Lease Rates


#1

What are going lease bonus rates per acre at $50/barrel oil in Reeves Co, TX


#2

Interesting question. Probably much less than @ $100/barrel.


#3

Location, location, location, but stil suggest starting at $3500/acre as a general rule. For leases, beside the “location” saying, I would add circumstances, circumstances, circumstances. Are you the first lessor on a tract on the outer frontier of drilling or the last lessor on a tract where they have started moving in the rig? There really is no one size fits all.


#4

Sounds high if you add circumstances. A lot of rigs are being stacked.

Banks and investors don't loan as much money to fund projects when the price of oil drops to $50.00 because the profit margins are not there. They want their money, not bankruptcy by the borrowers.

I would definitely add circumstances, circumstances, circumstances.

There is no starting general rule of $3,500/acre though. Why? Because it really does depend on location and circumstances. The $3,500 is arbitrary, if not fantasy, in many locations. Generally, bad advice.


#5


Reeves County, Texas, or the county that Mr. Posey inquired about, is located in the Permian Basin. The Permian Basin covers several counties in west Texas, along with a few in southeastern New Mexico. At any point within the last few years, approximately one-third of all oil wells being drilled in the United States were located in the Permian Basin.

"Permian Basin producers idled another 37 drilling rigs in the past week as the price collapse continues to force them to punch fewer holes in the ground, deepening a rapid downturn in oil activity, according to the latest rig count released by Baker Hughes.

The latest drop left the Permian Basin with 417 rigs, or 26% less than November, before OPEC decided not to cut production quotas in the face of weakening global demand and an oversupply in crude caused in part by the shale boom.

Nationally, the land rig count dropped by 86 to a total 1,395, rounding out what amounted to the worst two-week plummet since the 1980s. Producers shed a total 94 rigs last week.

"It's not done," said Joseph Triepke, a financial analyst from Odessa and the managing director of Oilpro.com. "No one has expected the rig count to fall this hard this quick." ...

-ODESSA AMERICAN, Saturday, February 7, 2015

Great advice adding "circumstances, circumstances, circumstances".

Dave Quincy said:

Sounds high if you add circumstances. A lot of rigs are being stacked.

Banks and investors don't loan as much money to fund projects when the price of oil drops to $50.00 because the profit margins are not there. They want their money, not bankruptcy by the borrowers.

I would definitely add circumstances, circumstances, circumstances.

There is no starting general rule of $3,500/acre though. Why? Because it really does depend on location and circumstances. The $3,500 is arbitrary, if not fantasy, in many locations. Generally, bad advice.


#6

Thanks, Wade. And thanks for helping me get that super deal! You gave me good advice, a well-written/negotiated lease, and at a very fair price. Linton


#7


"Observers expect the Permian , which remains the largest oil basin in the country, to be among the hardest hit, especially the workers on drilling rigs and well servicing crews. "I can tell you that the pace of price discounts and activity reductions is fast and furious. What you will see is a very sharp decline in revenue in North America," said Weatherford International CFO, Krishna Shivram.

The Permian Basin has about 40 service companies. Many are small and private. Driller Lariat Services last week laid off 265 workers as parent company SandRidge Energy decided to pull its subsidiary from the Permian Basin.

Triepke now predicts about another 333 rigs to be released nationally, about one-third of which from the Permian Basin. The analytics firm Genscape forecast a nadir of 270 in the Permian Basin in August, before a slow recovery begins."
Dave Quincy said:


Reeves County, Texas, or the county that Mr. Posey inquired about, is located in the Permian Basin. The Permian Basin covers several counties in west Texas, along with a few in southeastern New Mexico. At any point within the last few years, approximately one-third of all oil wells being drilled in the United States were located in the Permian Basin.

"Permian Basin producers idled another 37 drilling rigs in the past week as the price collapse continues to force them to punch fewer holes in the ground, deepening a rapid downturn in oil activity, according to the latest rig count released by Baker Hughes.

The latest drop left the Permian Basin with 417 rigs, or 26% less than November, before OPEC decided not to cut production quotas in the face of weakening global demand and an oversupply in crude caused in part by the shale boom.

Nationally, the land rig count dropped by 86 to a total 1,395, rounding out what amounted to the worst two-week plummet since the 1980s. Producers shed a total 94 rigs last week.

"It's not done," said Joseph Triepke, a financial analyst from Odessa and the managing director of Oilpro.com. "No one has expected the rig count to fall this hard this quick." ...

-ODESSA AMERICAN, Saturday, February 7, 2015

Great advice adding "circumstances, circumstances, circumstances".

Dave Quincy said:

Sounds high if you add circumstances. A lot of rigs are being stacked.

Banks and investors don't loan as much money to fund projects when the price of oil drops to $50.00 because the profit margins are not there. They want their money, not bankruptcy by the borrowers.

I would definitely add circumstances, circumstances, circumstances.

There is no starting general rule of $3,500/acre though. Why? Because it really does depend on location and circumstances. The $3,500 is arbitrary, if not fantasy, in many locations. Generally, bad advice.


#8

Mr Caldwell - I've always enjoyed reading your posts and I appreciate your opinions. Your suggestion of $3,500/acre as a "general rule" sounds like good advice to me. After all, a dollar figure has to be established at some point before negotiations can even begin.

