Alan Petzet
OGJ Chief Editor-Exploration
HOUSTON, Nov. 3 -- Talisman Energy Inc., Calgary, said it has more than doubled its acreage position to a combined 350,000 acres in the Pennsylvania Marcellus and British Columbia Montney shales and is restructuring its North American operations into shale and conventional business units.
Talisman said it is positioned for a major increase in Marcellus drilling in 2010 and plans to move parts of its Montney shale play to commercial development at the beginning of the year.
The company defines Tier 1 as top quality acreage with an expected full cycle breakeven of $4/Mcf. It has added 170,000 acres in the last few months through a combination of acquisitions and swaps for $570 million (Can.).
In the Marcellus, Talisman expects to end 2009 at 70 MMcfd. Production exceeds 50 MMcfd, compared with 5 MMcfd at the start of 2009 after commercial development began in late 2008.
The company’s last five Marcellus wells have estimated ultimate recoveries of 6 bcf/well, and it has hiked its average assumption for EUR over all Tier 1 acreage 17% to 3.5 bcf/well. The 2009 wells have average 30-day initial production rates of 4.5 MMcfd, and the last six wells flowed 5 MMcfd or more.
Marcellus drilling and completion costs are down to (US) $4.3 million/well.
The company’s 214,000 highly contiguous net acres in the Pennsylvania Marcellus are centered on Bradford and Tioga counties. Its 180,000 Tier 1 acres have 1,800 net well locations and a full-cycle breakeven of (US) $4/MMBtu. Land acquisition costs averaged (US) $3,250/acre.
Friday, November 6, 2009
Monday, April 6, 2009
Range Announces Record 2008 Results
Operational Highlights from Range-
During the fourth quarter, the Marcellus Shale division continued to make
outstanding progress in completion design and efficiencies and has brought to
sales another significant producer. Our most recent horizontal well brought
online had a maximum 24-hour rate to sales of 10.3 Mmcfe per day. This rate was
achieved after being produced under compressor-constrained conditions for 14
days. Of the last eleven Marcellus wells announced, four had initial rates of
9.9 Mmcfe per day or more. The best well had an initial rate of 24.5 Mmcfe per
day. We are also announcing results from two vertical delineation wells in the
northeast part of the Marcellus play. These two vertical wells achieved 24-hour
initial production rates of 6.3 Mmcfe per day and 2.3 Mmcfe per day. The 6.3
Mmcfe per day is the highest reported 24-hour initial rate from a vertical well
in the Marcellus play to date. These initial vertical well results are very
encouraging, and Range intends to analyze further opportunities including
horizontal development in the northeast portion of the play. Since late October
2008, 13 new Marcellus horizontal wells have been brought online to the new gas
processing facility. The 24-hour maximum production rate for those 13 wells
averaged 6.9 Mmcfe per day. Again, several of those wells have been produced
under constrained conditions. Currently there are 14 wells, including seven
horizontals that have been fraced and are waiting on processing capacity
expansion before they are turned to sales. In early April 2009, processing
capacity is expected to expand from 30 to 60 Mmcf per day. Additional expansions
are planned that would bring processing capacity to 180 Mmcf per day by late
2009 or early 2010. Plans are to drill more than 60 wells in the Marcellus Shale
play in 2009. The targeted production exit rate for 2009 is 80 - 100 Mmcfe per
day net. On the regulatory front, progress has been made in the permitting
process for Marcellus Shale wells, and Range has a majority of its 2009 drilling
permits already in hand. Range has also secured water withdrawal and disposal
capacity for several years of activity in the Marcellus Shale.
During the quarter, four horizontal Huron Shale wells were drilled at the Nora
Field in Virginia. To date, nine horizontals have been completed to the Huron
Shale and one horizontal Berea well has been completed. Of the seven horizontal
Huron Shale wells that are currently on production, the initial production rates
have averaged 1.1 Mmcf per day. The initial production rate on the Berea
horizontal well was 1.5 Mmcf per day. For 2009, Range plans 220 coal bed, 60
tight gas sand and 20 horizontal Huron Shale wells in the Nora field where Range
has a 50% working interest. In West Virginia, Range completed a horizontal Big
Lime well on its 77,000 acre Widen property in late 2008 with encouraging
results and plans two additional horizontal wells in 2009 to continue testing
this horizon.
In the Fort Worth Basin's Barnett Shale play, Range completed what it believes
to be the best well in Hill County to date, for both the Company and the
industry. The initial production rate from the Ellig #1-H was 9.0 Mmcfe per day,
and it has averaged 4.8 Mmcfe per day over the first 30 days of production.
