Unconventional Bust: The Great Land-Expiration Rush

Billions of dollars were dropped into acquiring acreage in unconventional plays in 2008, and then commodity prices-thus cash flow for drilling to hold leases by production-collapsed while access to debt and equity markets retreated. Some lease terms are for only three or five years, while some are secured by longer terms, existing shallow rights or outright ownership. The nature of lease terms, by play, is described here.

Haynesville-acreage bonuses grew to $30,000/acre; royalties, 25% and, on occasion, 27%. Lease terms settled at some three years and renewal options are prevalent.

Marcellus bonuses grew from $50-$100/acre and some 2006 leases at $5/acre to peak rates of $3,000-$5,000/acre. Royalties grew from the standard 12.5% to 16%-20%; lease terms were reduced from 3-5 years to 2-3 years.

Yet, there is little or no landowner control of drilling locations in the Marcellus play.

Featuring:

• Randy King, Partner, Porter & Hedges LLP

Total Length: 00:16:41

Included: Videos, Slides