Let's say, for the sake of argument, that I own, oh, about 50 acres of surface in the New Milton district rurals and also own the mineral rights for it. But I don't want to deal with the hassle of negotiating a lease or worrying about the surface, because of having bad experiences with drillers in the past, not to mention landmen.
What would be wrong with my figuring out what the per-acre value of the product in the Marcellus is supposed to be, according to what they themselves claim, and then my offering to sell outright the surface and all mineral rights to any company interested, for, say, about 40% of what the Marcellus-layer products alone are supposed to be worth?
I mean, if the Marcellus products are worth, for the sake of argument, around $100,000 an acre in that part of the New Milton district, why wouldn't one of the companies jump to buy the surface and all mineral rights for, say, $40,000 an acre, so that they could build or stage whatever they want any way they want for as long as they want on the surface and could own outright ALL layers of gas or other products located there forever, not just lease the Marcellus layer?
Seems to me that would be a much simpler deal for them and for me. Right? Or is that just a pipeline dream? At least it would give me something to say to any landmen sniffing around, wouldn't it?
In other words, why not counter all lease offers with offers to sell outright if surface and minerals are both owned by the same party?
I doubt any company will give a person what they think their property is worth by speculating it's value before production. There is no guarantee that if they drill they hit big. Oil/gas is in the leasing business and they benefit from using/borrowing your land to get the goods from it. When and if they don't need it anymore you get it back and they move on. I can name a lot of situations in life that you can say that about. LOL Remember, mineral rights are real estate. Someone left them to you so why would you not want to leave them to your kids etc. ?? Once a person sells their mineral rights, they are gone.
I realize that traditionally the land-acquisition stage of the drilling business has been considered mostly speculative in times past, but I am under the impression (perhaps a wrong one) that the technology involved with drilling Marcellus horizontals is a slightly different beast. I mean, how many horizontal Marcellus wells drilled in Doddridge have turned out to be unproductive?
I also know that leasing is the way the companies like to do business. But if I don't want the headache of how they do business, it seems to me that they can either adapt to my way of doing business (by buying outright) or they can choose not to do business with me, which would be fine. The property does have sentimental value to me, but I have no children to leave it to. And I don't need the money. And if leaving the mineral rights to someone else were important to me, I'd rather leave the rights to others intact. The minerals are likely to be worth a lot more in 50 to 100 years, seems to me.
So I guess I am strange, but my feeling is that just as I am not interested in leasing my car to anyone, but might consider selling it to them for the right price, I'm similarly not tempted by the prospect of entering into a long-term contract to partner with people I don't know or understand or trust when it comes to the oil and gas under my land. I'd rather let it sit right where it is. I am not a gambler. I have no need to take the risk over something that I have no control over. If someone else wants to gamble, assuming that it is a gamble, they can take their own risk by paying for the privilege by doing it with something they own. They can leave me out of it.
But I guess I just have a bad attitude. Thankfully, most people aren't like me, so the business can keep rolling merrily along! :-)
Thanks again for the reply, DT. You gave me things to think about.
Seems to me they'd be interested in buying up your property. I know other companies have done the same at times. But they're not likely to give you a very good price for it, unless you negotiate well. Keep in mind that just telling them no is one of the most effective tactics I've seen. You might have to wait months or longer, but if they're really interested they'll eventually come around.
I have no doubt that they are seriously interested in the area. The location is very near to infrastructure and soon-to-arrive infrastructure.
I told all the landmen no, but I gave a reason: I explained that leasing would not fit my financial circumstances, whereas selling outright for a good price would. It's capital gains or nothing, for me.
It's OK with me whether they (1) buy all my surface and interests at a price I agree to; (2) find a way to drill around me; or (3) "force-pool" my interests, once all that gets decided in WV. They are free to take their sweet time figuring out which option they prefer. I'm in no hurry; patience isn't an issue.
If Antero and I ever agree on price in the coming years, I may want an hourly lawyer in WV to glance over the deal for me before I do anything, if that's the sort of thing you are comfortable with or are doing then.
I think your posts do a tremendous service on these boards, Sir.
Just got a notice about a plat survey on my surface. Not sure why they would do that without a signature. But I guess that must mean they are serious.(?)
Yeah, if they haven't leased you, or somebody with an interest in your minerals, and you haven't given permission in some other way, they really don't have any legal right to come on your property. Maybe the notification was asking for permission?
They apparently bought out the lease of the well presently producing.
I am so confused.
I have had calls from a landman wanting to modify a lease, calls from a landman trying to create a new lease, and calls from a surface landman attempting to get a surface-use agreement. None of them seem to be aware of the others, and none of them seem to be talking sense, at this point, since none of their paperwork matches the tax maps or the deeds, from what I can see.