Additional activity in the Fort Worth Basin included the completion of a pilot
project to test 250-foot well spacing in southern Tarrant County. The first two
pilot wells had a combined initial production rate of 14.0 Mmcfe per day. Range
has more than 1,000 additional locations to drill in the core of the Barnett
Shale play. The division plans 64 (61 net) new wells for 2009 in the North Texas
Barnett Shale play.
Activity for the Midcontinent division in the fourth quarter included the
drilling of 16 (6.2 net) wells with an 88% success rate. In the Texas Panhandle,
Range's initial offset to its St. Louis discovery yielded production from the
St. Louis Lime at a rate of 2.3 (0.9 net) Mmcfe per day. A second offset
completed for 3.0 (1.1 net) Mmcfe per day, with a third well currently being
completed. Two additional wells in the Watonga-Chickasha Trend commenced
production during the quarter at rates of 2.0 (1.5 net) Mmcfe per day and 1.5
(1.2 net) Mmcfe per day. A deep Anadarko Basin well encountered significant
Springer production, commencing sales at a rate of 10.9 (3.5 net) Mmcfe per day.
Drilling has also continued in the Ardmore Basin Woodford Play, where three
wells are currently being completed. The division plans 44 (25 net) new wells
for 2009.
During the fourth quarter, the Marcellus Shale division continued to make
outstanding progress in completion design and efficiencies and has brought to
sales another significant producer. Our most recent horizontal well brought
online had a maximum 24-hour rate to sales of 10.3 Mmcfe per day. This rate was
achieved after being produced under compressor-constrained conditions for 14
days. Of the last eleven Marcellus wells announced, four had initial rates of
9.9 Mmcfe per day or more. The best well had an initial rate of 24.5 Mmcfe per
day. We are also announcing results from two vertical delineation wells in the
northeast part of the Marcellus play. These two vertical wells achieved 24-hour
initial production rates of 6.3 Mmcfe per day and 2.3 Mmcfe per day. The 6.3
Mmcfe per day is the highest reported 24-hour initial rate from a vertical well
in the Marcellus play to date. These initial vertical well results are very
encouraging, and Range intends to analyze further opportunities including
horizontal development in the northeast portion of the play. Since late October
2008, 13 new Marcellus horizontal wells have been brought online to the new gas
processing facility. The 24-hour maximum production rate for those 13 wells
averaged 6.9 Mmcfe per day. Again, several of those wells have been produced
under constrained conditions. Currently there are 14 wells, including seven
horizontals that have been fraced and are waiting on processing capacity
expansion before they are turned to sales. In early April 2009, processing
capacity is expected to expand from 30 to 60 Mmcf per day. Additional expansions
are planned that would bring processing capacity to 180 Mmcf per day by late
2009 or early 2010. Plans are to drill more than 60 wells in the Marcellus Shale
play in 2009. The targeted production exit rate for 2009 is 80 - 100 Mmcfe per
day net. On the regulatory front, progress has been made in the permitting
process for Marcellus Shale wells, and Range has a majority of its 2009 drilling
permits already in hand. Range has also secured water withdrawal and disposal
capacity for several years of activity in the Marcellus Shale.
During the quarter, four horizontal Huron Shale wells were drilled at the Nora
Field in Virginia. To date, nine horizontals have been completed to the Huron
Shale and one horizontal Berea well has been completed. Of the seven horizontal
Huron Shale wells that are currently on production, the initial production rates
have averaged 1.1 Mmcf per day. The initial production rate on the Berea
horizontal well was 1.5 Mmcf per day. For 2009, Range plans 220 coal bed, 60
tight gas sand and 20 horizontal Huron Shale wells in the Nora field where Range
has a 50% working interest. In West Virginia, Range completed a horizontal Big
Lime well on its 77,000 acre Widen property in late 2008 with encouraging
results and plans two additional horizontal wells in 2009 to continue testing
this horizon.
In the Fort Worth Basin's Barnett Shale play, Range completed what it believes
to be the best well in Hill County to date, for both the Company and the
industry. The initial production rate from the Ellig #1-H was 9.0 Mmcfe per day,
and it has averaged 4.8 Mmcfe per day over the first 30 days of production.
Additional activity in the Fort Worth Basin included the completion of a pilot
project to test 250-foot well spacing in southern Tarrant County. The first two
pilot wells had a combined initial production rate of 14.0 Mmcfe per day. Range
has more than 1,000 additional locations to drill in the core of the Barnett
Shale play. The division plans 64 (61 net) new wells for 2009 in the North Texas
Barnett Shale play.
