Utica Shale in Ohio

A few of us in southern Richland county Ohio have been approched to sign a lease on our farm land for $15 acre to horizontal drill for oil in the Utica shale. We are wondering if anyone else around the area has been approched also

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Permalink Reply by John H on February 26, 2011 at 8:20am

Let me present you with a few facts rather than opinions. 

 First and foremost, the Marcellus does not even exist in your part of Ohio.  In extreme eastern Ohio, it is about a mile deep and lies above the Utica.  Then it plays out and is replaced by the Utica as you move westward.  The Utica is found at less than 4000' in your part of Ohio.  It also thins out as it moves westward (generally speaking).

Second, the Utica is absolutely and totally unproven in your part of the state.  A decent well was drilled last year in Belmont County by Consol.  However, it only tested at 1.5 M cu ft over 24 hours.  It was not artificially stimulated (fracked) or horizontally drilled.

There is no way anyone is going to spend the money to drill horizontally and frack a Utica well at this point.  It is just too expensive to drill a wildcat at that depth for an unproven play.  They are just poking holes in the ground to explore parameters,i.e. structure depth, thickness, etc. and to take well cores so that they can explore the permeability and porosity, etc.  Absolutely no one is going to spend $5 million to drill a wildcat well right now.  One day the Utica may be proven and profitable, but that day has not yet arrived.

In order for exploration companies to drill and confirm their hunches regarding the Utica, they have to have some cooperation from land/mineral owners.  Once again, this is not a proven play.  Far from it.  Banding together in groups and demanding huge up-front bonuses is a fairy tale and will actually be counterproductive.  This is not the Marcellus.  It is not proven to have commercial production in Ohio whatsoever, especially as far west as you are.  If you want to profit from this play follow my advice.

The money to be made in oil and gas exploration is not on up-front bonuses but on long-term royalty payments.  There is no comparison between the two.  A signing bonus is a one time fee.  Royalty payments are every month for 30 years or more!  Which is more important?!?!

I don't now that I would settle for $15 dollars, but do not be a holdout for unreasonable bonus money or they will just move on to another area more proven where they can buy for the amount that you are asking or they will move their play into other unproven areas where they can actually buy for their target price.  If you want to band together, do so, but have reasonable targets with regard to what you want per acre to sign.  Work with the driller, and you may actually see some drilling happen.  You are not in a position as a wildcat mineral owner to be overly demanding or you will definatly see no drilling happen.  No drilling, no royalty payments.  Get my drift?

My best advice, if you have large acreage tracts, is to demand a Pugh clause.  This will force the leaseholder (or his assigns) to drill within the terms of the lease or forfeit it.  It will also prevent large acreage tracts from being held by production via a single well.  This is prevelant down south, but not here in Ohio.  It is a trade secret that they do not want you to know about.  It is the single biggest way to protect yourself and your interests while still being cooperative enough to work with the driller and encourage exploration to actually happen.

Whether the lease buyer is the actual driller or not is of no consequence whatsover.  You don't care who drills - you just want someone to do so!  Any large leasehold interest acquired will be turned to the appropriate exploration company so that they can put a bit in the ground.  They key is to allow acreage to be accumulated.  Holdouts will just prevent them from acquiring appropriate leasehold interest and assure that no drilling will ever happen.  Smaller independents do not hurt the majors, they help them.  It allows the drillers to accumulate much more leasehold acreage in a smaller period of time.  They can afford to pay a markup on the lease because they have no overhead associated with acquiring the lease (which can be VERY substantial)

In summary, get a reasonable signing bonus ($15 is probably too low).  Get a Pugh clause.  Be sure the lease is reasonable regarding surface damage, etc.  Band together if you wish, but not to the detriment.  Work together for a common cause, not against it.  You don't want the oil companies to be greedy, but you can't be either.  Above all, remember that the most important thing that you can do is to facilitate drilling so that you can get those royalty payments coming in.  If you have large acreage or multiple tracts, you can always hold some of the acreage back.  IF a well is ever drilled and the prospect proven, THEN you can demand a much higher signing bonus on your remaining acreage.

I don't have a dog in this hunt.....just passing along my thoughts and advice.  I know this is how I would play it if I were you.  I am not a lease buyer, but I can probably put you onto someone who is - their target in your part of the state would certainly not be in excess of a $100 per acre, if that.

Good luck!!

Permalink Reply by Mat B on February 26, 2011 at 11:25am
Range Resources has drilled a few Utica wells
Permalink Reply by Chuck Reed on February 27, 2011 at 3:07am

Several E&P's have.

Permalink Reply by Chuck Reed on February 26, 2011 at 3:02pm

sounds like PA/NY ten years ago before anyone was looking at this stuff. My contatacts, Geoligist told me it goes to Mich.  PRESUME it does and DON"T presume what you read on line is the facts.

 

Permalink Reply by Mat B on February 27, 2011 at 4:12am
They are going to be drilling a Utica near Fryburg, PA.  The permit has been issued.
Permalink Reply by Chuck Reed on February 27, 2011 at 4:40am
they are going to drill for many kinds of gas from each pad.  If they let stories be reported about how much gas was on the markeet, the markeet on wall St would fall apart.
Permalink Reply by matthew h mcsparren on February 28, 2011 at 12:29am
the drilling rig is set up on what used to be the ziegler farm. heard this is a test well, vertical only no lateral.
Permalink Reply by bill h on February 27, 2011 at 7:02am

Pa in 2006

 

Deja vue

Permalink Reply by Daniel Rupert on February 27, 2011 at 12:47pm

Posts like yours are really quite funny, but also incorrect and dangerous...you do not know what your talking about and you need to be discredited right now! Why would you post all of this if you don't have a dog in the hunt...I don't believe anything you have to say and I hope nobody takes any of your advise! People, trust me when I tell you to take your time, educate yourself, get an attorney! There are people on this forum who are not who they pretend to be...They know who they are...its our job to sniff out these individuals!The best of luck to all and GOD BLESS!

 

 

Permalink Reply by Daniel Rupert on February 27, 2011 at 1:23pm
This post was directed to John W Howard...Our family has a family farm in Elk County, Pa....I have been following the Marcellus development for 3 years and Utica the past 6 months. The first offer we received was 15$/ACRE back in 2008...since then, it has progressed like this15-50-100-250-500-1000-1500-2250-2500-2750.The royalties started @ the 12.5% minimum and progressed to 15% then 16%. The Utica shale has the potential to a larger play than the Marcellus and there are many Utica wells being drilled as we speak.Educate youself before you make any decisions!
Permalink Reply by John H on February 27, 2011 at 2:17pm

Daniel Rupert

No need for the personal attacks.  You must be a liberal hater.  They always take the attack postion rather than just expressing their opinion, which is what this sight was designed for.  You may think you know more than me but you are mistaken.  What you have "followed" for 6 months I have been involved in for almost 30 years.

I'm trying not to lower myself to your level so I will end here.  Try a little courtesy for a change.  You are welcome to your opinion as I am to mine.  I can assure you that no one with 6 months of experience will ever change my opnion.  So I'll just keep mine.  You keep yours.  But also keep you personal attacks to yourself as they are not appreciated nor welcomed on this site.

God Bless??? You don't seem very Christian to me.

Permalink Reply by bill h on February 27, 2011 at 3:07pm
John, I gave you the benefit of the doubt, but now you've shown your true colors.  You are the only one making attacks on here.  And, by the way, this has nothing to do with the left or right, OR Christianity.  You and you kind have hurt a lot of people.

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