Posted January 2nd, 2012
In the last six months we have seen a lot of changes in the oil and gas leasing game. More wells have been drilled and more data about the Utica Shale is now available. This has created a lot of buzz in the oil and gas world. There has been a real surge in interest by many oil and gas companies. There are new “hot” counties where lease prices have escalated substantially, while other counties are of less interest to the oil and gas companies. More companies are moving into this play every week. Major companies now include: Chesapeake, Devon, Hillcorp, Shell, Anadarko, Hess, Gulfport, Consol, and XTO (Exxon). However, not every company is interested in the same area.
It can be extremely difficult to figure out how to get the highest price for your property. As a law firm, we have worked with many landowner clients since the inception of the Utica shale play. We keep track of the offers in terms of upfront lease money and royalty. We also track the offers geographically so that we know which companies are interested in which counties and townships and what the ‘going rate’ is for a particular area. Because we understand the lease market, we are able to negotiate on your behalf and will attempt to get you the highest price available. Importantly, we also have contacts within the major Utica companies and can typically work more quickly than a landowner could on their own.
Give our office a call today at 888.324.5127 and let us do the negotiating work for you.
Posted January 2nd, 2012
We are often asked whether a landowner should join a “group.” The short answer is “it depends.” Certain landowners will benefit from joining a group while others will do better standing alone.
Factors we consider include:
- How many acres do you own?
- Are you willing to sign a lease that allows the company to drill on your property?
- Are your neighbors leased?
- If your neighbors are leased, did they sign with the same company that has approached you or a different company?
- Is the group made up of large landowners or small landowners?
- Is the group centered around your property or spread out?
- If the group is spread out, how many townships or counties does it span?
- Has the group already been approached by any companies?
- Does the group want you to pay a fee to join?
- Does the group want you to commit to joining the group for some period of time without guaranteeing terms?
Depending on the answers to these questions we may advise you to join or not join a landowner group. There are many different groups available. We often put our landowner clients into “groups” where we feel it benefits them. If we think your position is stronger by yourself, we will advise you to stand alone.
You should speak to an attorney to figure out if you will benefit from a group situation. As always, do not sign any documents committing you to anything until you have consulted an attorney.
Posted June 22nd, 2011
Oil and gas leasing in Ohio has continued at a rapid pace. Columbiana County, Jefferson County, Mahoning County, Caroll County, Stark County and Harrison County continue to generate signing bonuses in the $2,000/acre and up range, with prices in Harrison County (where a rumored huge well has been drilled) reportedly hitting over $3,000 per acre. Outside of that core area, in Trumbull County, Portage County, Summit County, and Tuscarawas County, activity is pretty brisk, but at lesser per acre amounts. Going beyond those counties, we are seeing new entrants, besides Chesapeake Energy, into the Utica shale play who are leasing in Medina County, Ashland County, Wayne County, Holmes County, Coshocton County, Belmont County and other areas. These new players are paying considerably less per acre than what we have seen in Chesapeake’s core area.
Approximately 5-6 horizontal Utica shale wells have been drilled to date, with only a few of those having been fully completed and put into production. We are likely to see some dozens more drilled by year end. Leasing trends are going to be dependent upon the success of these initial wells.
Finally, in some of the core areas, landowners with old leases are being courted by a company known as MC Mineral Company, LLC to buy out their mineral rights with a one-time payment. MC Mineral Company, LLC would appear to have a relationship with Chesapeake Energy. It need be understood that if you are selling your mineral rights, this is different than signing a lease. Under a lease, a landowner is entitled to future royalties if and when a well would be drilled. A sale of mineral rights would cut off an landowner’s right to future royalties. Tread carefully if you are considering such a sale of mineral rights. I am in the process of putting a group of landowners together to negotiate the sale of their mineral rights, so feel free to drop me a line if you have received a letter from MC Mineral Company on this issue.
Posted November 8th, 2010
During the summer of 2010, the oil and gas leasing situation in Ohio changed markedly. Prior to this point in time, oil and gas leasing and drilling in Ohio was conducted primarily by smaller, local companies. In 2010, an influx of larger companies changed the oil and gas landscape in Ohio. The primary company behind this move was Chesapeake Energy — a huge oil and gas producer based out of Oklahoma. Another large company, East Resources (recently purchased by Shell Petroleum) has also made a move into Ohio. Other out of state companies of varying size have also begun leasing — seemingly following at Chesapeake’s heels.
The initial area of interest in Ohio was in the southeastern part of the State. Huge amounts of acreage were leased in what appear to be the primary areas of interest – Jefferson County and Columbiana County. The surrounding areas of Mahoning County, Portage County, Stark County, Carroll County, Harrison County and Belmont County are also being leased.
The common practice in Ohio, prior to recent developments, had been to pay annual delay rentals to acquire a lease, with typical payments of $10-20 per acre, per year. These new players in Ohio are paying sums many times that amount and paying the delay rentals in advance, for the entire term of the lease. In certain hot spots, sums of $2,000/acre have been paid for a 5 year paid up lease. On the outer edges of the play sums of $4-500/acre are commonly offered. Some companies are offering more than the one-eighth landowner royalty, which has been the standard in Ohio for many years. I will say that the “standard” lease being offered by these new companies, while carrying favorable monetary terms, is otherwise heavily slanted in favor of the oil and gas company and needs substantial revision to get it into a fair agreement.
What are these new companies after? Certainly, the eastern tier of counties in Ohio does contain Marcellus shale, but it pinches out fairly close to the Pennsylvania border. Other Devonian shales of similar geologic age to the Marcellus exist in abundance in the eastern half of Ohio. Whether production from these shales or from the Marcellus (where it exists) will rival what is being produced in Pennsylvania is presently unknown. Another, deeper shale in Ohio (the Utica shale) is also of interest to oil and gas developers. Some believe that these shales in Ohio are more likely to produce liquid hydrocarbons or oil than the shales in Pennsylvania. Present pricing for oil and liquids is much more favorable than for dry natural gas.
Presently, there have not been enough wells drilled and produced in Ohio to know whether we are onto something really big in this State. Over time, we will learn more. I am presently involved in representing numerous landowners in lease negotiations, both individually and in groups — there are benefits to both approaches. It’s been a very busy summer.