Activity for the Midcontinent division in the fourth quarter included the
drilling of 16 (6.2 net) wells with an 88% success rate. In the Texas Panhandle,
Range's initial offset to its St. Louis discovery yielded production from the
St. Louis Lime at a rate of 2.3 (0.9 net) Mmcfe per day. A second offset
completed for 3.0 (1.1 net) Mmcfe per day, with a third well currently being
completed. Two additional wells in the Watonga-Chickasha Trend commenced
production during the quarter at rates of 2.0 (1.5 net) Mmcfe per day and 1.5
(1.2 net) Mmcfe per day. A deep Anadarko Basin well encountered significant
Springer production, commencing sales at a rate of 10.9 (3.5 net) Mmcfe per day.
Drilling has also continued in the Ardmore Basin Woodford Play, where three
wells are currently being completed. The division plans 44 (25 net) new wells
for 2009.
Friday, March 20, 2009
Severance Taxes!
Earlier this week I passed along a link to an article about a proposal for a severance tax on natural gas drilling in Pennsylvania. Since then I was talking with with someone who said (and was honest enough to admit it) that they didn't know what a severance tax" was. In case there are others like this individual, here's a general definition from the National Council of State Legislatures (NCSL) website:
"Severance taxes are excise taxes on natural resources "severed" from the earth. They are measured by the quantity or value of the resource removed or produced. In the majority of states, the taxes are applied to specific industries such as coal or iron mining and natural gas or oil production. They are usually payable by the severer or producer, although in a few states payment is made by the first purchaser. The taxes usually are imposed at a flat rate per unit of measure, with coal and ore mining taxes levied on a tonnage basis, oil production taxes on a per barrel basis, and gas production taxes on a per foot basis, although the rates may be graduated based on volume of production or value of the products. "Value" may mean market value in some states and gross value in others. Taxable net value or net proceeds are determined by deducting certain items from the gross value or gross proceeds. Examples of deductions include production costs, ad valorem taxes and royalties paid. Evaporation for gas wells also might qualify as a deduction."
Source: http://www.ncsl.org/programs/fiscal/severtax05.htm
Below is a map from the National Council of State Legislatures site that visually depicts states' severance tax policies as of 2006.
Source: Commerce Clearing House State Taxes, 2006.
A little more detail on individual state's severance tax policies can be found at: http://www.ncsl.org/programs/fiscal/severtax05.htm
If someone knows of a better explanation of this type of tax for the layperson, or a more up-to-date state by state comparison, please forward to me. Thanks!
Charlie
Charles W. Abdalla, Ph.D.
Professor of Agricultural & Environmental Economics
201-B Armsby Bldg.
Penn State University
University Park, PA 16802
814-865-2562 (office)
"Severance taxes are excise taxes on natural resources "severed" from the earth. They are measured by the quantity or value of the resource removed or produced. In the majority of states, the taxes are applied to specific industries such as coal or iron mining and natural gas or oil production. They are usually payable by the severer or producer, although in a few states payment is made by the first purchaser. The taxes usually are imposed at a flat rate per unit of measure, with coal and ore mining taxes levied on a tonnage basis, oil production taxes on a per barrel basis, and gas production taxes on a per foot basis, although the rates may be graduated based on volume of production or value of the products. "Value" may mean market value in some states and gross value in others. Taxable net value or net proceeds are determined by deducting certain items from the gross value or gross proceeds. Examples of deductions include production costs, ad valorem taxes and royalties paid. Evaporation for gas wells also might qualify as a deduction."
Source: http://www.ncsl.org/programs/fiscal/severtax05.htm
Below is a map from the National Council of State Legislatures site that visually depicts states' severance tax policies as of 2006.
Source: Commerce Clearing House State Taxes, 2006.
A little more detail on individual state's severance tax policies can be found at: http://www.ncsl.org/programs/fiscal/severtax05.htm
If someone knows of a better explanation of this type of tax for the layperson, or a more up-to-date state by state comparison, please forward to me. Thanks!
Charlie
Charles W. Abdalla, Ph.D.
Professor of Agricultural & Environmental Economics
201-B Armsby Bldg.
Penn State University
University Park, PA 16802
814-865-2562 (office)
Wednesday, December 17, 2008
Non-disclosure Clauses
Lots of discussions around "Non-disclosure clauses. Here's Ross Pifers opinion:
"I read through this thread and want to offer my thoughts on the topic. Anyone who is presented with a non-disclosure clause should review this clause with an attorney to understand the exact terms and consequences of the non-disclosure clause. The landowner should understand what information is covered by the non-disclosure clause and what will happen if that information is disclosed. The landowner also needs to be aware of the applicability of the non-disclosure clause to other individuals, such as family members, who may have knowledge of transaction.
