Thursday, May 05, 2011

How big is big?

It may be hard to appreciate the story in the news of Chevron leasing 228 thousand acres of land for Marcellus Shale development in the state.  How much is that?  By my calculation it looks like the area in red in the graphic below, compared to the footprint of the entire city of Pittsburgh. 
Someone really ought to go and do a study to figure out how much Pennsylvania landowners got for leasing their land and compare it to how much those rights are going for in this mega secondary market.


Anonymous The Wiz said...

Indeed, it would be interesting to see what landowners received vs what the leases are getting in the re-sale market. Some landowners signed for $50 to $100/acre that are re-selling for 8 or 10 G. Many of those leases are now expiring and the landowners are now getting much better leases.

But some of leases were signed very early when the play was still considered speculative. Additionally all those leases in that area of SW Pa also contain large, even massive Utica Shale deposits that are just now being recognized as just as valuable as the Marcellus(maybe even more), thus doubling the value.

The other issue that makes comparisons so difficult is what else has changed in the meantime. Chief has drilled many wells that are producing generating cash flow. They also have done seismic testing, placed gathering lines, permitting, engineering, legal work and more. And the process of aggregating 200,000 acres by meeting with 5000 landowners, doing title work on 7-8000 parcels(numbers are not accurate...just an example of the scope of work), registering all the deed reservations, generating mapping of leased lands, and more adds great value to large tracts like this. All capital expenditures like this contributes to a much larger value of the leases and make it hard to do any comparisons.

But would still be interesting to see. I have no doubt that many people got ripped off. I have seen what land agents do. Landowners need to do a lot of research before signing any lease.

Friday, May 06, 2011 10:50:00 AM  

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