Oil Gas Wells

[paulver]

I haven't posted on here in quite a while, but I have something that I need some insight into. I have been approached by an Oil & Gas exploration company to lease our land. The long and short of it is:
Signing bonus...5 year lease---$100.00 an acre.
10 year lease--$200.00 an acre. After that it's $5.00 an acre per year.
12 1/2% royalties per month on any gas production on my property.
400,000 CF of free natural gas per year.
If neighbors join in, everybody enjoys that 12% from each other's well, provided there are active wells on their property.
This is all coming about in Pennsylvania due to a new drilling technique into the Marcellus Shale formation found here in Western PA. My questions are for those with any experience in this. Is this a good deal? Should I hold out for more up front money? (I've read that some companies are paying $300 - $2100.00 per acre up front. I'm not trying to be greedy. I just don't know if this is a good deal or not. Some neighbors have already signed.) Should I try approaching another company?

Paul

 

[RayP(MI)]

SPEND THE MONEY AND GET THE BEST OIL/GAS LEASE ATTORNEY YOU CAN FIND! (Yes, I know I am SHOUTING!!) Those lease companies are about the slippriest bunch you ever want to meet. Don't go up against them unarmed. Better yet get your neighbors to go in with you on this. DO NOT GO WITHOUT PROPER COUNCIL>>>>

 

[phil lowe]

rent the movie "THERE WILL BE BLOOD" It will give you an insite into the mindset of the individuals your dealing with..
I Have a friend in next province to me who had his land raped and wood stolen and has been in coart for 5 years now dealing with them type folks...If you value your land at all keep em off,,....But thats easy for me to say,not being in your shoes...

 

[paulver]

Our land is completely clear..... only a few trees. Right now, we rent out the fields to a local farmer..... literally, "dirt cheap!!!!" He's already singed up ,and he's very respected around here.

P.

 

[IBorange in TX]

I agree with RayP, don"t sign anything. Get your self a good land/lease lawyer and let him/her take care of it. They will get the best deal for you, because its more money for them. Get your neighbor to go in with you with the lawyer.
Don"t sign anything w/o lawyer"s okay.
BTDT and didn"t get a T shirt
Good luck.....

 

[WantACaseLASomeday]

By all means seek counsel since you have questions. But at the end of the day sign the lease and take the money. My family did that for years - never got much in the way of production but the lease money was better then nothing. There are shysters in every business but there are also honorable operators who will treat you and your property with respect. From your standpoint it's all gravy so make sure you are legally protected then take the money.

 

[led]

Don't pretend to know about gas wells. But on -the after that- ($5.per acre) But I would want a basic $ amount per year or they lose the lease!!

Domestic Oil producers in the 1950's call them dry holes if not high producers.
1970's & 1980's the would fire up pump for 1 or 2 days a year to hold lease. Yet you have to farm around road, pump & tank battery. If you have livestock, they always seam to now how to open gate but not close gate. but you can't deny ingress or regress to their pipline, gagues ect.

Just me 2 cents.

 

[old]

Well I know if it where my place I would want 10-25% of there profits, no questions asked and no other option or tell them to shove it. I.E. if they made $100,00 a year off your land you would get the 10-25% of it for your self no ifs ands or buts about it
Hobby farm

 

[Bruce Hopf]

Personally, #1, I'd get a lawyer involved.
#2, I'd definitely try and get more money.
#3, Take a good look at the pumps at your local gas station. These oil companies, rummer has it, that they are going to increase the prices of Gas, Diesel, Heating oil, Natural gas, the hole nine yards, no mater if the price of crude oil goes up or down. There out to make money off you at both ends. Off your land, and off you at the pumps. Make sure you look after your self. Because they sure won't, you can guarantee that.
My two cents worth any way. Good Luck.
Bruce.

 

[Anonymous-0]

we found a attorney that knew about oil drilling and oil leases. Most don"t. He made about 4 pages of changes to the "standard lease" most people sign. he changed time frame from 5 to 3 years, percentage from 1/8 to 17%, some right of say where to put in driveway,shutin price from $1 to $10, $2000 fee payment when and if they start things,liability issues and many other things. Also did NOT recommend free gas rights because the liability is too great.got an extra percentage instead.
The 3 year limit helps keep the scouts that buy up leases until the big players get interested and then have to buy the lease from him. also puts you ahead of others if you lease to a big company.
leases are going for $100-300 an acre here.

