Wednesday, August 25, 2010

Marcellus Watch

Just a dump of random stuff catching up on a lot of Marcellus news.   Starting with, the Indians are coming.  Note that India's Reliance Energy is making a big play for Marcellus Shale. Read carefully the NYT version:

Some of the numbers in that piece are kind of interesting for a lot of reasons.  You have to wonder why anyone would sell their Marcellus holdings if they are as profitable as everyone is saying they are. Of course the economic answer is that everything has a price and the price must be good.  How good?  Looks like Reliance is paying over $6K per acre.  I wonder how much folks who have already signed leases received on their deals. A fraction of that for most I imagine.  I can't confirm, but a NS reader wrote saying some early leases are as low as a few dollars an acre.  Outliers I hope, but might be something for some intrepid investigative reporters to dig into. 

Why so valuable?  The Motley Fool has something worth reading carefully: Is There More to the Marcellus Than Meets the Eye?   That's not just another piece talking about how there are other layers of shale that may prove developable for additional gas... Think Jake Clampett. That would be interesting.

If you really want to parse the financials of the players in NatGas these days, try this from SeekingAlpha. Or if you are getting confused by all the different shale talk out there, here is a summary of all the shale plays in the US these days.  Tie it all together and here is the latest prognostication on how unconventional gas is taking out the bottom of different natural gas markets.

I was curious a bit on Katie Klaber's recent oped that ran in the Scranton Times:

I won't ping per se on her neologism for the Marcellus Multiplier which is a PR, not an economic, construct.  I was more curious that she was writing this after they engaged Tom Ridge at 7 figures to do PR work for the Marcellus Shale Coalition.  I thought the whole point of that was to get his name out there for that type of PR. 

But the oped does raise an interesting question.   Others will be quantifying the economic impact, or potential economic impact of Marcellus shale in the state. I sure am not going to answer that here, but the starting point is that overall mining employment has indeed gone up a bit, but only a bit over the last few years.  It wouldn't even be fair to say that was all Marcellus given that coal and coke prices are themselves reaching new highs of late.

I'll stop there. More to follow. Some interesting things when you dig into the employment patterns in the state.


Anonymous BrianTH said...

Random takeaways:

(1) Ever-improving production technologies and efficiencies seem to be making the low-price/high-volume scenarios more and more likely. I guess we are waiting to see if the demand side starts catching up, but will it ever get out ahead of the supply side response? As always, I hope we taking all this into account when devising an excise tax;

(2) According to the summary, the Utica Shale might or might not be coextensive with Marcellus, and the Utica play might be anywhere from 1/10th the size of Marcellus to actually bigger than Marcellus. Is there a more important variable in predicting the future economic impact of gas in Pennsylvania than this?

(3) Is the Marcellus multiplier just an export multiplier? Sounds like it to me (and even the estimates look familiar to me).

Wednesday, August 25, 2010 9:10:00 AM  
Anonymous Anonymous said...

I got a report this weekend from a very highly placed public official that folks in the city and county are getting 5-6K an acre, but if you've only got a quarter acre or so, like most city folk, that's not much money.

Wednesday, August 25, 2010 9:14:00 AM  
Anonymous The Wiz said...

The price of leases vary greatly. The main fairway of gas is from Washington Co diagonally across the state to Williamsport. Landowners in the main fairway are getting any where from $3500/acre up to $6000/acre. People further out, like me, are getting less.

And more important than the bonus payment is the royalty percentage and how it is figured. Once a well is drilled, the royalty will at least double the bonus payment. Get at least 15%, some are as high as 20%.

And as technologies improve they get more gas/well so lease prices go up. Additionally, as more pipelines are laid, the value of nearby leases increases. That is two reasons that a group of leases may be resold at a much higher value. There are many more variables that determine the price.

My neighbor signed for $300 three years ago. A friend signed 7 yrs ago for $100. I have an offer for $1500/acre. I am part of a group with 1400 acres and we are negotiating the language. There are numerous issues that one needs to be aware of before signing. And everything is a point.

The Utica is about to make big news. I know of companies signing leases in Ohio where the Marcellus is practically non-existent. For one thing, Utica gas is cleaner and it may be used to dilute Marcellus gas thus saving on processing costs.

The proposed pooling legislation is an issue. From what I have seen, it calls for no bonus payment and a 12.5% royalty for people forced into a pool. I have talked to several state legislators asking them to amend that proposal to say that anyone forced into a pool should get the average bonus and average royalty of leases signed within the last 12 months.

That would prevent companies from signing 75% of the land at several thousand/acre plus 18% royalty and then forcing the remainder into a pool for next to nothing.

And there is a lot of land across the state that is yet to leased. I just attended a meeting in Emlenton with 75 landowners that have yet to sign a lease.

Wednesday, August 25, 2010 11:20:00 AM  
Blogger Shawn Carter said...


Welcome BACK!!!

I think you should be disallowed from taking vacations, leaving the office, any of that stuff.

Catch up with you later!


Wednesday, August 25, 2010 11:25:00 AM  
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