Ever heard of Greg Bishop or West Bay Exploration?

Landman Discussion
1

We have been contacted by a landman named Greg Bishop wanting to lease our oil and gas rights for West Bay Exploration from Michigan. We do have an attorney advising us and he wants us to limit the lease to one or two years initially. But the landman says we must sign at least 3 years or they will walk away. He'd also like an extension clause.

The landman has been negotiating on several other things so seems reasonable. But I just found out that he is signing up leases about 70 miles from us near a high producing site at Decatur, IL for one year terms (for a different production company). Our area is new- has had little production except some old shallow wells from 50 years ago that are shut down. We are in west central Illinois.

Does anyone know Greg Bishop or West Bay? Are they honest and trustworthy? And why would someone need a longer lease here then 70 miles away?

Thanks.

2

I have heard of them, but do not have an opinion. Here is there website:

http://www.westbayexploration.com/

I have read that they are a conventional oil exploration company.

Here are a couple articles about activity they are involved with in OH.

http://ysnews.com/news/2012/01/oil-company-drilling-ok%E2%80%99d

http://www.daytondailynews.com/news/dayton-news/investments-show-ohio-could-be-part-of-oil-boom-1106812.html

Conventional oil exploration is different from what I understand. generally much more shallow then the shale gas/oil drilling. I think only vertical wells and probably not fracked. but I am not positive. You could ask the landman about that. By the way, I don't know Greg Bishop (but that doesn't mean anything) - don't be afraid to ask him experience, position with company and time with company. For that matter, I don't know west bay exploration (I have just read about them). A couple of things I would suggest you do:

It is essential to verify the exact name of the company. sometimes companies are formed (shells) and they use a similar name and then change the LLC or Inc. or something little so that you will think you are working with the legit company when you are not. I suspect this West Bay is correct, but be thorough. I would also check with your State business registry to be sure they are licensed to do business in your state.

Now about those terms. when a 1 year lease is offered, it generally implies they plan on drilling on that parcel (or that parcel would be part of a drilling unit which would get drilled). a 1 year lease is very rare and used probably only in that scenario (my opinion anyway).

A 3 year lease is decent actually. they are likely trying to lease a lot of land and this time span would give them time to drill, learn and develop plan for exploration of the area. Welcome to the game of mineral lease poker; he offers 3 year, you say 1 year, he???? You may settle with 3 year, but then negotiate the option out of the deal. An option is BAD for the landowner; why? because it is an option, solely up to the oil company whether they want to pay the lease bonus again - why would they? they would extend and pay if the market was hot and the market price was $5,000 and acre but your option price was $50. on the other hand if the play was dead, they would option OUT and not extend the lease. You could try to negotiate for a mandatory lease extension. Say 3+2 or something where the 2 year extension is mandatory if they have not drilled in the first 3 (see, no option). I have heard of extension sign bonuses of x, 1.5x or 2x.

I would also form a landowner group, get as many people and acreage around you in a group and work with an expert gas oil atty. you'll have strength in numbers and it actually simplifies things for the oil company because ultimately it would be a single agreement, perhaps executed at a single mass signing.

I think West Bay pays low sign bonuses and that may be OK if that is what the market is bears in your area. the lease details are what is important. 3/16 royalties with no production costs are the least you want.

The final comment - do not provide them with your signed lease until you have a company check or cashier check that has cleared and you have the "cash" in hand (bank). DO NOT accept bank draft, sight draft, Order for Payment. Cash on the barrel head only.

OK a final final comment - document every single discussion you have with this or any landman. keep very detailed and accurate notes. try to not communicate over the phone - use email so you'll have evidence of everything. then closely review the lease to be sure that whatever was promised is included.

Also, you mentioned your attorney - he/she MUST be a gas/oil experienced atty - no option here. this is not simple contract law.

Good luck.

Wilson

3

Thank you for your comments. It helps hearing that 3 years is not too out of line. Our attorney is the one the IL Farm Burear recommended here and seems familiar with O/G leases. He suggested 5/32 on the royalties. 1/8 seems to be the standard around here so we're trying for a little more without seeming too greedy.

One other thing we're asking for is a lease term of 20 years only. That would allow us to reevaluate if we want to continue at that time. Have you heard of this? Is it wise? Our thoughts were that if was still producing but only at a dribble, we might prefer to get the mess off our land. This whole process seems very tedious but I'm not wanting to make mistakes that will haunt our children for 50 years.

Thanks. Cathy



Wilsontownship said:

I have heard of them, but do not have an opinion. Here is there website:

http://www.westbayexploration.com/

I have read that they are a conventional oil exploration company.

Here are a couple articles about activity they are involved with in OH.

http://ysnews.com/news/2012/01/oil-company-drilling-ok%E2%80%99d

http://www.daytondailynews.com/news/dayton-news/investments-show-oh...

Conventional oil exploration is different from what I understand. generally much more shallow then the shale gas/oil drilling. I think only vertical wells and probably not fracked. but I am not positive. You could ask the landman about that. By the way, I don't know Greg Bishop (but that doesn't mean anything) - don't be afraid to ask him experience, position with company and time with company. For that matter, I don't know west bay exploration (I have just read about them). A couple of things I would suggest you do:

It is essential to verify the exact name of the company. sometimes companies are formed (shells) and they use a similar name and then change the LLC or Inc. or something little so that you will think you are working with the legit company when you are not. I suspect this West Bay is correct, but be thorough. I would also check with your State business registry to be sure they are licensed to do business in your state.

Now about those terms. when a 1 year lease is offered, it generally implies they plan on drilling on that parcel (or that parcel would be part of a drilling unit which would get drilled). a 1 year lease is very rare and used probably only in that scenario (my opinion anyway).

A 3 year lease is decent actually. they are likely trying to lease a lot of land and this time span would give them time to drill, learn and develop plan for exploration of the area. Welcome to the game of mineral lease poker; he offers 3 year, you say 1 year, he???? You may settle with 3 year, but then negotiate the option out of the deal. An option is BAD for the landowner; why? because it is an option, solely up to the oil company whether they want to pay the lease bonus again - why would they? they would extend and pay if the market was hot and the market price was $5,000 and acre but your option price was $50. on the other hand if the play was dead, they would option OUT and not extend the lease. You could try to negotiate for a mandatory lease extension. Say 3+2 or something where the 2 year extension is mandatory if they have not drilled in the first 3 (see, no option). I have heard of extension sign bonuses of x, 1.5x or 2x.

I would also form a landowner group, get as many people and acreage around you in a group and work with an expert gas oil atty. you'll have strength in numbers and it actually simplifies things for the oil company because ultimately it would be a single agreement, perhaps executed at a single mass signing.

I think West Bay pays low sign bonuses and that may be OK if that is what the market is bears in your area. the lease details are what is important. 3/16 royalties with no production costs are the least you want.

The final comment - do not provide them with your signed lease until you have a company check or cashier check that has cleared and you have the "cash" in hand (bank). DO NOT accept bank draft, sight draft, Order for Payment. Cash on the barrel head only.

OK a final final comment - document every single discussion you have with this or any landman. keep very detailed and accurate notes. try to not communicate over the phone - use email so you'll have evidence of everything. then closely review the lease to be sure that whatever was promised is included.

Also, you mentioned your attorney - he/she MUST be a gas/oil experienced atty - no option here. this is not simple contract law.

Good luck.

Wilson