Approached to Lease Land We Didn't know We Owned

My deceased father had mineral rights to a parcel of land in Bradford County. . . about which he told us (kids) nothing. We have just been approached by Chief Exploration and Development to lease the property. They propose to pay us 1/8 of the revenues from the sale of either gas or oil. My questions about this proposal are:

  1. Is this amount (1/8 of the revenues) low, normal, or high?
  2. The property is 173 acres. Is there any way to estimate how much gas (I wouldn't expect them to find any oil) might be produced from a property this size and what the revenues from the production would be?

I realize question 2. is hard to answer, but we'd like to have some indication of the averages in Bradford County.

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Permalink Reply by Donald K. Taber on March 6, 2018 at 3:45pm

Dave: How old is your lease? My understanding is that there's a "glut" of gas in the country now and the price of gas has gone down, so companies are not paying what they used to. 'Course, this info came from the prospective lessee, so not sure it's true, but it is true that we're awash in natural gas and have become an energy exporter, when for most of my life we've been a importer.

Permalink Reply by justin clouse on March 22, 2018 at 9:08am
Well production will vary greatly depending on area, completion and need for gas in any given pipeline. I would not lease below the Onadoga formation without a set the family for life lease bonus. The Marcellus( upper and lower, 2 separate formations) and the Utica is just the beginning in NEPA. Companies are currently working to delineate the Rome Trough below the Onadoga which contains many Oil and gas bearing formations, some of which will likely become commercially viable. A good Oil and Gas attorney is a must, preferablely from Pittsburgh or Houston( it will be worth it). Don't sign on the dotted line until it sits well with you.
I have seen estimates of Total Gas In Place as high as 175 BCF per square mile/ times 2 where upper and lower are present.
At 2.50 per mcf that is 1,367,000 per acre of recoverable gas in place, so the percentages and lease language matter. Good Luck and God bless, feel free to contact me if you need any more information.
Permalink Reply by Bullfrex on March 22, 2018 at 12:47pm

Donald, my two cents worth from someone who has been in a VERY similar situation.

Get a KNOWLEDGEABLE O&G attorney before you do anything else. 157 acres is a sizable chunk of rights, and you will only get one chance to get it right. A good attorney will cost a bunch, but NEVER pledge any proceeds from the rights. Pay your attorney an hourly rate. If you can get all parties on board, the cost will be more manageable.

Sorry....going to repeat myself here.....get a GOOD attorney. Ask around and find one with extensive O&G experience. Then, ask him the questions associated with the info you have received from all the good folks on this site.

I think Bradford Co. is the #2 NG producer in NEPA, and the monies possible with this scenario can be life-changing to a degree, so treat it as an asset, a really valuable asset, and ACTIVELY manage it.

Best of luck to you!

Permalink Reply by Spike's Kin on March 30, 2018 at 10:21am
Bradford Co, PA? You want to be sure the operator you choose to lease with is drilling and completing wells in the Marcellus and Utica shales. Most standard leases are worded greatly to the advantage of the exploration co. Any well drilled and completed, even a low-producing shallow well, could lock up your gas and oil rights essentially forever, so choose wisely.
If you negotiate carefully and if it comes to fruition, 173 acres in a Utica or Marcellus shale natural gas well could make you a millionaire several times over.

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