In most cases, a landowner who agrees to a non-disclosure clause and then "anonymously" posts the information on some type of lease tracker has violated the non-disclosure clause.
As one poster noted, a non-disclosure clause cannot prevent a landowner from disclosing the substance of negotiations prior to the execution of the lease agreement. Until a lease agreement is signed, the landowner has no obligation to the gas company.
One poster stated incorrectly that all information in the leasing process is a "business secret" owned by the gas company. Any information that is exchanged or created during the negotiation process is not a "business secret." There are two parties to the leasing negotiations (the landowner and the gas company), and either is free to share any information unless contractually prohibited from doing so. Contrary to the incorrect poster, the landowner does not need permission from the gas company to disclose the substance of lease negotiations.
Is agreeing to a non-disclosure clause a bad thing? For landowners as a whole, non-disclosure clauses are not good because they will impair the free flow of information. An individual, however, will make his/her own decision based on his/her own interests. I see no reason for a landowner to agree to the clause if the landowner is not receiving anything for it. If the gas company is willing to pay a premium to include the clause, then it may make sense for the landowner to agree to it. This, of course, may have the effect of depressing future lease rates for others in the area."
Ross H. Pifer, J.D., LL.M.
Director, Agricultural Law Resource & Reference Center
Penn State University, The Dickinson School of Law
"I read through this thread and want to offer my thoughts on the topic. Anyone who is presented with a non-disclosure clause should review this clause with an attorney to understand the exact terms and consequences of the non-disclosure clause. The landowner should understand what information is covered by the non-disclosure clause and what will happen if that information is disclosed. The landowner also needs to be aware of the applicability of the non-disclosure clause to other individuals, such as family members, who may have knowledge of transaction.
In most cases, a landowner who agrees to a non-disclosure clause and then "anonymously" posts the information on some type of lease tracker has violated the non-disclosure clause.
As one poster noted, a non-disclosure clause cannot prevent a landowner from disclosing the substance of negotiations prior to the execution of the lease agreement. Until a lease agreement is signed, the landowner has no obligation to the gas company.
One poster stated incorrectly that all information in the leasing process is a "business secret" owned by the gas company. Any information that is exchanged or created during the negotiation process is not a "business secret." There are two parties to the leasing negotiations (the landowner and the gas company), and either is free to share any information unless contractually prohibited from doing so. Contrary to the incorrect poster, the landowner does not need permission from the gas company to disclose the substance of lease negotiations.
Is agreeing to a non-disclosure clause a bad thing? For landowners as a whole, non-disclosure clauses are not good because they will impair the free flow of information. An individual, however, will make his/her own decision based on his/her own interests. I see no reason for a landowner to agree to the clause if the landowner is not receiving anything for it. If the gas company is willing to pay a premium to include the clause, then it may make sense for the landowner to agree to it. This, of course, may have the effect of depressing future lease rates for others in the area."
Ross H. Pifer, J.D., LL.M.
Director, Agricultural Law Resource & Reference Center
Penn State University, The Dickinson School of Law
Forest Landowners Face Unique Issues with Gas Wells
The recent wave of leasing for natural gas exploration presents many unique and important issues to Pennsylvania's forest landowners. Tens of thousands of acres of forest land have already been leased, with many more to follow. This summer, dozens of new wells will be drilled into the Marcellus Shale where energy companies hope to extract trillions of dollars of natural gas just in Pennsylvania alone. Eventually hundreds of wells will be drilled annually, resulting in four acre clearings popping up all over the countryside, along with an extensive network of pipelines to take that gas to market. Furthermore, thousands of landowners will have to deal with pipelines across their property, even if they do not participate in a well. What do forest landowners need to know in order to deal with the issues and opportunities natural gas extraction will present?
Add addendums that protect your forest value.
Your lease will control all the "rules" gas companies need to follow on your leasehold for at least five years, typically longer. Carefully examine your lease and negotiate with the special needs of your forest in mind. For example, if you have fragile wet lands, take steps to be sure they are not damaged by machinery encroachments or water degradation. If you have high value timber, protect as many trees from damage as possible and negotiate to get full market value for your trees that need to be removed. There are many "clauses" in a standard gas company lease that may impact your forest. Generally, instead of changing each one, landowners add addendums that supersede the "standard" terms. Consider addendums that address forest concerns or answer questions such as:
· How will the market value of the trees to be removed be determined?
