WEST VIRGINIA BONUSES AND ROYALTIES
West Virginia mineral owners are simply not asking enough for their leases.
The Motley Fool says that the Marcellus is the most economic shale play around. In other words, oil and gas companies are getting the best bang for their buck right here in West Virginia.
When I saw that, I was shocked. I've been involved in the oil and gas business long enough to know that we're not being paid much for our leases here. Why would the most economical shale play in America not command higher prices?
CURRENT WEST VIRGINIA OIL & GAS LEASE OFFERS
Most lease offers right now are around $1,350/acre on the bonus and 12.5% on the royalty. Admittedly, with a little negotiation and some leverage it's not hard to get to $1,500/acre and 14% royalty. I've recently seen $1,800 and 18%. Up in the northern panhandle at one point, some large tracts were commanding $5,000/acre on the bonus, and Wetzel and Marshall counties could count on $2,500/acre.
I decided to spend some time doing research on some of the other shale plays across the country. What I discovered astounded me, and kind of made me mad.
WEST VIRGINIA OIL & GAS ROYALTIES
Lessor's in the Bakken shale seem to be getting 1/6 (16-2/3%) to 3/16 (18.75%) pretty regularly, if forum discussions are a fair indicator. The Haynesville Shale looks like it's from 3/16 up to 1/4. The Barnett Shale got up to 1/4 easily, back when it was big. I know from my own contacts that leases in the Utica Shale are going regularly for 18%.
LEASE BONUSES
Doing the same thing with bonuses, it appears that the Bakken shale averaged $3,600 back in November of 2009. Public lands sold at auction by the federal government varied greatly in 2012. The Haynesville Shale was apparently worth up to $30,000/acre at one time, but those kinds of prices just couldn't stand the test of time. The Barnett Shale also got up to ridiculous prices, with large landowner groups getting $22,000 and $27,000 per acre, until the Barnett Shale play busted. But it was common to hear of prices above $10,000/acre for quite a while down there. The highest price reported in the Utica Shale last fall was $8,200.
DEMAND CHANGE
So why can't we get prices like that here in West Virginia?
We don't demand it.
That's the only reason.
So, Marcellus Shale mineral owners, I've done the research for you. I'll do my best to spread the word. We need to demand more from the oil and gas companies. Lots more. If they don't deal with you now, they'll deal with you later. There's no forced pooling in West Virginia, so time is on your side.
One last note. Keep in mind that the Marcellus Shale isn't the only formation down there. Parts of West Virginia have the Utica, and the Upper Devonian may someday be a very interesting play as well. Who knows what other formations may produce in the future? Don't sell your mineral interest for a pittance.
Kyle Nuttall is a former landman and practicing lawyer in the State of West Virginia. You can view his web site at www.nuttalllegal.com.