• filter:

Do you own prospective land?

  • Page :
  • 1
  • Text Only
  • Search this Topic »
Voting History
rated:
The topic of royalties from oil and gas (O&G) is a huge money-related matter I see discussed here very seldom.  Wanted to start a thread to allow comment by other landowners regarding their experiences.

Most important, if you are a landowner with questions or concerns, who is not well versed in O&G, feel free to ask questions.  This goes double if you are currently being approached by one or more landmen.  BTW, compared with landmen, used car salesmen are honest, church-going, upright, admirable citizens.

My own experience with leasing goes back a number of years.  I owned prospective land in a region not previously developed.  As a result we had no O&G lawyers here, such as you would routinely find in prospective regions of the ArkLaTex for example.  This made leasing most difficult, and in the end I had to do all my own research and write my own lease, an intense exercise that spanned a couple of years.  If you can find a good O&G lawyer where you live, it is better to pay their fee and benefit from their expertise.  The absolute worst thing you can do, IMO, is to sign the landman's boilerplate lease.  I know people who did that and destroyed their own future and that of their progeny for years to come.  Remember, the chance you will outlive your lease is slim to none, and when you croak it becomes the problem of your heirs and assigns.

Another topic of this thread is leasing of land for O&G pipeline.  As you might be aware, the O&G companies push their ridiculous one-time-payment leases.  No larger rip-off exists IMO.  I'm thinking in terms of gathering lines, where you might have some leverage.  If you get nailed with an interstate pipeline, well, good luck with that.

Anyway, with the recent changes in DC I believe O&G leasing will be picking up and spreading, so I hope this thread is timely.

Member Summary
Staff Summary
Thanks for visiting FatWallet.com. Join for free to remove this ad.

rated:
shinobi1 said:   The absolute worst thing you can do, IMO, is to sign the landman's boilerplate lease.  I know people who did that and destroyed their own future and that of their progeny for years to come.  Remember, the chance you will outlive your lease is slim to none, and when you croak it becomes the problem of your heirs and assigns.

 

  
Can you provide a little more information on the comment above?  My grandfather inherited land in Montana, and he says they have drilled on it, but I don't think they found anything.  Granpa is nearing 90, my mom has terminal cancer, so if the "problem" you mention exists, it very well may become mine.  Thanks.

rated:
snnistle said:   
shinobi1 said:   The absolute worst thing you can do, IMO, is to sign the landman's boilerplate lease.  I know people who did that and destroyed their own future and that of their progeny for years to come.  Remember, the chance you will outlive your lease is slim to none, and when you croak it becomes the problem of your heirs and assigns.

 

  
Can you provide a little more information on the comment above?  My grandfather inherited land in Montana, and he says they have drilled on it, but I don't think they found anything.  Granpa is nearing 90, my mom has terminal cancer, so if the "problem" you mention exists, it very well may become mine.  Thanks.

 
Sure.  Sorry your grandpa is not well.

Boilerplate leases can become troublesome when oil or gas is discovered.  They are written virtually solely for benefit of the O&G company.  Many critical landowner protections are routinely omitted, intentionally and on purpose, to save the O&G company money.  This is why it is so important to seek legal counsel before signing a lease.

But what of the situation where, following signing of the lease, nothing is discovered or developed?  Well, the boilerplate lease can still be problematic, both for the Lessor and for the Lessor's heirs.  Any lease, until it is released, ties up the land.  You need to read your grandpa's lease and see if it contains release terms.  It might or might not.  If it does contain such terms, and if they have been satisfied (often by passage of time with no paying quantities of oil or gas having been produced), then you need to contact the Lessee, formally request a release of lease, then follow up to be certain the release is recorded.  Why?

The stratigraphy of O&G development is something many landowners overlook.  In your case you mention your grandpa's land was explored and no paying quantities of oil or gas were found.  However, the drilling sciences are massively active, changing, and advancing, with techniques improving at a remarkable pace.  So while nothing might have been found in the past at whatever depth was explored, there could be millions of dollars worth of oil or gas down deeper, as yet undiscovered.

One of the most wicked, but legal, exploits where I live has been use by O&G companies of old leases, having very poor terms and royalty fractions, to explore strata never even known or contemplated as prospective when the lease originally was signed.  This is a wonderful outcome for the O&G company because they avoid completely having to make another bonus payment, and they avoid need to lease beneath today's more landowner-friendly terms and conditions and today's oftentimes higher royalty fractions. 