Who will measure the trees and who will pay for it?
What will happen to the trees after they have been paid for?
It is much easier for land clearing companies to push over trees when they are still connected to the root ball. Will the company sever the logs from the roots? Sorting through a pile of large trees with root balls attached is hard work and very dangerous. Timber that has been pushed over will incur damages externally and internally. Be aware that such visible and unseen damage may reduce their market value.
· Specify what and how you want plantings done after the site is retired. Up to 75% of the site will be seeded to re-establish ground cover after drilling. What type of vegetation would you prefer? These openings often present fine opportunities for wildlife food plots.
· Well-planned forest roads can greatly increase the value of your property. Poorly-planned roads can be a drain on finances and an eyesore forever. Who will locate the new road? Consider gates and other "natural" barriers to control unwanted outside traffic.
Prepare a site plan to attach to your lease. Ask your forester to help plan the location of the well site and access roads with the gas company before you sign. It is much easier to get concessions before you sign than after. The location of a well site is very flexible. Modern rigs can drill up to a mile in any horizontal direction. The location of the well site should consider important factors such as: noise abatement, road placement and length, visual impact, streams and wetlands, timber value, recreational value, aspect, required pipelines, winter access, and many other factors. A site plan should contain at a minimum: topographic maps, boundary maps, timber stand maps, location of existing and proposed physical features (well site, access roads), location of sensitive or special protection areas, soil maps, E & S control structures, and identification information.
Manage the opening of a well site or pipeline the same as a timber sale. Hire a consulting forester to help you plan and supervise tree selection and removal. Your forester may suggest adding other clauses to the scope of your gas lease related to forest management because it may be an opportune time to carry out an important activity. Gas companies may have to install costly temporary stream crossings that may also provide access to previously isolated forest management units. Look at each of your goals for your forest, and discuss if this event presents an opportunity to improve or implement a management practice. For example, pipeline borders can be "tiered" to provide habitat and multi-storied structure favored by some species. Slash piles can be left on the site for wildlife habitat. Herbaceous plantings can be selected for certain wildlife populations such as turkey and deer.
Pipelines and well-site openings will present other special management issues. Forest openings increase air pressure within those openings and cause an increase in wind-throw. Your forester can help you plan a site location or aspect that may lessen the chance of damage; or they can recommend stands with trees that are less susceptible to throw. Timely timber stand improvement operations can also be undertaken to minimize risk or damage. Openings in the canopy created by well activity may encourage unwanted local invasive plants such as hay-scent fern, multiflora rose and autumn olive. Footholds gained in these openings may provide easy access to the rest of your forest when the opportunity presents itself, resulting in the need for expensive spraying regimes. Openings also often result in moderate to severe epicormic branching; and bottomlands may incur frost cracking and sun scald, adding further degrades to your remaining timber resource. Trees highly susceptible to this damage should be considered for removal if they are in a merchantable timber class. Finally, find out how the company plans to control vegetation on the well site or pipelines. Aerial applications of herbicides for woody plant control are common and may require planning to minimize damage to sensitive areas from "herbicide drift".
In summary, when the landman knocks on your door looking for you to sign a lease, be sure to take your time and evaluate the impact on your forest land. Sit down with your forester and plan for all the "What if's". Take control of your lease by using addendums and a well thought out site plan, and always, always, always consult with your attorney before signing a lease....By Ken Balliet, From "Pennsylvania Forests" magazine 2008
For more information on natural gas exploration and leasing go to: http://naturalgaslease.pbwiki.com/
Add addendums that protect your forest value.
Your lease will control all the "rules" gas companies need to follow on your leasehold for at least five years, typically longer. Carefully examine your lease and negotiate with the special needs of your forest in mind. For example, if you have fragile wet lands, take steps to be sure they are not damaged by machinery encroachments or water degradation. If you have high value timber, protect as many trees from damage as possible and negotiate to get full market value for your trees that need to be removed. There are many "clauses" in a standard gas company lease that may impact your forest. Generally, instead of changing each one, landowners add addendums that supersede the "standard" terms. Consider addendums that address forest concerns or answer questions such as:
· How will the market value of the trees to be removed be determined?
Who will measure the trees and who will pay for it?
What will happen to the trees after they have been paid for?
It is much easier for land clearing companies to push over trees when they are still connected to the root ball. Will the company sever the logs from the roots? Sorting through a pile of large trees with root balls attached is hard work and very dangerous. Timber that has been pushed over will incur damages externally and internally. Be aware that such visible and unseen damage may reduce their market value.
