Replies to This Discussion

Permalink Reply by Jon on January 5, 2011 at 5:12pm

I think you're right. I'm sure it will change once the economy goes back to where it was. What do you suggest to do about the royalties?

Permalink Reply by Jon on January 11, 2011 at 7:26am

it's interesting how much there is to a lease. i talked to someone else that had negotiated at some point and it sounded like they were able to negotiate the royalties up to 12.5% ...... which is the state minimum ..... and they had no idea, they couldn't legally get less than that. A lease is definitely something that needs to be read over a few times.

Permalink Reply by Sarah Violet on January 7, 2011 at 4:18pm

Welcome Jon !  Is Cherry Township near 38 ?   I have 11 Acres in Lancaster Township. I have a lease that was signed in 06,  $ 110.00 per yr for 5 years, ($10s per acre ) with 12.5 % royalties. This lease is due to expire

Nov 14th, 2011.

 

I received and Extension and Amendment in the mail mid Dec. They are now offering, $1,200.00 per net mineral acre for the (3) year Extension Term and 15% royalties. I'm so new to all of this. I'm not sure if this is a good deal or not. It does seam like a big difference from the original signing of the 06 lease. I did find a link to Lease Offer Data, that as of 10/26/10 the offers in Butler County were, 15% royalty, $ 2500, 5years, 16.5 acres.

I'm finding my situation is a little different 1) I already have a signed lease. 2) I cannot join a landowners group,due to already having a signed lease. 3) I only have 11 acres, there will be no well on my property, but I am in a Unit. At this time I have know idea what the plans are for my property. We are having a meeting with an attorney and the land man at the same time, sometime this month.

If anyone has any thoughts on this and/or any suggestions of questions I should ask the land man. Please toss them my way, I'm all ears.

Oh the Lease is NOT with Dale/Chesapeake.

 

 

 

Permalink Reply by Sam Douglass on January 7, 2011 at 5:04pm

There is the possibility of drilling in your unit [after it is established] before the end of the term.  Drilling anywhere in that unit would hold the lease for what amounts to "forever."  Should they do that without your accepting the current offer, you will get no more up front money and will be stuck with the measly 1/8 royalty.   Between now and November, there is time for them to spud a well if they really want to hold the property.

 

That does not seem too likely - otherwise the;y would not be talking to you.  The company has made no meaningful investment and can easily afford to walk away and let the lease expire - which is likely to be great for you.  Right now companies seem more interested in leasing and holding properties rather than drilling.  $4/ mcf gas may be with us for a while and there are likely to be better places to drill than Butler County.  If you are uncertain, let the company know that [without necessarily saying no]  and watch the time pass.

 

Should the primary term expire without any extension or renewal, you will be free.  Someday, they will want your modest acreage and will pay a fair price for it.  It seems likely that your original deal came from some local smaller company that is not used to paying what these leases are worth.  It may be putting together a package of properties to lease to some big company when the time is right - probably for an up front bonus of $5000/acre for 5 years and around a 20% royalty [with them keeping the difference].

 

The operator needs almost every single property, even the smallest say 1/3 of an acre if it prevents the producer from drilling parallel horizontal holes close to a mile long about 500 feet apart.   In the shales, the gas only travels relatively short distances - even after fracking.  Of coursed, forced pooling could be on the horizon if the producer gets enough people to sigh up.  Note that if they are after you, they probably are working on your neighbors as well.  Get together with them !

 

Typically, the leases have many onerous provisions and require significant time to negotiate to change language.  You should use a lawyer experienced in these things.

 

The deal is yours to make.  It may be some time before they drill in your area and their offer may be meaningful to you.  But if you can afford to wait, the offers will get better -  and possibly better and better.

 

 

 

Permalink Reply by Glenn Hunkele on April 10, 2011 at 7:57am

sam, 

what should we hold out for We have the rights to a little less than 300 acres in summit twp?

Permalink Reply by Jon on February 2, 2011 at 4:42pm

Thanks for the information Sarah. My property is off of 308 which is a couple miles west of 38.

 

It's good to have something to compare against. 1,200 sounds low, but they were probably honest with you if they said that was net and not gross and 15% is above the legal minimum 12.5%. I think that in your case signing a lease is not necessarily a bad thing especially if your neighbors have already done it.

 

If you see someone drilling a ms well near by and your neighbors have leases, they really can take 'your' shale without you being able to do anything about it. For the sake of the argument if we all own parts of a big punch bowel and someone puts a straw in the middle of it and starts drinking the punch there's really no way to stop them from not taking your specific area, they pretty much have to drink all of it. Just talk to your attorney and have them make sure that everything's reasonable or at the least and talk to your neighbors and see if they were approached.

 

I hope that all went well with your meeting.

Permalink Reply by Sam Douglass on February 2, 2011 at 4:54pm

a straw works fine in a punch bowl - but not as well when you are trying to suck through relatively impenetrable rock.  They drill the parallel horizontal wells 500 feet apart because they have to and not because they want to spend all that money drilling.

And if you can wait that long, some landman in the future will readily offer $5000/acre signing bonus and royalty in the 20% range.  If you need the bonus money now, take it.

Permalink Reply by patricia on March 30, 2011 at 5:34am

I have a friend who just received $4,500 per acre from Chesapeake March 2011.  Jefferson twp buter co pa.

Permalink Reply by patricia on April 10, 2011 at 11:45am

I was told only that it was a female

Permalink Reply by Sam Douglass on April 2, 2011 at 10:02am

I do not know what kind of royalty you got, but it sounds like your friend is moving in the right direction.  When the financial terms look qood, it is time to see a knowledgeable lawyer.  You have to read and understand all the fine print [every word] and provide for protections that may be individual to your property.  

 

As pointed out in various publications, there may be over 100 years of drilling in the Marcellus and work will proceed first in areas where the deposit looks the best and the infrastructure is established.  The fact that the landman says there is drilling just down the road may or may not mean much.  In addition to getting property for immediate development, companies want to buy reserves as they can - partitularly while they can get them cheaply.

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