 

[dlplost]

Agree with RayP and others..Those leases are negotiable, not set in stone.
He'll fuss and say he's got to talk to his Boss, but remember they HAVE to have you in thier lease area or they can't drill.

1. No longer than 3 years at a time.
2. No less than $100 per acre.
3. Don't remember exactly what our % is without looking it up but 12-1/2% is about right I think. Highest I ever heard of was 17%, long time ago.

I'm in the southern tier NY..Corning. Lots of drilling going on here. May of the companies were ripping people off so bad the State stepped in and created a whole bunch of new laws and rules for them to follow. It goes something like this...they MUST have an area of about 640 acres under lease where they want to drill, and that includes everybody.. even the little guy with only 1/4 acre, if you and the neibors get together, you can make a lot of money depending on just how bad they want to drill. We've been under lease for about 8 years now, 2-3 years at a time, each renewal the price goes up cause we know that they know the gas is here. They've done sismic testing here 3 times, first 2 times with the thumper trucks on the road, 3rd time with dynamite holes drilled all over the place. Each time one of the recorder boxes was right here in the yard and we talked to the engineer that collected the data. He asked us about any heavy equipment in the area, we showed him our TD-9 we'd been using to log the hill. He laffed and said that explained it! Seems thier recorders were picking up some funny sounds they couldn't explain..
They are now drilling just down the road from us.
The guys on the rig say this one is a shure thing from the data they've seen. They drill down then horizontally thru the area where the gas is. Going down 13,000 feet then right up the road past our house.

 

[Anonymous-0]

I have ground in NE Pa. and I've been offered 1500 per acre with 15% royalty. Be sure that the royalty comes off the top - not "after expenses".You should get a lawyer involved - one that has experiance in O/G - should be a lot of them in your area. I've looked at 5 different leases and a couple of them were really rip-offs.

 

[Gun guru]

I agree witht the others, get a lawyer and be sure that you are being paid a fair rate, and that your property is not going to be trashed.

 

[Anonymous-0]

don't get in hurry, if land gets leased around you they will be seeing you once a week...just got one company offer in tx.. 175 per acre (2years) and 1/5 production..the 175 does not get paid again if they start paying royalties...In Tx someone else can own minerals lease them and the oil companies can drill any place on your property and just pay what they want in damages..also they can put down pipelines same way..best bet is to get as much as you can in tx and stay out of courts....



MAY GOD BLESS THE USA

 

[JK-NY]

dlplost gave you some good advice. All through Southern tier of NY up into the Finger Lakes area alot of gas exploration has been going on and many areas contain good amounts of gas. As mentioned below NY State got involved , in NY the DEC(Dept of Environmental Conservation) is the State agency that over sees such things. I'd suggest checking with your PA equivalent of the DEC and also maybe the Farm Bureau. Here in NY both have lots of info for Landowners about gas leases. Good Luck, and dont be in a big hurry to sign up till you do the research to find out what you need to know.

 

[Dave 2N]

You wouldn't get 10-25% of their profits.

 

[old]

Then they would not be on my land either

 

[Dave 2N]

In the Southern Tier of NY (Tioga County, for example), Chesapeake Energy is offering $1000.00/acre signing bonus with 12-1/2%royalties for a five year lease. They also have an "appendix" attached to the contract that covers thoroughly all landowner concerns, the concerns that one might ordnarily have to see a lawyer about. Other companies are working the area too but seem to be losing out to Cheaspeake Energy.

You can't compare PA bonuses to NY bonuses as the operating rules are different in both states. In PA, you might lease your property and they drill there and you get all the royalties even though the gas field might extend underneath other property owners farther away.

NYS requires the gas companies to lease land in 640 acre "units" and then get DEC approval before drilling. All landowners in the "unit" will share in the roaylties based on the number of acres each landowner has in the "unit."

Yes, you can negotiate but only up to a point. Bonus payments are most negotiable whereas royalties are pretty much standard in the industry and are less likely to be negotiable. Those, like "old" below who says he wants 10%-25% royalties are living in a dream world. 12-1/2% is the usual royalty with some companies maybe going as high as 13-1/2%.

In our area, bonus payments began last summer at $75.00/ acre, then went to $125.00, $200.00, jumped to $875.00 and most recently levelled off at $1000.00/acre. Many people are taking the $1000.00/ acre at 12-1/2%. Some are holding out for more and might get more. The common feeling among those taking the $1000.00/acre at 12-1/2% is that if they hold out and the company drills some wells in the area that are duds, then the value of unleased land drops considerably.

These leases are for Marcellus Shale exploration.

