I am a landowner in the area. After doing heck of a lot of research, I see that landowners in Southwest PA are receiving 2-5000 dollars per acre for their mineral rights and they are on dry gas. Ohio and WV are receiving upwards of 5000/acre for wet gas. Why would I lease for $25.00 per acre. Even when they were in the "exploratory" phase, they were paying 200-2000 dollars per acre. Does anyone know enough about Bakersfield to give me that information? Please be honest with me. I do not want to lease to find out a year from now that I lost 100's of thousands of dollars for being to quick on the draw.
I wish I could help you but I don't know...
Steven:
Kern County has yet to get up to those type of numbers for rents. I presume that the rents that you have been seeing out of state are for lands that are in known fields and/or are in locations with known hydrocarbons. Kern County have known hydrocarbons but the fields in the Monterey Shale, which is the current play that is driving most of the leasing in California, has yet to be exploited with such success as those out-of-state plays. The out-if-state plays are now relatively certain given that they have successfully utilized new technology to exploit them. We are still in the early stages of exploration and anticipate that it will be several years before we can unlock the Monterey Shale with such similar success. That said, however, $25 per net mineral acre may be low depending upon the location and the net mineral acreage that you hold.
Hope this helps!
Good day Ms. Pledger,
It is time for my renewal (81 acres net) in Kern County, was Vintage, Oxi now the letterhead reads California Resources. Upt my lease to $30 acre 3/16 royalty. T25 south. Frankly I was surprised they were still interested with price of gas etc. What are your thoughts on the future.
Thanks for your thoughts, Pat
California Resources Corporation *"CRC") is the California spinoff of Occidental Petroleum. Vintage Petroleum was an Oxy owned company. It is now either California Resources Petroleum Corporation or California Resources Production Company (either way, "CRPC"). We are relatively surprised as well that CRC and/or CRPC are renewing leases but this shows their intention to retain the property in hopes that prices come back a bit and that they will have had the forethought to keep the property to explore at that time. I cannot tell where your property is located nor do I know how much acreage you have, but the rent and royalty seem fair.
Unless you have others seeking a lease, you may wish to go ahead and renew your lease. I would not do so for more than about 5 years, however, so that you're not locked in for too long.
Good luck!
Its simple economics. Some of those Marcellus gas wells are capable of making 50MMcf of gas per day-- Even with cheap gas prices (around $1.80/mcf) that would work out to over $90K per day gross revenue. Considering current crude prices, that would be equal to a Kern county well producing over 2,500 bbl/day-- I suppose its theoretically possible, but you can trust me that isn't going to happen any time soon. Plus, I would frankly be surprised if anyone is paying over $2K/acre for a lease given current commodity prices.
That being said, $25 seems low, but the market for crude is weak right now and $25 beats $0. IMO, you should concern yourself more with negotiating a good royalty % and short lease term.