So bottom line, first, read your grandpa's lease.  Second, read it again.  Then if you can extricate his land from the lease do so promptly.  If not, at least you will know where you and your grandpa stand.  And if you get another shot some day at re-leasing the land, do it carefully and do it right.     

rated:
I work for a large mineral/royalty owner, I'll be following this thread and can provide answers.

rated:
ryoung81 said:   I work for a large mineral/royalty owner, I'll be following this thread and can provide answers.
  
That offer is much appreciated.

America is a really large country.  Leasing tends to be somewhat individualized depending on location.  Part of that is because state law controls the process to a great extent, and laws in the various states can differ significantly.  Another part is owing to differences in geology from region to region.

I live on my developed land, which is located in the Appalachian Mountains.  My knowledge of leasing in the ArkLaTex, for example, is very limited (I am aware of Garza).  My knowledge of leasing in Wyoming or the Dakotas is non-existent.  So any help others can provide here is very welcome.  Thank you. 

rated:
We have a fairly sizable position in Appalachia. I hate it, it's like wild west (east) up there, the operators get to do anything they want.

rated:
ryoung81 said:   We have a fairly sizable position in Appalachia. I hate it, it's like wild west (east) up there, the operators get to do anything they want.
  
One of the reasons I was reaching out here is in hope of helping undeveloped landowners early.  I am thinking, for example, of those living (or owning land) in North Carolina's Cumnock or in Kentucky's Rogersville . . and there are so many other examples.  If you can reach landowners before the thumper trucks roll through and before the first shot seismic is ever fired off, there is still time to help a landowner avoid economic catastrophe.  People need to realize that when the landmen begin knocking on the door they are already potentially in deep doo-doo and way behind the curve.  So many landowners sign without any real understanding of the immensity of their action.  In particular I believe:

Leasing of land for O&G development is a FAR larger life event that mere sale of land or home.    

rated:
Agree, the best advice I give (I used to be a landman) is that if you don't understand the words on the page -- you get help and keep learning until you do understand it. It's not enough to have an attorney do it for you, you need to know what you are signing, because it can be with you for many years. Also, it's important not to have pre-conceived notions. Not everyone is out to get you, maybe you are being offered a fair deal, etc. A healthy dose of skepticism is deserved, but by and large, most people are good people.

rated:
We have a pretty good size chunk in Oklahoma and have for about 100 years.  Lately I've been a little suspicious - the checks were low for a long time in the 80's, then went up and down, then about 4 years ago went way way up (thousands a month) then now have gone to almost zero and last month no check.  When we queried, the response was that one of the wells had parted tubing and will not produce at this time, however they are considering repairs.  The other wells are still producing and we asked about that and they said they had "no sales" the last two months. 

Anyway, I will look at the lease again, but I'm a little suspicious also of your threads that you're kinda paranoid/crazy.  After all, you're in your backyard burying silver coins.  Maybe the oilmen are taking advantage...but maybe they are not.  Again, we've been in this business for a century, and most of the folks seem pretty alright we've dealt with, or as close to alright as an Oklahoman can be. 

rated:
My story - I'm definitely an absolute novice at oil & gas leasing, although not necessarily in some other financial arenas   A while back we inherited some undeveloped land that according to the relevant maps is located in what is called the "New Albany" oil field or shale field, which is apparently within the Illinois Basin.  My (likely naive) take on things is that it is "marginal" oil production land, at best.  The land is fairly hilly and heavily wooded.  Some of the timber has recently grown to be marketable size, and I expect that this is the way we'll go.  We've put a very small investment into "timber stand improvement" done by a contracting forester, but none into replanting because that was not recommended.
 
To date we've never been approached by oil and gas exploration firms, at least any who've identified themselves as such.  However a few weeks ago I had a call from someone at an anonymous number who "wanted to buy the land".  They wouldn't say for what purpose, or give any other information.  Clearly they'd gotten our contact information from the county online plat map data, which of course is public record.  I didn't particularly like the fact that they didn't say why they wanted the land, so I suggested that they go "elsewhere".
 
We probably do not want to sell the land outright.  It's also not necessary for us to depend on any future income from either timber from the land, or from oil or gas (if such exists) taken from this land.  So we have the option of being somewhat conservative in either scenario. 
 
