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We inherited 22 acres in Gilmore Township, Greene County Pennsylvania. We were offered $5,000 a acre by a gas company. We are not sure what to do. The family owns a total of 88 acres are share is 25 percent. A lawyer told us we could get 25 percent royalaties on the 88 acres. We don't know what to do any suggestions?

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Permalink Reply by bo boboski on May 19, 2018 at 1:19am

Did anyone close to those 22 acres get 25% royalties? I doubt it. Something is fishy. But it would be nice if this lawyer is right! If you somehow do get 25%,please let everyone on here know. That's what it should be, but most are lucky to get 20%.and then the producer tries to find a way to get it down to12% by illegal deductions.

Permalink Reply by Marci Feustel on May 19, 2018 at 1:21am
Sorry I meant 25 percent of the land, not 25 royalaties. We don't know if we should sell for $5,000 or wait.
Permalink Reply by David Cain on May 19, 2018 at 4:37am

Marci,

My suggestion would be to gather as much information as you can before you make a decision.  You are off to a good start by using this site - it is a great resource full of information and experiences shared by other land owners.  It sounds like you just learned about this windfall and you are trying to get up to speed on what it means for you and your family.  One of the big decisions a mineral owner has is whether they should sell their minerals or lease them. 

If you were contacted by a gas company then they were probably trying to lease your minerals.  Under a lease, an oil and gas company will typically pay a one time sign on bonus (the $5,000 you mentioned per acre sounds about right) and then also pay a royalty on the gas and oil when it is extracted from the ground.  The royalties can last for 20 years or more but the biggest part of royalties will be earned in the first 5 years or so.  Many people on this site (myself included) would tell you that most of time it is better to lease your minerals rather than sell them.

Whatever you are thinking of doing, you will want to talk to a good gas and oil attorney before you sign any contracts to sell or lease.  A typical lease presented to you by an oil and gas company is usually weighted very heavily on the side of the oil and gas company and you need somebody on your side to help level the playing field.  You may want to work with the other heirs of this 88 acres so that you have more negotiating power and you could also split any costs incurred as well.  

If my assumption that this is all brand new to you is incorrect then I apologize.  I am just giving some basic information that you may already be aware of.  But I know that when I first strarted looking into this seven years ago I was overwhelmed.  Just gather as much information as you can before you make your decision.  Good luck. 

 

Permalink Reply by Marci Feustel on May 19, 2018 at 4:43am
Thank you for your input. We contacted a lawyer on Friday in Pennsylvania. Thanks again.
Permalink Reply by Lynn mudder on May 19, 2018 at 5:21am

I would never SELL  for $5000.    You ay be able to LEASE your land for that amount, still own it, and be able to collect royalties for life.  I urge you to do your research, and a lot of it.  Get a good oil and gas attorney, take your time, this could be life changing money for you and your family.  Please take your time and educate yourself to put together a good lease. 

Permalink Reply by Marci Feustel on May 19, 2018 at 6:03am
Thank you for the information. The broker who wants to buy from us is telling us we will have a hard time selling or leasing to anyone else because they own the surrounding area. I guess that would be a question for are lawyer. Thank you.
Permalink Reply by G.H. on May 23, 2018 at 3:41am

That response from the broker is laughable.  If you aren't going to be able to lease it to anyone, why do they want to buy it?

Permalink Reply by jason irvine on May 19, 2018 at 11:48am
Greene county is one of the hot spots and is in the core for utica dry and marcellus. We are not to far away in wetzel and tyler county in wv. You should get 5k in the bonus and try for 20 or above on royalties. We did not get that much but I heard people say they got that much. Do not sell. It's worth way more then 5k a acre........WAY MORE.
Permalink Reply by Marci Feustel on May 19, 2018 at 2:18pm
Thank you for your helpful insight.
Permalink Reply by Bullfrex on May 20, 2018 at 1:50am

Marci,

The previous post by David Cain is full of good, useful information. I will piggyback on what he said with a few thoughts, as we went through this same scenario several years ago. It was a time of uncertainty and a feeling of being 'lost', but with some work on your part on this site and elsewhere, the confusion will clear. 

First thought, the attorney can help determine the ownership tree, and hopefully the four parties are amicable and can work toward an agreement on the best way to proceed. You DO NOT need to be in a hurry to do anything, as this is a buyer of your rights, not an oil and gas driller looking to lease. And remember that any of the four parties are free to pursue their own course of action, as long as clear ownership has been established. That would be my focus with the attorney at this point. You did not mention if you own the surface rights as well as the Oil, Gas and Mineral rights. This is not important at this time, but knowing this will be useful down the road.

Second thought, if your first offer to purchase was for $5K per net mineral acre, you can rest assured that is the very lowest you could get if you choose to sell. I am not advocating retaining or selling; that subject has been 'beat to death' here FOREVER, but just know that everyone's situation is different, and do your homework before you decide to move forward; the first and second offer will be lowball, as the buyer will want to maximize their return by buying as low as possible.

Thirdly, join the County Group on this site, as it will have some good intel on the activities of the E&Ps (drillers/producers) specific to your area. There, you should be able to find leasing and royalty information, perhaps production numbers and other tidbits. Just keep in mind, some things posted here are OPINIONS ONLY (like this post, lol). Remember, knowledge is power in the decision making process....make yourself powerful!!

Good luck in this new venture and enjoy the ride!

Permalink Reply by Bullfrex on May 20, 2018 at 2:58am

Marci,

This could help or further muddy the waters; I looked at Greene Co. gas production for March 2018 (the latest for which production numbers are available), and the best new wells coming online are impressive. First month IP (initial production) of 740,000 Mcf, and with the three important variables set as shown below-

If your entire 22 acres (88 acres for all) were included in a 640 acre unit; gas price at $2.25/mcf and a royalty Percentage (WITH NO DEDUCTIONS....this is an important assumption) of 18%-the royalty for this scenario.....would be greater than $10,000 for that one month...

Now no one can predict the production of any well(s), and the well above, this is a truly impressive well, but imagine if you were in a unit with 3 or 4 wells with similar production, or even half of this production, could possibly be $5K to $20K royalties per month initially....for each owner! This is why the LEASE is EVERYTHING in this process. Make certain your attorney is a true O&G attorney, and never assign them a percentage of the proceeds...pay their hourly rate happily and if you can do it as a group, so much the better.

I am not advocating any particular course of action for you, rather trying to show that David and Lynn and Jason are giving you great advice.....there is much work to be done on your part, and I will borrow Lynn's remark----"this could be life changing money for you and your family"....let's hope it is!

Get smart....and good luck!!

Permalink Reply by Lynn mudder on May 20, 2018 at 5:09am

Bullfrex, could you please share where exactly you are finding your production numbers for Greene?  10 years ago when all of this madness started, I knew all of these sites. But, I’m older now and finally getting a well, and can’t remember how to find this info.  Thanks in advance. 

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