Lease options - what would you do?

My first post, really enjoy the website. We've got a couple offers for our appx 100 acres in T1S, R5E, in Avoyelles which from the map posted on this site is just north of the shelf edge which I'm thinking is a good thing. One offer 3 year/2 year $350/300 bonus 20 percent royalty, or $225/200 with 22.5 percent bonus, same company. Original offer 6 months ago, $150, 5 yr 20 percent. I'm wanting to wait a while longer, better half is ready to go for the larger bonus offer, says land's been leased on/off for 30 years never panned out. Just looking for some opinions, what would you do? Thanks appreciate your thoughts

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Replies to This Discussion

Permalink Reply by Bob Johnston on September 18, 2011 at 8:25pm
My brother and I have a smaller tract (54 acres) on the eastern bank of the Atchafalaya in Pointe Coupee that is just north of the shelf, too.  We were offered $150, 5 yr, 20 per cent approximately 6 months ago as well.  We held out for a better offer, but we have not heard from anyone else.  I have been watching Pryme to see if the second well does better than the first.
Permalink Reply by Steve on September 18, 2011 at 9:53pm
It all boils down to guessing whether or not they will be successful with the wells being drilled near you. If the answer is no success, then you should have leased at the current rate, if the answer is yes the well are successful, then you will probably be mad that you leased for such a low $. No one can tell you which is the best decision at this point. Just be emotionallly prepared to live with a wrong guess, whichever way you go. Personally speaking, I would wait for better terms(bigger bonus and 25% royalty) if I had 100 acres or less. The larger royalty  (22.5%) is the better of the 2 deals currently being offered in my opinion. If you do lease now, ask for a "no cost" royalty.  I would have an attorney, who has oil and gas leasing expertise,  review and make changes to any lease offered to me. You can get short changed with a generic oil lease. Good Luck!
Permalink Reply by William C. Morrison on September 19, 2011 at 7:08am
Hard to say.  If you are a gambling man, go for the larger royalty.  Me, I would take the higher lease offer.  If it turns out to be a bonaza, you can always sell a part of your royalties for a big bunch of cash if needed.  But get a good lawyer and follow his advice.
Permalink Reply by ShaleGeo on September 19, 2011 at 7:34am

Leasing a small tract of land for more money and less royalty is likely the worst advice you can be given.  Get the best royalty you can.  The cash is merely chump change at this point in time.  And the more royalty you get the more you would have to sell if you ever took that silly advice.

Jay

Permalink Reply by jeff on September 19, 2011 at 7:48pm

This is a little off subject but I was wondering what the spacing/acreage requirements are for a vertical Chalk well in Rapides Parish.

Permalink Reply by Geologist on November 14, 2011 at 10:25am

50' FN/S L and 1500' FE/W L

Permalink Reply by jeff on November 14, 2011 at 10:41am

Jennifer, are you replying to my spacing post?  If not then disregard, if so I am really wondering what the amount of acreage would be needed?

 

Thanks

Permalink Reply by Geologist on November 14, 2011 at 11:04am

I was replying to your post.  Each unit is configured differently but in my experience it is about 2 sq. mile, usually centered around the well.  LA is extremely hard for me to understand because the unit configurations are made at the time the well is drilled and are very hard to change once the unit boundaries are decided upon.  The shape isn't consistent and seems to be decided upon by what best suited the operator.  If you are interested in a specific well you would need to pull the plat.  If you are interested in a specific area you are going to have to spend some time on the Sonris document access website.  I can tell you how to do this if you don't know how to pull units up.

This isn't an easy task and if you know how to fast track it I would appreciate knowing it.  Fenstermaker and Associates out of Lafayette is a good resource but they are a vendor so may charge for their services.

Long story short, I would expect to have at least 2 sq. miles leased up before attempting an Austin Chalk well due to the mile lateral most operators drill.  If you didn't want N/S orientation then you could half that but I would err on the side of caution and get a full 2 sq. miles.  This is what makes being a small landowner so difficult.  You can be forced pooled and carried in the well but this isn't the most ideal way to be involved as a land owner.

 

 

Permalink Reply by jeff on November 14, 2011 at 11:17am

What a quick reply, Thanks Jennifer. I am aware of all you stated, my question is about a vertical test. Chalk units under me are 1920 acres, do you suppose that would be applicable to vertical wells? 

Permalink Reply by Geologist on November 14, 2011 at 1:05pm

The trouble with vertical wells is they aren't going to last long.  If you create a unit that doesn't allow for horizontal laterals you are asking for trouble.  I am not sure what the vertical wells would be permitted as.  I do know that it will depend on surrounding units.

 

I would strongly advise against attempting a vertical Chalk well with no allowance built in to your unit for laterals.  Going back and altering units, I'm told, is a huge undertaking.

 

Sorry I couldn't be of more help.  Feel free to message me if you want/need.

 

Jenn

Permalink Reply by jeff on November 14, 2011 at 2:43pm

Thanks Jennifer.

Permalink Reply by Deanie on September 19, 2011 at 7:40pm
Thanks guys for weighing in, it's much appreciated. I know that the smartest thing is to take the higher royalty, we do have the "No Cost Royalty" clause included. Hopefully, I can get the better half to agree.

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