I have a lease in Reeves county Blk. 13 that is set to expire this July. It seems to me that when oil prices recover to the point that drilling is profitable again, one must first have acreage in place. Oil prices go up and down and they will go up again but if you don't have acreage in place, you aren't competing. As you said though, location and circumstances will determine one's bonus amount.

Being knew to all this, would it be somewhat accurate to say that operators are still willing to pay lease bonuses fairly close to what they were paying prior to the fall in oil prices?....location and circumstances in mind of course. My guess is somewhere between $1,500 and $2,500/acre in good shale plays like Wolfcamp. Any thoughts?

Wade Caldwell said:

Location, location, location, but stil suggest starting at $3500/acre as a general rule. For leases, beside the "location" saying, I would add circumstances, circumstances, circumstances. Are you the first lessor on a tract on the outer frontier of drilling or the last lessor on a tract where they have started moving in the rig? There really is no one size fits all.

#9


Not being new to this, it will probably be more a matter of whether they have any money to acquire leases. It will probably not be how much you are offered, but more like why isn't anyone calling me to lease.

Banks and investors are less likely to fund projects when prices are down.

Everything that you wrote makes sense in a logical sort of way, but may not be realistic. Sounds more on the hopeful side. Good luck.
Dave Quincy said:

Sounds high if you add circumstances. A lot of rigs are being stacked.

Banks and investors don't loan as much money to fund projects when the price of oil drops to $50.00 because the profit margins are not there. They want their money, not bankruptcy by the borrowers.

I would definitely add circumstances, circumstances, circumstances.

There is no starting general rule of $3,500/acre though. Why? Because it really does depend on location and circumstances. The $3,500 is arbitrary, if not fantasy, in many locations. Generally, bad advice.


#10

Another question that might be fairly asked is if 5,000 landman are being laid off, as was alleged in an earlier posting, who is going to contact you to lease?

Another grass roots example:

"More and more oil producers are announcing cutbacks in anticipation of continuued low prices.

Many remain in a state of uncertainty like Thornton Drilling Company, a small business that moved their two drilling rigs to Odessa from Oklahoma about five years ago. The company had to fire half of their roughly 50 employees a few weeks ago, when an oil company released one of the rigs and they could find no new work, said Scott Thornton, a health and safety manager who is the son of the company's founder.

"We are actively trying to find something, but you know as well as I do how that is right now," Thornton said. "We are scaling everything back. Obviously our budget is adjusted while we're re-strategizing, refocusing, cutting up everything expense-wise. We've all taken paycuts."

The second rig has a few more drilling jobs scheduled before it too will be released, Thornton said. And then, they do not know what will happen."

-ODESSA AMERICAN, Sunday, February 8, 2015



Fred Ribb said:

Mr Caldwell - I've always enjoyed reading your posts and I appreciate your opinions. Your suggestion of $3,500/acre as a "general rule" sounds like good advice to me. After all, a dollar figure has to be established at some point before negotiations can even begin.

I have a lease in Reeves county Blk. 13 that is set to expire this July. It seems to me that when oil prices recover to the point that drilling is profitable again, one must first have acreage in place. Oil prices go up and down and they will go up again but if you don't have acreage in place, you aren't competing. As you said though, location and circumstances will determine one's bonus amount.

Being knew to all this, would it be somewhat accurate to say that operators are still willing to pay lease bonuses fairly close to what they were paying prior to the fall in oil prices?....location and circumstances in mind of course. My guess is somewhere between $1,500 and $2,500/acre in good shale plays like Wolfcamp. Any thoughts?

Wade Caldwell said:

Location, location, location, but stil suggest starting at $3500/acre as a general rule. For leases, beside the "location" saying, I would add circumstances, circumstances, circumstances. Are you the first lessor on a tract on the outer frontier of drilling or the last lessor on a tract where they have started moving in the rig? There really is no one size fits all.

#11

As Dave mentions, no doubt we are going through a rapid pullback, and I am seeing new leasing activity slow dramatically. However, in the leasing being done, which is primarily filling out sections that they still may develop, I have not seen the same level of dramatic fall in bonus prices. $3000 + is still being paid in some areas, and I do believe $3500 is a good starting point, as a very general, non-specific, rule.

There is alot of activity in extending drilling commitments going on currently. It is a good opportunity to pocket some cash and get some of ones really bad lease provisions fixed.

Thanks, Linton.


#12

Mr. Caldwell - Yes, things are not what they once were but it appears all is not lost either. I will be contacting you as we draw closer to our lease expiration date this July. Thank you for your insight Sir.


#13

two different states I worked in going rAte WAS $3500/AC MIN. INTEREST///$ 3oday50 LEASE 3+2

today $1000-1500min interest and I don't want your lease.!


#14

I AGREE TOTALLY!


#15

This sounds sad in big oil country . Here in Tyler county WV and Monroe County Ohio I got $4900 a acre and 20% royalty. Lesson I learned the hard way lease each zone separately that is what the state of WV did on what is known as the Bambi lease the there are two shale zones they leased them for close to $12000 a acre . Form an


#16

I've just been contacted by a landman who offered to buy my minerals in a 1,975 ac tract in Tyler County for $3,000/ac. I inherited 7% and my family owns the remaining. Leasing at $4900/20% sounds good. I also got an offer to buy 5 acres of minerals in Reeves County. $10,000/mineral acre. This also sounds good. Any information in either area would be greatly appreciated. You can email direct at ■■■■■■■■■■■■■■■■■■■■. Thank you. L E Sawyer


#17