Mineral Rights Leasing Blog

What is a fair lease offer… in the Bakken? in the Barnett? in the Fayetteville? in the Marcellus? in my region?

This most-often-asked question is a good one. It is also impossible to answer with exact values because what is good for one person, parcel of land, period of time and area, may not be good for another. The best answer: a fair lease offer is one that you feel good about.

As you probably already know, lease rates have been a moving target over the past year due to the unprecedented oil price highs, and now the economic downturn. With oil and gas prices so low, companies are going for one of two things at this time: either as-near-to-sure-things-as-possible or very low cost wildcat, higher risk areas. This means that they are still obtaining leases and they will still pay relatively well for a low-risk area, or alternatively, they ...

There are a few major parts to each Oil Lease, and many minor parts. In particular, there are three major parts that need careful consideration before signing. They are:

Lease Term

In short, this is the time period in which the lease is valid. The term can vary between 1-50 years, but in general it is 3-5 years. Depending on the specific leasing document, Drilling operations usually will have had to start before the expiration of this time period, and drilling operations will have to be continual until either a completion or an abondonment. If the Lease is a “Paid-Up” lease, then the lease is only enforceable for the stated term, and cannot be extended without additional agreements. If however the lease allows for “delayed rentals”, then the lease will have a primary term, within which drilling operations must begin, or the leasing party must pay a delayed rental if ...

Let me expound a little bit on lease values. While lease offers accross the board have gone down both in number, and in value, there are reasons for optimism. This is a very tepid time for many smaller oil and gas companies who are adopting a wait and see approach. These are the companies who are small enough to start and stop projects fairly quickly. If things go wrong in the short term for these companies, they might go out of business, and because of their short term approach, lease offers will be less competitive from this group. From Bigger more established oil and gas companies like Newfield, Petrohawk, Anadarko, XTO, Cheasapeake, E.O.G., etc… Lease offers will remain competitive because of the long term approach these companies have. Fresh off of periods full of windfall profits, many of these larger and intermediate sized companies continue to look for promising properties ...

We are seeing a drastic reduction in the price and royalty offers on new leases. This can be expected because of the massive price hemorrhaging that has taken place with the price of oil since July. In July, oil hit an all time record of $147 per barrel while Natural Gas was at $13.50/MM Btu. As of this posting, Oil is at $46.79/barrel and Natural Gas is at $6.35/MM Btu. Quick math shows us that oil is 32% of what it was just 5 months ago, while Natural Gas is 47% of its recent high. Many people have asked my opinion as to how on Earth this happened. Was it because of an Energy Bubble caused by Speculators? Was it because “Peak Oil” was proved wrong? Was it because of new oil discoveries which increased the oil supply? Was it because of the economic collapse? Three culprits have become glaringly ...

Let’s get right down to business
The reason this blog was created, is to help inform the common land owner of the Oil Industry, its direction, its potential, and its noteworthy news. As much power and influence that the Oil industry has, one would think that transparency of data would run freely through the culture like a springbuck on steroids. One would be wrong. In fact simple lack of understanding has infected nearly part of our country from politicians to principals; and sadly, even trusted industry professionals and analysts are often as mislead as a North Korean missile. In my investigations and analysis, I hope to be able to interact with many of you and draw attention to the gravity of the situation at hand, as well as give direction as to people whose analysis can be trusted–and whose track record is impeccable.
Vocabulary and Pun disclaimer: For Reasons ...