Replies to This Discussion

Permalink Reply by E. Progar on January 20, 2011 at 1:55pm

Hi Tony, Thanks for the replay. Its sounds good but has anyone signed with CPK with those terms. My latest offer went from $2000 to $3200 at 18%- 5 years. This is a couple hundred more then they offered the Township.

Permalink Reply by E. Progar on January 20, 2011 at 3:28pm

Thanks, I will consider that approach and keep you updated.

Permalink Reply by Craig Morris on January 20, 2011 at 4:13am

Received an offer similar to this ... $3100 for 2.5 acres in Venetia.  Didn't discuss any other terms but the landman wants to meet Monday evening to go offer the offer.  I must confess to being completely naive on all of this as my wife and I just moved to Washington County last month from Allegheny.  This site has been helpful but any input would be most welcome.

 

Permalink Reply by E. Progar on January 20, 2011 at 2:06pm

Hi Craig, That sounds like the the going rate. $3000+ bonus/ 18% royalty/ 5 year lease. The pad locations in Venetia is selected for drilling in the near future. I am having Chris at Smith Butz Law firm look over the papers. Maybe they can answer some of your questions. Phone # 724-745-5121

Ed Progar

Permalink Reply by Craig Morris on January 21, 2011 at 3:01am

Thanks Tony and Edmond for your replies.  I will definitely have the lease reviewed with an attroney before entering into it.  As this is coming as a pleasant surprise to us, we don't wish to be greedy but want to be treated fairly as well.

 

Permalink Reply by Carol M. on January 22, 2011 at 6:09pm

Yes.  My property is close to Trax farms.  Your offer is low.

Permalink Reply by E. Progar on January 23, 2011 at 5:02am

Hi Carol, Our 16 acres joins a 300 acre parcel just west of the Trax farm. I have no idea how they come up with their offer. Do they go by size, location, or some other requirements. What would you suggest for a counter offer?

Ed

Permalink Reply by E. Progar on January 24, 2011 at 3:31am

Thanks for the insight.

Permalink Reply by Craig on January 27, 2011 at 5:21pm

Tony,

How many leases have you signed?  I mean, do you have acreage that you have signed with a company? 

Reason I ask, I have acreage in several states, multiple leases over the years, and I have found, especially on this site, alot of people saying how to do it, but I don't hear of their successes.  I know of several groups on this website that have been putting together property for 3+ years, 40k+ acres and no bids.  Now, in Washington its different, it is in the fairway, with overlaps, thats what makes it valuable - all of those overlapping possible pay zones - but if what you say is true - the royalty is most important - then they are going to pay me rotalty on all the zones anyway, and, I have a greater shot of having all the zones drilled and fracked by leasing all of them to one company, for, the companies a re going to put in large sites, frac large laterals, and then, if I withold zones form the company drilling, the next company is going t look at that and not want to be in the same field where someone else is operatiing at great depths and possibly stirring up liability for each other - with the craziness on the internet about do this, no do this, not make them pay you 2500 for each zone per acre - in all the years I have been leasing my land out, I have found that very few companies want to operate in the a field where there are others operating, except maybe with specific depths  delineated, not specific pay zone, unless it is something like "to the bottom of the helderberg"  or from the bottom of the helderger to the center of the earth.  But now, so many that are unfamiliar with the problems of operating in overlapping fields think its easy to delineate different zones and get paid for each one individually.  I don't see how it will work, and have never seen companies take something like that - with the litigious attitudes of people nowadays, especially in PA, the likelihood of being saddled with someone else's mistakes becomes very real to the companies doing the drilling. Insight - no, idea, yes, practical, not in my experience, and I work both sides of the fence - I invest in O&G, and own rights in several states, and have drilles wells in several, but with the impractical ides being floated on this www, I no longer attempt to drill in any state but Texas, the prices may be higher in some areas, but the people are more practical and have enough true experience with the business to understand that some things just are not within the realm of possibility.  Like paying per acre per zone, for a lease, when that leaves the possibility of another operator entering the field and possibly screwing up the 20million dollar investment one just put in. 