· Specify what and how you want plantings done after the site is retired. Up to 75% of the site will be seeded to re-establish ground cover after drilling. What type of vegetation would you prefer? These openings often present fine opportunities for wildlife food plots.
· Well-planned forest roads can greatly increase the value of your property. Poorly-planned roads can be a drain on finances and an eyesore forever. Who will locate the new road? Consider gates and other "natural" barriers to control unwanted outside traffic.
Prepare a site plan to attach to your lease. Ask your forester to help plan the location of the well site and access roads with the gas company before you sign. It is much easier to get concessions before you sign than after. The location of a well site is very flexible. Modern rigs can drill up to a mile in any horizontal direction. The location of the well site should consider important factors such as: noise abatement, road placement and length, visual impact, streams and wetlands, timber value, recreational value, aspect, required pipelines, winter access, and many other factors. A site plan should contain at a minimum: topographic maps, boundary maps, timber stand maps, location of existing and proposed physical features (well site, access roads), location of sensitive or special protection areas, soil maps, E & S control structures, and identification information.
Manage the opening of a well site or pipeline the same as a timber sale. Hire a consulting forester to help you plan and supervise tree selection and removal. Your forester may suggest adding other clauses to the scope of your gas lease related to forest management because it may be an opportune time to carry out an important activity. Gas companies may have to install costly temporary stream crossings that may also provide access to previously isolated forest management units. Look at each of your goals for your forest, and discuss if this event presents an opportunity to improve or implement a management practice. For example, pipeline borders can be "tiered" to provide habitat and multi-storied structure favored by some species. Slash piles can be left on the site for wildlife habitat. Herbaceous plantings can be selected for certain wildlife populations such as turkey and deer.
Pipelines and well-site openings will present other special management issues. Forest openings increase air pressure within those openings and cause an increase in wind-throw. Your forester can help you plan a site location or aspect that may lessen the chance of damage; or they can recommend stands with trees that are less susceptible to throw. Timely timber stand improvement operations can also be undertaken to minimize risk or damage. Openings in the canopy created by well activity may encourage unwanted local invasive plants such as hay-scent fern, multiflora rose and autumn olive. Footholds gained in these openings may provide easy access to the rest of your forest when the opportunity presents itself, resulting in the need for expensive spraying regimes. Openings also often result in moderate to severe epicormic branching; and bottomlands may incur frost cracking and sun scald, adding further degrades to your remaining timber resource. Trees highly susceptible to this damage should be considered for removal if they are in a merchantable timber class. Finally, find out how the company plans to control vegetation on the well site or pipelines. Aerial applications of herbicides for woody plant control are common and may require planning to minimize damage to sensitive areas from "herbicide drift".
In summary, when the landman knocks on your door looking for you to sign a lease, be sure to take your time and evaluate the impact on your forest land. Sit down with your forester and plan for all the "What if's". Take control of your lease by using addendums and a well thought out site plan, and always, always, always consult with your attorney before signing a lease....By Ken Balliet, From "Pennsylvania Forests" magazine 2008
For more information on natural gas exploration and leasing go to: http://naturalgaslease.pbwiki.com/
Life Beyond Leasing
Tens of thousands of landowners have signed gas development leases with energy companies in dozens of counties across the state. Congratulations! I know what an ordeal it can be since I've been through the experience two times! But what now? Sit on the porch and wait for the drilling rigs to show up? My advice is NO! You need to prepare for the business of managing you gas royalty. Thats the message I took away from the National Association of Royalty Owners(NARO) meeting I attended in Little Rock .
Lessor or Royalty Owner?
Ok...before we go any further let's get our terminology straight. If you are now a lessor, meaning you have signed a lease, you are hopeful that sometime in the near future you will be a royalty owner (ie, receiving royalties from a well). Royalty owners may own land, or not, but they all have a royalty interest in a well. Royalty interests can be sold or divided to anyone you might choose. So far so good? In many states "mineral owners" own subsurface rights to all the minerals, which includes oil and gas. In Pennsylvania, I am told, oil and gas rights can be deeded separately from mineral rights. What is transferred in separations of mineral rights is typically controlled by the lease or transfer deed and is way beyond the subject of this blog. But the important thing is that as a Lessor, we need to start thinking of ourselves as "royalty owners". Yes, participating in a well may seem like a pipedream now, even after the substantial bonus check some received. But, there will be much drilling and chances are good that sometime in the near future you will start receiving royalties. The question is, between now and then, what can happen to your share of the market value of your gas.