So for those landowners with more experience in the oil and gas area than me, my questions are -
 
1) In your experience, are oil and gas interests likely to make their initial contact by stating "we'd like to buy your land"?  And to offer no reason regarding why?  (I was almost thinking "Nigerian Prince" with that call a few weeks ago!)  Or, are they more likely to make a more honest initial approach, regarding leasing?
 
2) Do THEY typically make the first move - by contacting YOU?  Or, have YOU made the first move to contact THEM, when you have (or acquire) land that is "marginal or better" oil and gas land according to the maps?
 
Thanks.
 

rated:
ryoung81 said:   Agree, the best advice I give (I used to be a landman) is that if you don't understand the words on the page -- you get help and keep learning until you do understand it. It's not enough to have an attorney do it for you, you need to know what you are signing, because it can be with you for many years. Also, it's important not to have pre-conceived notions. Not everyone is out to get you, maybe you are being offered a fair deal, etc. A healthy dose of skepticism is deserved, but by and large, most people are good people.
  We have had oil/gas speculators in FWF before, and a couple have lived to tell the tale....

I'm not trying to threadcrap, but I do want to warn people who don't have past experience that this is a very inefficient market that is easy to lose money in. You're competing against people who have trained their entire life refining their judgement with a technological advantage, experience on the ground, and a budget larger then you'd earn in 10 lifetimes. While I don't invest in land for prospecting, I do invest in distressed properties, and the amount of local and regional statutes, and related court rulings means someone inexperienced going alone is essentially throwing their money away.

Feel free to red this post, but 95% of people should stick to a liquid index fund, and devote no more then a couple percent of their net worth to any single play.
If you do continue this adventure, find a mentor, and split deals with him to understand the trade. The truly wealthy will boast how they used massive leverage, but that's survivorship bias. 

Clearly they'd gotten our contact information from the county online plat map data, which of course is public record.  I didn't particularly like the fact that they didn't say why they wanted the land, so I suggested that they go "elsewhere". As a buyer, I'm not going to share my research with the seller. I'm trying to buy a property in it's current condition, and it makes no sense to price in risks (denied permit, dry well, etc) into land costs. This isn't personal; deeds are often traded like baseball cards, and rather then outright rejecting them, I'd suggest quoting a price value 2-3x what you'd sell it for. 

 

rated:
ThomasPaine said:   
ryoung81 said:   Agree, the best advice I give (I used to be a landman) is that if you don't understand the words on the page -- you get help and keep learning until you do understand it. It's not enough to have an attorney do it for you, you need to know what you are signing, because it can be with you for many years. Also, it's important not to have pre-conceived notions. Not everyone is out to get you, maybe you are being offered a fair deal, etc. A healthy dose of skepticism is deserved, but by and large, most people are good people.
  We have had oil/gas speculators in FWF before, and a couple have lived to tell the tale....

I'm not trying to threadcrap, but I do want to warn people who don't have past experience that this is a very inefficient market that is easy to lose money in. You're competing against people who have trained their entire life refining their judgement with a technological advantage, experience on the ground, and a budget larger then you'd earn in 10 lifetimes. While I don't invest in land for prospecting, I do invest in distressed properties, and the amount of local and regional statutes, and related court rulings means someone inexperienced going alone is essentially throwing their money away.

Feel free to red this post, but 95% of people should stick to a liquid index fund, and devote no more then a couple percent of their net worth to any single play.
If you do continue this adventure, find a mentor, and split deals with him to understand the trade. The truly wealthy will boast how they used massive leverage, but that's survivorship bias. 

Clearly they'd gotten our contact information from the county online plat map data, which of course is public record.  I didn't particularly like the fact that they didn't say why they wanted the land, so I suggested that they go "elsewhere".
As a buyer, I'm not going to share my research with the seller. I'm trying to buy a property in it's current condition, and it makes no sense to price in risks (denied permit, dry well, etc) into land costs. This isn't personal; deeds are often traded like baseball cards, and rather then outright rejecting them, I'd suggest quoting a price value 2-3x what you'd sell it for. 

 

  
???????????

Really have no idea what you're writing about.  This thread is for people who own land, quite possibly land which has been in the family for a great many years, in a region now perhaps for first time (or not) experiencing development for oil and gas.  In other words, there is oil and gas underlying their land, even possibly previously unknown to them or their forebearers or anyone else, oil and gas in paying quantities which some large company might now (again for first time) be approaching them wanting to lease for development.  Development means production (i.e., harvesting) of oil or natural gas.

