Analysis: Chesapeake retreat ends American energy land grab

Yahoo/Reuters ^ | 10 Jul 2012 | Edward McAllister

[shove_it]

NEW YORK (Reuters) - About six years ago, an army of agents hired by energy companies started desperately courting landowners across the United States whose farms and ranches happened to sit atop some of the richest oil and gas deposits in the world. And so began one of the biggest land grabs in recent memory.

Those days are over.

U.S. energy titan Chesapeake Energy is quickly cutting back on an aggressive land-leasing program that in recent years has made it one of America's largest leaseholders, putting an end to half a decade of frenzied energy wildcatting.

Beset by growing governance and financial problems, and a sharp slump in natural gas prices, the No. 2 U.S. gas driller is reducing by half the ranks of its agents, known in the industry as landmen.

[...]

[USS Alaska]

Beset by growing governance and financial problems, and a sharp slump in natural gas prices, the No. 2 U.S. gas driller is reducing by half the ranks of its agents, known in the industry as landmen.

Supply and demand.

Lots of gas, lower prices.

If/when we start using natural gas for auto usage, the price will go higher.

[saganite]

Land grab? You mean they took the land from those poor people?

Sarc

[Sir Napsalot]

How is this ‘land grab’ by an energy company? Don't they give the land owners any choice?

Fed and local gubbmint using ‘eminent domain’ without due compensation to farmers or land owners, that is ‘land grab’.

This Reuters reporter failed to grasp the fundamental difference.

[Rebelbase]

Anyone who does business in the registry offices of the county courthouses in W. PA and E. OH is breathing a sigh of relief over this development.

[shove_it]

Right, an oil/gas lease isn’t a “land grab”. It’s pretty much a take it or leave it proposition.

[saganite]

Not necessarily. Iirc oil and gas companies have to obtain leases on 75 or so percent of the acreage in a section and then they are able by law to obtain the other mineral rights over the objection of the mineral rights holder who may or may not own the land. At least that’s how it works in Louisiana.

[Okieshooter]

Poorly written article. To begin with it sounds like the oil & gas companies are taking over the land when in fact they are leasing mineral rights and giving the mineral owners a pretty penny for the rights sometimes thousands of dollars per acre. I only skimmed the artile, but i don’t recall seeing the term mineral rights mentiond at all.Also they receive a portion of the production income off the top, that is before expenses are paid, usually about 3/16.

The oil gas companies are also taking a risk that the lease may not be productive at all after spending millions in leasing and drilling costs.

[txrefugee]

In Texas, oil and gas companies cannot take your land. Only governmental agencies can, through the most flagrant land grab of all, eminent domain.

[q_an_a]

Good this will mean that people with smaller balance sheets will work with landowners and they both will get bigger YEA!!

[X-spurt]

Don’t think Cheasapeake figured on gas prices going this low.

Do think that they figured on pulling back on exploration at some point. Laying off Landmen and drilling crews is life in the oil patch. The big companies know its Boom or Bust and work around it to drill again another day. Smaller ones will chase the prices right down to the bottom, then in the next Boom there’ll be a whole new bunch of small ones popping up.

[Smokin' Joe]

Not necessarily. Iirc oil and gas companies have to obtain leases on 75 or so percent of the acreage in a section and then they are able by law to obtain the other mineral rights over the objection of the mineral rights holder who may or may not own the land. At least that’s how it works in Louisiana.

IIRC, the mineral rights owner who is a non participant in the well then is entitled to a share of the revenue proportional to their mineral acres holding within the lease spacing. If they own 25% of the minerals in the lease, they are entitled to 25% of the revenue, not just a royalty interest in that fraction.

[Okieshooter]

“
IIRC, the mineral rights owner who is a non participant in the well then is entitled to a share of the revenue proportional to their mineral acres holding within the lease spacing. If they own 25% of the minerals in the lease, they are entitled to 25% of the revenue, not just a royalty interest in that fraction.”

Not correct at least in Oklahoma and I am sure it is similar in other states. In order to collect all of the revenue for you acreage you have to participate in the drilling of the well. That is pay your proportional share of the drilling and operating costs.

If you chose not to lease you can have the option of participating or you will be what is termed be forced pooled. That usually means you will recieve what a judge determines what is the best lease deal.

I usually try to negotiate for a lease deal that does not include any lease bonus payment, but has a higher royalty payment on the minerals I own. That way in a way I am gambling with the operator that the well will be good by not taking any up front money, but receiving in turn greater payments down the road.

I used to participate a lot but not so much anymore as drilling costs have gotten so high it is usually beyond my means.

[Smokin' Joe]

Thanks for straightening that out. I admit I’m not completely up on the leasing end of things. I’m more closely associated with drilling operations. Royalties here are running 20%, and mineral lease payments have been generous (I have heard of $4000.00/acre), but this is a long-term play (Bakken/Three Forks).

[Okieshooter]

Yes I am aware of the prices up there. My wife works for a land company doing their direct mail leasing and mineral buying program, and sends out thousand of offers a week to North Dakota mineral owners.

Also my cousin is now reaping the benefits of my uncles activities in Norh Dakata back in the 50's. He was involved in drilling wells there and bought quite a lot of mineral acreage while there. Most of it was under lease being held by production so he hasn't received lease bonus, but is now getting some handsome royalty checks.

BTW my family has been involved in the drilling business for almost 100 years. You might enjoy this, 1922 Mexia, Tx. My dad on slips, uncle on brake and grand dad with hands in pockets

[Smokin' Joe]

Great photo!

Your uncle made the right moves during the first oil boom up here.

I am the first in my family in the industry and have only been at it for a third of that time. My grand kids have been out to drilling locations with me. (They aren't allowed on the drill floor any more, with all the safety regs, even with hard hats, PPE, and FR clothing--even though there aren't any drive chains without guards nowadays.)

At least they have some nice photos of us with the rig in the background.

[Okieshooter]

Here are three more pictures you might enjoy. The Blackstock referred to on the buckle  is my grandfather who is seated

Hank Blackstock  aka Okieshooter

[Okieshooter]

Times have changed, my father and uncle started roughnecking at 13 in the 30’s. I started working summers as extra hand on drilling crew in the 50’s at 12 and started roughnecking at 15. I would not trade those experiances for anything.

[Smokin' Joe]

Neat!

I got my start at an older age, but I came in cold.

It never ceases to amaze me how much the technology has changed.

The drilling tools of today are the science fiction of yesteryear....

I joke that if we'd have seriously proposed then doing half of what is routine today we'd have been cut off and kicked out of the bar...