I know I'm not supposed to attribute to malice what can be adequately explained by sloppiness, but no one seems to be on the same page with anyone else.
Antero needs to figure out what it has in mind and present something coherent, seems to me.
It did not ask permission. It was the WV DEP O&G Notice of Entry for Plat Survey, WW-6A3.
Actually it was two, one for surface, one for minerals. And the names were just slightly off.
Apparently their paperwork is done by Ned and the Third Grade Readers.
From a line by an over confident landman "This is not my first rodeo". In all truth, I think some of them must have fell on their head while riding in the rodeo. To be so sloppy and so confident I can only imagine just how accurate these companies are when it comes to paying royalties to the lessors. I would have to think you would need a doctorial degree to cipher the courthouse records from the 1800's to now.
Yes. The mineral new-contract man is independent but subcontracted by Antero, according to him. The surface man is an in-office employee. Not sure about the renegotiation man, but I would think he must be a direct employee if he is trying to renegotiate leases they have purcahsed. (Assuming, of course, that has actually happened.) I told the renegotiation man that I was already in negotiation with Antero to sell, since I had given a number already to the surface man, and to the renegotiation man's credit, he backed off immediately.
Truth be told, I liked them all. Very polite and professional in approach, if not always with substance.
And I have had a few days of peace, as far as the phone calls go.
And for the record, I have no direct issues with Antero as a whole.
Yet.
:-)
I might even choose to own stock in them one day, as far as that goes.
I assume they are all just scrambling with partial information, trying to go on what they've got. Each one has been assigned a piece of the puzzle without any of them understanding the larger picture. Just my guess.
And, after all, I'm sure Antero has had no reason to bring in the highly-trained final title searchers yet, since obviously everyone isn't signed.
The tax-map mistakes could be accidental. The heirship mistakes could be someone in the area without knowledge trying to mislead them. And the lack of understanding of what is proved by the deeds, surveys, and earlier title searches could be normal for this stage--I don't know. But it is disconcerting to say the least.
Hopefully they will do their title search and eventually come back with a serious counteroffer so that I can get it looked over, take the check, and be on my way out of the county and off these boards. Hey, I can dream, can't I?
Until such time, I'll just try to be entertained by it all and to post my experiences here.
Thanks, everyone, for taking the time to read my meandering thoughts and experiences so far.
I hope everyone still feels free to point out any errors in my thinking on these matters.
Fortunately I do have deeds going back to the 1800s. And surveys. And legal opinions based on previous title searches on file. Etc. I see no reason to share any of that with Antero, since they would likely only trust the work of their own people, anyway.
When it comes to Marcellus in Doddridge, it still feels early in the rodeo to me from an interest-owner's perspective. According to Antero's own material, they are '100% successful' in drilling Marcellus. I see no speculation in that. It's shooting fish in a barrel. They may find some wells "diappointing," I guess, in the words of one landman. But that just means it was only highly successful instead of being VERY highly successful, I think.
So it is a whole new world for drilling, and too many landmen and property owners appear to be fighting the last war instead of becoming familiar with the technology of this one, in my opinion.
So I think the wells being drilled these days have been de-risked on multiple levels and not just financially speaking. When they drill, they know it is going to be good--the only question is how good.
That's part of the reason that this entire leasing model from days gone by no longer makes sense to me. The company knows what is there, knows how much it will cost to drill amd produce, and knows how to get it. So if they want it, in my opinion they should just buy it.
But my thinking has always been a little off. Just ask my wife.
:-D
DT said:
From a line by an over confident landman "This is not my first rodeo". In all truth, I think some of them must have fell on their head while riding in the rodeo. To be so sloppy and so confident I can only imagine just how accurate these companies are when it comes to paying royalties to the lessors. I would have to think you would need a doctorial degree to cipher the courthouse records from the 1800's to now.
JNK, they do not want to buy you out. That would be capital investment up front and the operator wants to get into the well cheap. They want to pay you a bonus to buy 80+% of your oil, really 100%, along with a promise to pay royalty in the future, they don't want to pay up front, they want to pay less and make you wait decades for your money, you would actually be sharing risk with them if you lease. If they had to buy from you, you would be derisked. They also don't want to pay you 40%, when they are sure that eventually they will get your minerals for 12.5% to 20%. An oil company believes that time is on it's side, as an institution, it can last 100 years or more, they think we are mayflies, that none of us take the long view, sadly I think they are generally right. So many people would not wait 5 to 10 years to get 400% as much.
There is a little distance between your and the operators position, you want 40% up front and they want to buy your minerals for 1% of what they think their value is or less and have you share the risk with your royalty until the property is abandoned decades from now. Essentially a rent to own agreement where they don't necessarily have to pay more than a pittance for rent but the ownership is immediate, what a deal!