas lease terms. Please contact me if you are interested in information on the group.

John McClelland

mcclelland.john7@gmail.com

515 292 7974

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