Growing concern
Since the start of my involvement in the Marcellus Play over two years ago, one of my growing concerns has been "Who represents the interests of Lessors (royalty owners) in industry and governmental issues here in Pennsylvania?" The last 6 months has seen the Susquehanna River Basin Commission, DEP, and other state agencies promulgate regulations that will have lasting effects on Lessors (future royalty owners) for a long time. Local municipal and county task forces are looking at Lessor's large bonus payments and projected royalties with the objective of determining what is their fair share, ostensibly to cover the environmental, infrastructure, and social costs of gas development. The natural gas industry has been opening communications with stakeholders across the state in order to maintain a working relationship with landowners. But there was absolutely no leadership from any organization at the table that solely represents the Lessors on critical landowner vs. gas company issues. I don't know about you but as a Lessor (royalty owner wanna be), that scares me.
NARO
What is NARO? This spring I did a Google search, looking to see what organizations exist across the nation that represent Lessors and their interests to gas companies and local, state and national governmental agencies. The main organization that came to the top of the list is The National Association of Royalty Owners (NARO). So one day I called Mr. Jerry Simmons, Executive Director of NARO and had a nice chat about the needs of landowners in Pa and the NARO organization. NARO is the only organization that represents exclusively the rights of mineral and royalty owners. It was quickly evident that as new Lessors in PA, we have no clue as to the issues that are facing us as royalty owners. So I kicked in my $105.00 and joined, looking to learn more from the experienced royalty owners and in the hopes a Pennsylvania Chapter would be formed. Later this summer the Board of NARO asked me to speak at the NARO Annual Meeting in Little Rock on the topic of the Marcellus Shale in the Appalachian Basin. In the meantime NARO has been getting a great response from many states and the idea of an Appalachian Basin Chapter emerged from the newest members.
NARO Annual Meeting
Last week I attended the National Association of Royalty Owners(NARO) Annual Meeting in Little Rock(Ar) as a new member and as a speaker. The folks were so friendly and eager to discuss the issues we are facing and how they relate to their knowledge gained over decades of ownership of oil and gas wells in other states. After hearing about all about the issues one can have with just division orders, I knew I recouped my membership fee in that single 45 minute presentation. But the opportunities were many, both in presentations and networking to learn about the big picture of the oil and gas business from a mineral owners perspective. And let me be the first to tell you...we are in for a ride. You thought leases were complex and frought with pitfalls! Ha! We are just beginning. But the one thing that came clearly to me was that the todays Lessors need to think of their mineral rights as a business, and a big one at that!. As in any business, you need to learn all about it and know where to go for help understanding the issues from an owners perspective. Not the gas company perspective. Not the local governments perspective. An owners perspective. And to have access to that information when you need it. I also know that todays Lessors need to think of their mineral rights as a business, and they need to do it quickly! Regulations, taxes and other grabs at Lessor's bonus money and royalties are happening now. If you wait to become involved until your well is drilled, it will be far to late.
NARO Appalachian
Well, the good news for Lessors and all future royalty owners in the Appalachian basin as that the National Association of Royalty Owners(NARO) voted at its Annnual Meeting in Little Rock to accept the new chapter that has been organized to cover the Appalachian Basin! That includes all of Pennsylvania and West Virginia, and parts of New York, Ohio, Maryland, Virginia, Tennessee and Kentucky. Yes, it is a large area. As one of the founders, I think that the scope will allow us to reach more Lessors with greater diversity of solutions to the issues most of us will face. Issues that go far beyond who is leasing, where, and what is the bonus rate. Issues that require balance of interests between the complex relationships between gas companies and royalty owners who need each other to get the gas to market. And balance between the needs of local government and keeping your profit from your new business. Yes, it is a business and you are entitled to the profit because everyone needs to understand there will be expenses on the other side of your ledger. We need to get involved now because decisions are being made now. The only question is will you learn from the "school of hard knocks" or take advantage of the help folks from across the nation are offering you. Check out NARO. Sign up to get involved in some aspect of helping owners like you be a better mineral managers. Who would've ever thought it huh!...............Ken Balliet, Natural Gas Reseource Management
Lessor or Royalty Owner?
Ok...before we go any further let's get our terminology straight. If you are now a lessor, meaning you have signed a lease, you are hopeful that sometime in the near future you will be a royalty owner (ie, receiving royalties from a well). Royalty owners may own land, or not, but they all have a royalty interest in a well. Royalty interests can be sold or divided to anyone you might choose. So far so good? In many states "mineral owners" own subsurface rights to all the minerals, which includes oil and gas. In Pennsylvania, I am told, oil and gas rights can be deeded separately from mineral rights. What is transferred in separations of mineral rights is typically controlled by the lease or transfer deed and is way beyond the subject of this blog. But the important thing is that as a Lessor, we need to start thinking of ourselves as "royalty owners". Yes, participating in a well may seem like a pipedream now, even after the substantial bonus check some received. But, there will be much drilling and chances are good that sometime in the near future you will start receiving royalties. The question is, between now and then, what can happen to your share of the market value of your gas.