 

Additionally, from the landowners aspect - I lease to one company doing horizontals in the shale - for that is all that is practical, today, they do mltpiple legs from one site.  OK, they clear off 15 acres and bring in trucks, rigs, frac tanks,etc. and stay on site for 2 years drilling, fracing, cleaning and putting into production one "super-site with 6 leags in the Marcellus.  But, I witheld the rhinestreet, now, another company comes in and builds another supersite, and brings in all their trucks, frac tanks, etc, and is on site for 2 years, and then, because I witheld the Utica, even though it is unproven and no-one has actually released their production, just speculation on 24 hr tests, I now have a third company come in and build another "super-site" and now I have 45 acres cleaered off, numerous trucks runnig 24 hours a day, nummerous fracs and disposal operations simultaneously running , but yet, i am land conscious?  I don't think so - let them have it all, that gives you a better chance of other zones being drilled, but possibly put in a drilling commitment - that once they dril and frac and produce a specific zone, they must act sufficiently and with regards to your interests in exploring other zones with expediency when producttion from one zone falls off to a specifi percentage from the initial production, and if they do ot act in such and expeditious manner, then they must pay a penalty of forfeit the entire lease - all depths.   Give them 3-5 years after the production falls off, so that you are not rushing them into drillig something that they are not properly experienced in drilling so there is less possibility of wasting the opportunity.  I saw it at the beginning of the Marcellus run-up.  Everybody thought it woudl be the same as other shales, it wasn't, some were rushed into drilling without the proven parameters, to meet landowner demands and the wells suffered, they did not produce like those that came after them, but now the well is there, the field is messed up and cannot be fully exploited due to the pushing greed of the mineral owner. 

 

My suggestion - find a company that you believe in, get a lease signed with proper, but resonable and practical expectations and let them do their best to produce the most fomr it.  If you have one compsny that holds all depthsd- they know what is down there, they wil design their pads to be ready to pull back and go down hole and enter other zones from the same pad, once production falls off, for they already will have 30% of the hole cost invested, it now becomes more practical for them to go to other zones and test them, when, if you withold certain zones, especially shales, you just made another company have to overcome pipeline costs, vertical hole costs, pad costs, all added in , but if the first company has all  of that in place, they are more likely to explore new zones, for the millions invested get to be utilized time and time again.

I know there are many typos in this - I am not a very good typist.  I do know how to spell, but I don't have great dexterity.  Y necessito muchos horas de sueno.

Permalink Reply by E. Progar on January 28, 2011 at 2:54pm

I am now reviewing the lease with an attorney. I know I will be asking for some changes to the lease. I will let you know how it goes.

Permalink Reply by Craig on February 1, 2011 at 2:21am

So, basically, you leased with a drilling commitment - the drilling commitment came with a penalty, but the company would retain the lease, if they paid the penalty(ies).  Smart, and you got what you wanted - good up front monies, and a well that will pay out for years to come.   You did not say that you witheld any pay zones - I am assuming you did not.  I also think that is smart - if, after having fracced the Marcellus (which is what I am assuming the are going after in your area right now) and the production drops off and the majority of the sand and water have flowed back in a couple of years, they can then go down hole and tap other zones from the same pad - not necessarily the same hole - the pressures can sometimes crack the casing and it caused problems in the production.  The method that yo used, is one I have advised many in the past to utilize - give the company the opportunity to own the Lease for an extended amount of time, but if they do not utilize the opportunity, they must pay dearly to retain the right to do so in the future.

Permalink Reply by Carol M. on February 2, 2011 at 3:19pm

There is a landowners Town Meeting at Trax Farms this Sunday at 1:00 pm.  This will be a great place to talk to other landowners in Washington County since Chesapeake just drilled a well there.

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