This is a summary of what I've learned since last August.

 

[Dave 2N]

That's right; your choice. All I'm saying is, no matter what you want, you can only go so far as to telling these companies "where the bear POOPED in the buckwheat." Don't overlook a profitable situation just because you are hard-headed. Or, as my grandfather used to say, "Don't stumble over a dollar while your're looking for a nickel."

 

[Anonymous-0]

The laws where your at must be a lot different than Louisiana -- You are supposed to receive a percentage of the royalties of any well drilled in the same section your land lays in whether your leased or not. These royalties would be based on acres owned in that section. You can hear any number of horror stories but one thing you can bank on, if an established,big name oil company or large independent is involved you will not be taken advantage of or have your property destroyed. The oil and gas business gets the worst press of any industry in the nation and they cannot afford to be wrong. Period. The companies lease as much land as they can in a promising area knowing most of it will not be drilled on. Usally the serious seismic and exploration work starts afterwards. Read the contract, research the company, take the money and hope they drill on your land.

 

[Dave 2N]

I agree. Yes, folks should be careful before signing a lease but please remember: this situation is made to order for lawyers and the lawyers want to make everyone think that they automatically need lawyers.

The big companies are responsible and honest. I have neighbors who have had wells drilled on their properties and nothing but good has come of it. The responsible companies don't leave the land in a mess and they state that right up front in the contract.

 

[old]

Very true but if some one wants to do something on my land they will have to pay a fair price or they don't do it. I can't see some company coming in and makes 1000s of $ off what they get from under my land and giving me penny to do so. I have a guy the gets gravel from my place and he pays me about 10% per load

 

[oscar80]

DLPlost,
When did they start drilling in that area? I lived in savona until I was 19 and only been back a handful of times.

Dave

 

[Bill in Colo]

15% is closer to the norm in leasing today always make sure that shut in fee is as high or higher than the annual lease fee. Pay to play.
Hopefully this is the last year of lease or shut in. We have several wells that are to be online by sept 1st.

 

[Roland]

My BIL who lives in New Milford, Pa. was offered $2000 an acre 3 weeks ago. Many farmers signed a Top Lease here for less that $200 an acre in 06 and they offered my MIL $300 an acre about 3 weeks ago. I'm stuck at $5 an acre unless I want to Top Lease. NO WAY, see an Oil Lease Lawyer! Do a search online. Southern NY, Pa. eastern Ohio and WV have this Marcellus shale that may contain 168 to 516 trillion cubic feet, a "Super Giant" gas field. Also Texas has this Barnett Shale that is real hot now with the new Horizontal Drilling and Hydraulic Fracturing that has opened the door to much better production, the same technology that has opened up this Marcellus shale they have knowned was here for years. By the way they are paying up to $25,000 an acre in Texas (do a search.) We better stay on top of this, and not get burnt twice.

 

[dlplost]

They've been drilling here for about 5 years, Im in East Campbell on Meads Creek, there are wells all over the place now.

 

[dlplost]

Cheaspeake Energy has recently purchased a couple of helicopters from Schweizer Aircraft in Elmira, NY for checking thier pipe lines. Seems to be a decent company.

Yes I work at Schweizer..

 

[L.C.Gray]

The price varies greatly from one area to another. I leased my place 3 years ago on a 3 yr lease for $250 and acre plus 20% royalty as did all my neighbors. The lease came due for renewal first of this year but was not picked up. Just 50 miles northeast of here, in the same Barnett Shale formation, there are neighborhoods in town banding together to negotiate in bloc and are getting up to $25,000 and acre and 25% royalty in the middle of Fort Wort and Arlington Texas. DFW Airport leased its 18,000 acres for $10,000 an acre and 28% royalties. It"s crazy I think, but thats what they"re paying in virtual bidding wars to sign mineral rights owners in that area.

 

[oscar80]

My stepdad Joe Arnett worked at Schweizer. Got a good friend that still works there.

Dave

 

[dlplost]

Joe Arnett, Never knew Him, but remember the name. Who's the Friend? Probably know Him, I've been there since 1973.

 

[dlplost]

Here's the latest picture of the local well..
Picture was taken from a nearby hill about 250' above the location.

 

[oscar80]

Carl Overhiser

 

[dlplost]

Yup, Carl and i go WAY back, tell him you talked to Dave Pierce. Jimmy worked there, and Jimmy's Son Jimmy worked there. Marion is still there also.

 

[oscar80]

I dont get up that way much anymore living in NC but next time I see him I tell him. Small world.

Dave