Growing concern
Since the start of my involvement in the Marcellus Play over two years ago, one of my growing concerns has been "Who represents the interests of Lessors (royalty owners) in industry and governmental issues here in Pennsylvania?" The last 6 months has seen the Susquehanna River Basin Commission, DEP, and other state agencies promulgate regulations that will have lasting effects on Lessors (future royalty owners) for a long time. Local municipal and county task forces are looking at Lessor's large bonus payments and projected royalties with the objective of determining what is their fair share, ostensibly to cover the environmental, infrastructure, and social costs of gas development. The natural gas industry has been opening communications with stakeholders across the state in order to maintain a working relationship with landowners. But there was absolutely no leadership from any organization at the table that solely represents the Lessors on critical landowner vs. gas company issues. I don't know about you but as a Lessor (royalty owner wanna be), that scares me.
NARO
What is NARO? This spring I did a Google search, looking to see what organizations exist across the nation that represent Lessors and their interests to gas companies and local, state and national governmental agencies. The main organization that came to the top of the list is The National Association of Royalty Owners (NARO). So one day I called Mr. Jerry Simmons, Executive Director of NARO and had a nice chat about the needs of landowners in Pa and the NARO organization. NARO is the only organization that represents exclusively the rights of mineral and royalty owners. It was quickly evident that as new Lessors in PA, we have no clue as to the issues that are facing us as royalty owners. So I kicked in my $105.00 and joined, looking to learn more from the experienced royalty owners and in the hopes a Pennsylvania Chapter would be formed. Later this summer the Board of NARO asked me to speak at the NARO Annual Meeting in Little Rock on the topic of the Marcellus Shale in the Appalachian Basin. In the meantime NARO has been getting a great response from many states and the idea of an Appalachian Basin Chapter emerged from the newest members.
NARO Annual Meeting
Last week I attended the National Association of Royalty Owners(NARO) Annual Meeting in Little Rock(Ar) as a new member and as a speaker. The folks were so friendly and eager to discuss the issues we are facing and how they relate to their knowledge gained over decades of ownership of oil and gas wells in other states. After hearing about all about the issues one can have with just division orders, I knew I recouped my membership fee in that single 45 minute presentation. But the opportunities were many, both in presentations and networking to learn about the big picture of the oil and gas business from a mineral owners perspective. And let me be the first to tell you...we are in for a ride. You thought leases were complex and frought with pitfalls! Ha! We are just beginning. But the one thing that came clearly to me was that the todays Lessors need to think of their mineral rights as a business, and a big one at that!. As in any business, you need to learn all about it and know where to go for help understanding the issues from an owners perspective. Not the gas company perspective. Not the local governments perspective. An owners perspective. And to have access to that information when you need it. I also know that todays Lessors need to think of their mineral rights as a business, and they need to do it quickly! Regulations, taxes and other grabs at Lessor's bonus money and royalties are happening now. If you wait to become involved until your well is drilled, it will be far to late.
NARO Appalachian
Well, the good news for Lessors and all future royalty owners in the Appalachian basin as that the National Association of Royalty Owners(NARO) voted at its Annnual Meeting in Little Rock to accept the new chapter that has been organized to cover the Appalachian Basin! That includes all of Pennsylvania and West Virginia, and parts of New York, Ohio, Maryland, Virginia, Tennessee and Kentucky. Yes, it is a large area. As one of the founders, I think that the scope will allow us to reach more Lessors with greater diversity of solutions to the issues most of us will face. Issues that go far beyond who is leasing, where, and what is the bonus rate. Issues that require balance of interests between the complex relationships between gas companies and royalty owners who need each other to get the gas to market. And balance between the needs of local government and keeping your profit from your new business. Yes, it is a business and you are entitled to the profit because everyone needs to understand there will be expenses on the other side of your ledger. We need to get involved now because decisions are being made now. The only question is will you learn from the "school of hard knocks" or take advantage of the help folks from across the nation are offering you. Check out NARO. Sign up to get involved in some aspect of helping owners like you be a better mineral managers. Who would've ever thought it huh!...............Ken Balliet, Natural Gas Reseource Management
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