Investment Groups versus Producers

Started April 13, 2017 at 11:23 am by @JHH in GoHaynesvilleShale

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04/13/17 11:23:26AM

How should mineral owners negotiate with investment groups seeking to lease minerals versus actual oil/gas producers.  Would rather negotiate with known/proven producers but we've been seeing a lot of investment groups seeking to "tie-up" leases... only to sell or assign them before the term runs out.  I know assignment clauses can offer some protection... but not a lot.  Thanks for any help.

Skip Peel - Independent Landman
04/14/17 09:08:10AM @skip-peel-independent-landman:

If the desire is for upfront money, investors are often willing to pay more per acre on the bonus.  They will offer a lower royalty because that is their potential return on investment.  Investors hope to recover some significant portion of their bonus costs upon assignment.  For example they might offer a $2000/acre bonus and expect $1500 to $2000/acre for assigning their lease rights to an operating company.  Many investors also seek to cover their front end costs by selling interests in their leases to other investors.  Most investors are acquiring rights from those with small to modest acreage ownership.  They will not accept any lease clause that inhibits their rights to assign.  They might go for an obligation to provide you notice when they do assign but the mineral owner will never have a say in any assignment.

04/14/17 10:41:47AM @jhh:

Very good information.  Thanks.

Jim Bemis
04/25/17 05:23:34PM @jim-bemis:

Thanks once again, Skip, for helping clarify the ever-changing roles o f oil-patch players  Back in 2014, your assessment of Anadarko's Morris ER H-1 in Cass County was extremely useful to me as a small royalty owner.  More recently, your analyses of the evolving "CUL" operations has been the most useful that I have found. Certainly, you have been spot-on in advising royalty owners that the current oil patch scene requires a different "mindset", especially for those of us with minimal knowledge to begin with.

Now as seen in more recent Forum notes, Anadarko has transferred their ownership in the Morris E,R, well to Aethon. And I figure that it is fair to assume that Aethon will operate much like the "investors" mentioned in your note above. 

However, I am wondering if other royalty owners have found that the Aethon owner-relations capabilities do not seem to be as responsible and/or well developed as those at Anadarko or other producers. 

I guess I'm asking if this will a general pattern for investors  that we will see within the current Haynesville scene, as well as elsewhere?

Thanks for any additional insights.

Jim Bemis

Skip Peel - Independent Landman
04/25/17 09:32:48PM @skip-peel-independent-landman:

You're welcome, Jim.  The "investors" I mention in my reply to JHH are different than Aethon.  The investors referenced in that comment are speculating in leases.  They do not operate.  They are looking to assign their leases to an operating company. 

Aethon is different in that they do operate.  They are similar to Vine O&G and GEP Haynesville in that they are backed by private equity capital.  Their Haynesville footprint is smaller than Vine and GEPH but they likely have a similar business plan.  Since Aethon acquired their interest from J-W Energy it is widely spread and not limited to Haynesville Shale.  It usually takes some time for customer service functions to run smoothly when operations shift from one company to another.  Here is a link to an article announcing the acquisition.




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