I would be grateful if this thread could be kept on topic, and I hope you understand.  Thank you.

rated:
fw9999 said:   My story - I'm definitely an absolute novice at oil & gas leasing, although not necessarily in some other financial arenas   A while back we inherited some undeveloped land that according to the relevant maps is located in what is called the "New Albany" oil field or shale field, which is apparently within the Illinois Basin.  My (likely naive) take on things is that it is "marginal" oil production land, at best.  The land is fairly hilly and heavily wooded.  Some of the timber has recently grown to be marketable size, and I expect that this is the way we'll go.  We've put a very small investment into "timber stand improvement" done by a contracting forester, but none into replanting because that was not recommended.
 
To date we've never been approached by oil and gas exploration firms, at least any who've identified themselves as such.  However a few weeks ago I had a call from someone at an anonymous number who "wanted to buy the land".  They wouldn't say for what purpose, or give any other information.  Clearly they'd gotten our contact information from the county online plat map data, which of course is public record.  I didn't particularly like the fact that they didn't say why they wanted the land, so I suggested that they go "elsewhere".
 
We probably do not want to sell the land outright.  It's also not necessary for us to depend on any future income from either timber from the land, or from oil or gas (if such exists) taken from this land.  So we have the option of being somewhat conservative in either scenario. 
 
So for those landowners with more experience in the oil and gas area than me, my questions are -
 
1) In your experience, are oil and gas interests likely to make their initial contact by stating "we'd like to buy your land"?  And to offer no reason regarding why?  (I was almost thinking "Nigerian Prince" with that call a few weeks ago!)  Or, are they more likely to make a more honest initial approach, regarding leasing?
 
2) Do THEY typically make the first move - by contacting YOU?  Or, have YOU made the first move to contact THEM, when you have (or acquire) land that is "marginal or better" oil and gas land according to the maps?
 
Thanks.

  
Thanks for a great post.

While it is quite common for oil and gas development companies to make the first move, it is unusual for them to want to purchase your land outright.  It is FAR more common for them to offer to lease your land.

Regarding revelations as to reasons for interest in your land:

In the very, very earliest portions of any play, public information is at an absolute premium and is tightly held by the development companies.  It can take literally several years, following exploratory drilling and even some early developmental drilling, before knowledge regarding the richness and extent of the play surfaces and becomes widely known.  In the early days, information is quite literally money.  The oil and gas companies, early, will make every effort to take advantage of uninformed landowners with low bonus offers and royalty fractions.  In my experience (i.e., where I live) this is especially problematic for poorer landowners who jump on any such offer without realizing they might be surrendering a fortune in oil or natural gas for peanuts.  Indeed, it is a goal of this thread to warn landowners of such perils, so thank you for bringing this up.

Specific to your own situation, I was unaware of the New Albany play and I had to look it up:

The New Albany play 

It is immense, as are so many of these plays, and it appears to typify a play in the early stages of development.  As a very general comment, let me observe:

The United States of America has a nearly unlimited supply of natural gas, a supply which will last at least several hundred years, perhaps longer.  And this is to say nothing of reserves existing throughout the remainder of North America.  Hence, development rapidity of any play will depend on a great many factors, for example proximity to markets (including foreign markets), availability of pipeline, and acceptance of oil and gas development by persons living within the region .  In some states such development is actually banned!

So keep a weather eye.  Watch for thumper trucks and presence of other seismic testing (i.e., helicopters flying low and dropping stuff (cable and geophones) off, and presence of landmen.  If you do not live on your land, talk with neighbors who do and ask questions about such activity.  All too often landowners will witness early exploratory efforts ongoing without knowing the implications.

If you are approached, be very cautions and thoughtful regarding granting of permission for access to your land to facilitate running of seismic.  Remember, it's not only just the liability consideration.  If your land is discovered to be faulted, for example, you might never be leased, something which could cost you real money.  Let the development company assume the risk of thrusts and faults AFTER they pay you.

Good luck! 

  • Quick Reply:  Have something quick to contribute? Just reply below and you're done! hide Quick Reply
     
    Click here for full-featured reply.


Disclaimer: By providing links to other sites, FatWallet.com does not guarantee, approve or endorse the information or products available at these sites, nor does a link indicate any association with or endorsement by the linked site to FatWallet.com.

Thanks for visiting FatWallet.com. Join for free to remove this ad.

While FatWallet makes every effort to post correct information, offers are subject to change without notice.
Some exclusions may apply based upon merchant policies.
© 1999-2017